OFT to curb BA-American deal

Click to follow
The Office of Fair Trading is planning to impose curbs on the British Airways-American Airlines alliance covering six key areas of the deal as a condition for allowing it to proceed without a monopolies referral.

The OFT, which has been taking evidence for the past two months, is expected to submit its formal recommendation to the President of the Board of Trade, Ian Lang, next week after a meeting of the Mergers Panel pencilled in for next Monday.

According to airline sources, the key concession demanded by the OFT concerns take-off and landing slots. BA and American will be obliged to reduce their combined holding which, together with those belonging to BA partner airlines, is close to 50 per cent.

The OFT is also seeking concessions on terminal capacity and airport capacity from BA and American so that rival carriers have sufficient gates and parking facilities to operate rival services.

A further area where curbs will be imposed is frequent-flyer programmes. The two airlines will have to allow points earned on their flights to be used to book flights on other airlines, not just their own.

The OFT also intends to place restrictions on the use by BA and American of discounts for travel agents and concessions for regular corporate travellers, known as fidelity rebates.

BA's chief executive, Bob Ayling, has argued that BA and American should not be obliged to give up slots at Heathrow since rival alliances, such as those between Lufthansa/ United and KLM/ North West, control a much larger proportion of slots at their hub airports of Frankfurt and Amsterdam respectively.

Meanwhile, Bob Crandall, the chairman of American, yesterday floated the idea that the alliance might lease slots to other carriers to allow greater competition on transatlantic routes.

Approval for the alliance under US anti-trust law is contingent upon Britain and the US reaching an open skies agreement across the Atlantic. The negotiations are stalled over Britain's insistence that its carriers be allowed to operate domestic flights within the US - a system known as cabotage - in return for US airlines being allowed to pick up passengers at Heathrow and fly to Europe.

Mr Crandall said that if the open skies agreement could be sealed there would be a substantial increase in US carriers flying into London and hence more competition on transatlantic routes. He said that between 10 and 15 per cent of Heathrow's 50,000 slots could be made available for new entrants.