EoW May 2010

The regulators’ pride in their accom- ❈ plishment may seem overblown to carriers striving, during a downturn in air travel, to pare operating costs and identify new sources of revenue – an e ort that has intensi ed their interest in airline alliances. Existing partnerships for transatlantic operations include four members of the Star Alliance – Germany’s Lufthansa, Continental Airlines and United Air Lines (both of the USA), and Air Canada – and the SkyTeam members Air France-KLM and Delta Air Lines, which absorbed Northwest Airlines (also of the USA) last year. For some time, the European Union has been under pressure to approve what might be termed the alliance- within-an-alliance of British Airways and American Airlines – already members of Oneworld, the smallest of the three main international airline alliances – for an even closer partnership. The arrangement proposed by BA and AA envisions shared revenues and coordination of ight marketing and scheduling on routes among the USA, Mexico, Canada, and the countries of the European Union, as well as Switzerland and Norway. It would create a uni ed network of some 500 destinations in over 100 countries. The hopes of the two big carriers for the outright removal of ownership limits – and a go-ahead to dovetail, even merge, their operations as they see t – were dashed, at least for now, by the preliminary agreement announced in March. With some justi cation, British Airways promptly expressed dismay that the limits would remain in place for the foreseeable future. When the rst phase of Open Skies was implemented, BA was among the European carriers that stipulated, as a condition of cooperation, that ownership rules be addressed in the second set of negotiations. A BA statement concluded, “We call on both sides to honor the rm commitments they have made in this agreement to further liberalization, and to redouble their e orts going forward, in order to make a fully liberal ‘open aviation area’ a reality.” If the BA appeal is heeded, the British carrier would gain the potentially lucrative right to y USA o cials, currently restricted to using American carriers. The draft deal is to be presented for approval to EU transport ministers in June. It also requires approval by the USA Congress, which has rejected previous e orts to ease the ownership restrictions.

The British Airways-American Airlines ❈ venture is the two carriers’ third attempt over the last decade to forge a closer partnership. Their exasperation with Brussels and Washington is further exacerbated by the new uncertainty of another project, this one involving a third party: Spain’s Iberia.

That plan, which stops just short of full merger, would allow the three airline companies to share costs and revenues on transatlantic ights. But it awaits relaxation of the rules on ownership.

Dorothy Fabian USA Editor

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EuroWire – May 2010