BA alliance could breach EU competition law, say officials

EU regulators fear that Anglo-American alliance will dominate aviation market / Investigation to look at ticket price agreements and transatlantic schedules

An agreement between British Airways, American Airlines and the Spanish carrier Iberia to co-operate on ticket prices and transatlantic schedules is being investigated by European competition regulators who say the pact may breach anti-trust laws.

The Oneworld alliance members had planned to take advantage of the "open skies" agreement, which allows any airline to fly between the European Union and the US, to persuade officials that the proposed tie-up did not give the three a dominant market position. However, news that the European Commission is investigating the deal suggests it is unhappy with what would be BA and AA's dominant market share – a concern that twice led to the deal being scuppered in the past.

The move was cheered by BA's rivals, particularly Sir Richard Branson's Virgin Atlantic, which welcomed the decision to put what it calls "a monster monopoly" on notice that rules may have been broken.

The EC competition watchdog said it had sent a charge sheet to the three airlines. Since April, it has also been investigating similar deals between the 24 members of the rival Star Alliance – including BMI, United and Lufthansa – as well as the SkyTeam partnership of 11 airlines including Air France-KLM, Delta and Aeroflot. It has yet to move on either inquiry.

"The EC can confirm that it has sent a statement of objections to British Airways, American Airlines and Iberia, members of the Oneworld airline alliance, in relation to their proposed co-operation ... which the commission considers may be in breach of European rules on restrictive business practices," it said yesterday.

A statement of objections is a formal document sent to inform companies of complaints against them. The three airlines have been asked to reply, setting out their defence. BA said it was looking forward to answering the commission's questions, adding: "The EU's thorough review of our plans and supporting evidence was anticipated and is similar to its continuing review of the Star and SkyTeam alliances which already have anti-trust immunity from the US Department of Transportation.

"We believe the quickest way to robust competition and more travel choices for consumers is to ensure that all three global airline alliances can compete on an equal footing.

"It would also allow Oneworld to compete on a level playing field with Star Alliance and Skyteam, which have larger and increasing shares of transatlantic traffic and have been granted anti-trust immunity."

Oneworld members have also asked for immunity from US officials, but this has not yet been granted. Gert Zonneveld, an analyst at Panmure Gordon, said Oneworld was likely to come under more scrutiny than the other agreements because of its bigger market share.

"BA and AA's market share is substantially larger than the other alliances' and that is why the Oneworld venture has been challenged by the anti-trust authorities, and indeed, why it has already been twice down," he said. "Of course, they will eventually come to some sort of agreement but it may demand a high price from BA, especially if it is linked to giving up slots at Heathrow."

If officials do rule that the Oneworld partners' deal is unlawful, it will kibosh BA's third attempt to join forces with American Airlines. The previous attempts, in 1997 and 2001, failed because regulators insisted on the pair giving up take-off and landing slots at Heathrow to reduce their dominance at the world's busiest airport.

When he announced plans to join forces with American last year, BA's chief executive Willie Walsh said he believed the open skies agreement would allow the deal to be agreed without many concerns over competition.

Officials will also have noted BA's suggestion earlier this week that it could wrap up its merger with Iberia by the end of the year.

On Wednesday Mr Walsh said the appointment of a new chairman at Iberia had given fresh impetus to talks about a £4.2bn all-share deal. Asked if a deal would be completed by Christmas, he added: "We have been making good progress since the change of leadership at Iberia. We have met them on three occasions and we are meeting them again in the next few weeks."

Opening the skies: Where previous tie-ups faltered

Questions from the competition authorities are nothing new to British Airways and American Airlines.

The UK flag carrier has tried three times to form an alliance with American Airlines. The first two bids, in 1997 and 2001, foundered on demands from UK, European and US competition regulators that the two airlines give up some of their prized take-off and landing slots at Heathrow, the world's busiest airport.

In 1997, the Office of Fair Trading called for a surrender of up to 267 slots, while the bid four years later fell apart when the US Department of Justice said that the two companies would have to hand back 126 weekly slots. It was a move too far for the airlines and the engagement was called off on both occasions.

It seems that round three will also come down to regulators demanding that slots are given up. BA and AA may already know this, but will hope that they can persuade officials that the "open skies agreement", which allows more airlines to operate on financially important transatlantic routes, tempers their combined market share.

Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features staging of a playground gun massacre
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
i100This Instagram photo does not prove Russian army is in Ukraine
Morrissey pictured in 2013
sportVan Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
filmReview: Sometimes the immersive experience was so good it blurred the line between fiction and reality
Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Tyred out: should fair weather cyclists have a separate slow lane?
environmentFormer Labour minister demands 'pootling lanes' for women cyclists
i100  ... he was into holy war way before it was on trend
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices