BA challenged over transatlantic alliance plan

British Airways faces a battle to go ahead with its planned alliance on transatlantic routes with giant US carrier American Airlines (AA), it was revealed today.

BA has received a formal statement of objections to the link-up from the EU's Competition Commission.

It will now have to convince the commission that the link-up, which also involves Spanish carrier Iberia, does not breach EU competition regulations.

BA, AA and Iberia are seeking to jointly market and operate transatlantic flights in an arrangement that also includes joint pricing and a sharing of revenues.

The commission said today that issuing a statement of objections was a formal step in its investigation into the alliance and did not prejudge the final outcome of its deliberations.

The link-up also needs approval from the US regulatory authorities.

BA said today: "We have received the EU's statement of objections and look forward to the opportunity to address and overcome the EU's concerns, especially given the substantial benefits for consumers that would result from our transatlantic joint business."

It added that the proposed link-up would "benefit millions of customers with greater access to discounted fares, more convenient connections and better access to a global network of more than 500 destinations".

Sir Richard Branson's airline Virgin Atlantic has been vociferous in its opposition to the alliance.

Virgin's chief executive Steve Ridgway said today: "Virgin Atlantic agrees with the commission that there are anti-competitive issues with BA and AA's proposals.

"The commission's concerns are absolutely justified. This alliance between BA and AA is a monster monopoly which, if given the go-ahead, will allow these dominant carriers to increase their stranglehold at Heathrow by setting prices and agreeing schedules."

The three airlines - members of the "oneworld alliance" - can now submit a defence to the Commission's objections before a final decision is made under EU fair competition rules.

A similar Commission inquiry is still going on into existing cooperation between four airlines - Air Canada, Continental, United and Lufthansa - which are part of the "Star" alliance.

Both investigations followed last year's new "Open Skies" deal between the EU and America, designed to open up transatlantic air routes.

When the investigations began, the Commission said the levels of cooperation between the airlines seemed "more extensive than the general cooperation between these airlines and other airlines which are part of the Star and oneworld alliances".

A Commission spokesman emphasised: "Sending a Statement of Objections does not prejudge the final outcome of the (inquiry) procedure."

Earlier this year Tory MEP Timothy Kirkhope said cooperation between airlines could be beneficial for consumers, but could not be allowed to develop into "anti-competitive collusion".

He said: "The marketplace has already been distorted by the 'Open Skies' deal, which gives US carriers full access to our markets whilst blocking our operators out of theirs.

"While anti-competitive behaviour is never acceptable, we have to ask whether international agreements are themselves encouraging this behaviour."