Global Economics

Branson Takes BA Fight to Brussels


Outspoken Virgin Atlantic founder Richard Branson says concessions by rival British Airways and American Airlines for their tie-up are "woefully inadequate"

British Airways' (BAIRY) concessions to Europe's competition watchdog over its proposed tie-up with American Airlines (AMR) were derided by Sir Richard Branson as "woefully inadequate" yesterday.

In an effort to address monopoly concerns raised by the European Commission last September, BA is offering to lease out four daily pairs of take-off and landing slots between the UK and the US – two to Boston and one each to Dallas and Miami – plus another two to New York that could be included "at some point in the future."

But Sir Richard, who is the president of BA rival Virgin Atlantic and has campaigned vociferously against the BA/AA plan, claims that if the revenue-sharing agreement gets the go-ahead, it will destroy competition, raise prices and reduce choice on some of the busiest routes between Heathrow and the US.

BA's latest offer to give up some take-off slots does not go far enough to address such concerns, according to Virgin Atlantic. The proposed alliance, which also includes Spain's Iberia (with which BA is in the process of merging), would, they say, still constitute a "monster monopoly" with an "overwhelming dominance".

Sir Richard met with Joaquin Almunia, the EU Competition Commissioner, this week to press Virgin Atlantic's arguments on the subject. "The proposals are woefully inadequate in counteracting the anti-competitive harm of a combined BA/AA," Sir Richard said. "I continue to question why the Commission is even considering these proposals to try to put right the consumer harm of this monster monopoly when it does not seem to have any evidence of concrete consumer benefits. You can't remedy the irremediable."

The proposals "fall far short of what is necessary" and Virgin Atlantic will use the time until the closure of the market-testing consultation on 10 April to fight its corner. "Consumers on both sides of the Atlantic are relying on the European Commission to protect their rights," Sir Richard said. "We will continue to work with the commission to help them recognise the potential damage BA/AA could cause as the new commissioner gets to grips with this important issue."

BA denies Virgin Atlantic's charges. The flag carrier maintains that the plan – which includes shared revenues and jointly managed schedules, pricing and capacity on transatlantic routes – will give customers cheaper fares, more connections and better access to a bigger network. It is also vital for the 11-carrier Oneworld alliance of airlines to compete with global rivals who already have already had transatlantic links signed off by competition authorities on both sides of the pond.

Willie Walsh, the chief executive of BA, said: "We've offered to lease slots to gain European Commission approval for our joint business which will bring benefits to our customers, shareholders and employees. It will also enable Oneworld to compete on a level playing field with the other global alliances across the Atlantic."

The economic slowdown and the Open Skies Treaty liberalising flights between Europe and the US is causing massive disruption to the global airline industry, including an expansion in scope of the three main alliance groupings. Oneworld is still dwarfed by its rivals. The Star Alliance, which includes Lufthansa (DLAKY) and US Airways (LCC), is more than twice its size. And although Skyteam, which includes Air France (AFRAF) and Delta (DAL), has fewer members, it has the greatest number of routes. Crucially, both Star Alliance and Skyteam already have monopoly immunity on transatlantic flights.

The BA/AA plan is also under consideration by the US Department for Transportation for the formal anti-trust immunity (ATI) status. Last month, an initial ruling from the DoT stipulated that BA/AA must give up four pairs of slots, two to Boston and two to destinations elsewhere in the US. The proposals are now subject to a 45-day public consultation, after which BA gets another 15 days to respond to any points raised.

Signs of life: BAA traffic rises

The aviation industry may at last be showing signs of recovery. BAA saw traffic at its six British airports grow for the first time in two years last month. Some 7.13 million people travelled through its facilities in February, a 2.4 per cent rise on February 2009.

Heathrow was the high point. The London hub escaped the worst of this year's snow and traffic was up by 5.3 per cent. Even adjusted to take account of the effect of last year's winter weather, Heathrow's traffic was still up by 2.7 per cent.

At BAA's smaller facilities the picture was less rosy. Some 4.5 per cent fewer passengers used Stansted, Glasgow was down 5 per cent and Aberdeen by 4.6 per cent.

BAA's chief executive Colin Matthews said: "Heathrow remains resilient and other airports are beginning to see encouraging signs. However, traffic remains depressed, reflecting tough conditions in the economy generally and in aviation specifically."

Provided by The Independent—from London, for Independent minds

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