Branson attacks US anti-trust move on BA tie-up

Virgin Atlantic president says British Airways' merger with American Airlines will 'stick two fingers up' at consumers

Sir Richard Branson yesterday launched a scathing attack on the US Department of Transportation (DOT), labelling its decision to grant anti-trust immunity to the proposed transatlantic tie-up between British Airways and American Airlines (AA) as a "kick in teeth for consumers".

The comments come after the DOT gave provisional support to the merger, which was first mooted more than a decade ago, saying it would lead to lower fares, new routes and better schedules. The two airlines would maintain their own brands, but would pool revenue and, crucially for rivals such as Sir Richard's Virgin Atlantic, would be permitted to collude on prices.

The DOT decision gives opponents 45 days to raise further objections to the deal, which Sir Richard has described as a "monster monopoly".

Previous attempts to get competition authorities to grant permission for the deal, which would also include BA and American Airlines' Oneworld alliance partners Iberia, Royal Jordanian and Finnair, have floundered on the number of runway slots officials have asked the groups to surrender. The DOT has, however, agreed to give the airlines immunity in return for the companies giving up just four pairs of slots, a much lower number than expected.

"This preliminary decision beggars belief," Sir Richard said. "The DOT last time said that in order to address the competitive harms, hundreds of slot pairs had to be handed over permanently – absolutely nothing has changed since then. Four slot pairs is a complete joke and those responsible for this decision should hang their heads in shame."

The latest attempt to secure a merger gained added impetus when the "open skies" agreement, which allows any airline to fly between the European Union and the US, came into effect two years ago.

Despite the tentative approval for the deal, several hurdles still have to be overcome, not least sceptical EU competition authorities, which have already said the proposed deal may breach European competition rules.

Last October, the EU's anti-trust watchdog sent a so-called statement of objections to members of the Oneworld alliance. Similar deals, such as the Star and SkyTeam alliances, have been granted competition immunity, but BA and AA's agreement has attracted more attention as both have large market shares.

"The DOT's order is a key step in the process towards allowing Oneworld alliance members to co-operate more effectively in competing with the Star and SkyTeam alliances, both of which already have transatlantic anti-trust immunity," said BA in a statement. "Discussions with the European Union about seeking approval for the transatlantic joint business continue."

The decision by the DOT is likely to lead to an uptick in lobbying by those such as Virgin that oppose the deal.

"The US Department of Justice, who are the experts in competition issues, called for strict remedies to protect the public interest, because the alliance will blatantly harm competition and the consumer," added Sir Richard. "The Department of Transport[ation] has chosen to stick two fingers up at them. Millions of transatlantic travellers will be adversely affected if the alliance receives final approval.

"This draft decision is a real kick in the teeth for consumers and they will be paying the price for it for years to come. I urge the European Commission continue its more consumer-focused approach when it takes its decision in the coming weeks."