BA and American create air superpower
Wednesday 12 June 1996
Under the arrangement, announced simultaneously in London by BA's chief executive, Bob Ayling, and in New York by his American counterpart, Robert Crandall, the two airlines would splice together their schedules and share flight codes to forge a single network of routes around the world. But the alliance will be the subject of close scrutiny from competition authorities on both sides of the Atlantic and rivals were quick to warn yesterday of the dangers to competition.
Virgin's Richard Branson immediately condemned the deal as anti-competitive. Delta Air Lines, the third-biggest carrier, said it would oppose the alliance unless Britain and the US reached agreement on an "open-skies" agreement to further open up Heathrow airport to US airlines. Continental Airlines and the Dutch operator KLM were others that expressed unease at the link- up, with only USAir, in which BA has a 24.6 per cent stake, saying it would open up new opportunities.
The deal was welcomed by the stock market, which marked BA's shares 9p higher to 562p. Chris Tarry, an analyst with Kleinwort Benson Securities, described it as a major step. "It is likely to mark a greater willingness on the part of the UK to have a more liberal [open-skies] agreement. But it also opens the way for Virgin and others to wrest concessions," he said.
The link-up means that from April next year passengers booking with BA to the US, for instance, could find themselves on an American Airlines flight. Among those planes carrying both BA and American flight codes will be Concorde.
The two companies will remain independent, however. Contrary to the rumours of recent weeks, the pact does not foresee any swapping of equity or any trading of seats between the respective boards. British Airways, meanwhile, is seeking to retain its shareholding in USAir.
Instant criticism of the deal was provided by Richard Branson, whose Virgin Atlantic Airways could face harsh new conditions across the Atlantic. "Given the history of these two airlines and their anti-competitive behaviour, it would be hard to believe any rational government, in the interest of consumers, would allow this to go forward," he said.
Already among the world's most powerful airlines, BA and American would together account for almost 60 per cent of traffic between Britain and the US. Between Kennedy airport in New York and Heathrow their share is 70 per cent, while they are the only carriers on the London-to-Dallas route.
Analysts predicted that the two companies will be expected at the very least to carve out from the agreement some routes where their domination would be unacceptable, including possibly between New York and London. "This is nowhere near what the governments are going to accept," Craig Jenks, an aviation expert in New York, said. "Were the US to approve this, they would be abandoning the criteria they have applied to all previous cases of this kind".
For the agreement to be viable, the two carriers must extract immunity from the US government from current fair-competition regulations. That, is likely to be contingent upon the US and British governments resolving long-standing arguments on an "open-skies" aviation agreement.
Comment, page 17
- 1 I was a Woman Against Feminism too
- 2 Fifty Shades of Grey movie trailer released: First look at Jamie Dornan as Christian Grey
- 3 Is Gideon Levy the most hated man in Israel or just the most heroic?
- 4 Students offered grants if they tweet pro-Israeli propaganda
- 5 Israel has discovered that it's no longer so easy to get away with murder in the age of social media
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned
Peaches Geldof: Her final day – and her fatal decision
Students offered grants if they tweet pro-Israeli propaganda
Israel-Gaza conflict: Israel may have committed war crimes, says UN human rights chief
John Barrowman praised for Commonwealth Games opening ceremony gay kiss
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
iJobs Money & Business
£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...
competitive: Progressive Recruitment: This really is a fantastic chance to joi...
£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...
£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...