BA-American alliance faces MPs' inquiry

Growing concerns: Controversial deal to create the world's most powerful airline grouping is being investigated again

An influential cross-party committee of MPs is to launch an investigation into British Airways' proposed alliance with American Airlines amid growing concern about the impact of the deal on competition across the Atlantic.

The inquiry, by the Commons' Transport Select Committee, is the fourth probe into the deal since BA and American unveiled their hugely ambitious plan last month, forging the most powerful airline alliance in the world.

The tie-up is already being examined by the Office of Fair Trading in Britain and the United States Justice Department. Today EU transport commissioner Neil Kinnock and competition commissioner Karel van Miert will announce that Brussels is also investigating the deal, along with five other alliances between American and US carriers.

News of another inquiry into the proposed deal came as Richard Branson's Virgin Atlantic rejected the creation of an independent tribunal to protect smaller airlines against uncompetitive behaviour from a BA-American alliance.

The proposal is expected to be put by the British government negotiators during bilateral talks with their US counterparts which began in Washington yesterday.

But the idea was quickly dismissed by Virgin, BA's only UK-based long- haul rival. "To link the creation of an independent tribunal to a deal with American Airlines that gives BA 60 per cent of the transatlantic market to and from London is not something we are in favour of," Virgin spokesman Will Whitehorn said.

"There should be some form of mechanism to promote competition and look after consumers' interests," he added. "It's long overdue. We've been arguing for an 'Ofair' regulator ever since BA's dirty tricks campaign four years ago."

The latest inquiry by MPs comes as BA prepares to submit its formal response to the OFT later this week.

It will argue strongly that the alliance, under which BA will pool revenues and services with American, will mean greater competition and lower prices.

Critics, led by Mr Branson, claim the two airlines' dominance of transatlantic traffic in and out of London will allow them to unfairly dominate the market.

The Transport Select Committee, chaired by Sir Paul Channon, a former Secretary of State for both Transport and Industry, will take evidence from BA, American and Virgin next Wednesday. The rival US carrier, Delta Airlines, will give evidence the following Monday.

And a transport minister, probably the Secretary of State Sir George Young, will also be called before MPs. The committee intends to complete its investigation before Parliament rises for the summer recess at the end of this month.

Robert Ayling, BA's chief executive, yesterday rebutted the claims made by Mr Branson and insisted the alliance would benefit competition. "This is not a consumer issue because it is absolutely clear they will be better off," he said. "The issue is does Britain want to be a major competitor in the global airlines system or not. We can take it with both hands or we can miss the boat."

He also described proposals for an independent tribunal to monitor the BA/American as "imaginative". But the tribunal would protect smaller airlines from any future abuses by BA and American of their dominant position whereas the OFT is examining whether the alliance as it stands should be referred to the Monopolies and Mergers Commission. Mr Ayling forecast that the deal would result in BA and American having a smaller share of a larger market.

The impact of the alliance on competition will inevitably be affected by parallel talks going on between London and Washington to strike an open-skies deal across the Atlantic. If the talks succeed it would give more US airlines greater access to BA's hub airport at Heathrow.

Comment, page 17

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