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.

Start your day with The Independent, sign up for daily news emails
Lucerne’s Hotel Château Gütsch, one of the lots in our Homeless Veterans appeal charity auction
charity appeal
Arts and Entertainment
Tony Hughes (James Nesbitt) after his son Olly disappeared on a family holiday in France

Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt

Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
Arts and Entertainment
The Apprentice candidates Roisin Hogan, Solomon Akhtar, Mark Wright, Bianca Miller, Daniel Lassman
tvReview: But which contestants got the boot?
Life and Style
A woman walks by a pandal art installation entitled 'Mars Mission' with the figure of an astronaut during the Durga Puja festival in Calcutta, India
techHow we’ll investigate the existence of, and maybe move in with, our alien neighbours
Arts and Entertainment
Jim Carrey and Jeff Daniels ride again in Dumb and Dumber To
filmReview: Dumb And Dumber To was a really stupid idea
Arts and Entertainment
Sir Ian McKellen tempts the Cookie Monster
tvSir Ian McKellen joins the Cookie Monster for a lesson on temptation
Tourists bask in the sun beneath the skyscrapers of Dubai
travelBritish embassy uses social media campaign to issue travel advice for festive holiday-makers in UAE
ebooksNow available in paperback
Arts and Entertainment
Jennifer Saunders stars as Miss Windsor, Dennis's hysterical French teacher
filmJennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress
Life and Style
Nabil Bentaleb (centre) celebrates putting Tottenham ahead
footballTottenham 4 Newcastle 0: Spurs fans dreaming of Wembley final after dominant win
Jimmy Mubenga died after being restrained on an aircraft by G4S escorts
voicesJonathan Cox: Tragedy of Jimmy Mubenga highlights lack of dignity shown to migrants
Life and Style
Sebastian Siemiatkowski is the 33-year-old co-founder and CEO of Klarna, which provides a simple way for people to buy things online
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

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Carlton Senior Appointments: Sr Wealth Manager - San Francisco - Inv AdvisoryFirm

$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager – In...

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Day In a Page

Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum