It is seven years since AA and BA first applied to the US Department of Transportation (DOT) for antitrust immunity toward better collaboration on pricing, routes, and schedules, as well as offering connection convenience to their passengers. In 2002, the DOT approved the application, but with several conditions including specific demands for relinquishing landing slots at London-Heathrow to other US carriers. AA and BA decided to not accept those conditions.
Much has changed since then: an even more globalized economy; the rise of both the Star Alliance and SkyTeam alliances; the merger of Delta Air Lines and Northwest Airlines (Airways, April 2009); and, most notably, the implementation of the Open Skies agreement (Airways, February 2009), which allowed Delta, Northwest, Continental, and US Airways into Heathrow. According to the three applicants, this change alone solves all of the slot demands of the previous process.
The DOT is due to make a ruling in second-half of 2009. In addition, the airlines are dealing with any concerns the regulatory agencies of the European Union (EU) may raise. In the EU, there is no formal application process—the airlines merely announce their intentions and, if necessary, the EU investigates and requests further information, or simply approves the proposal.
Meanwhile, the merger of SkyTeam members Air France and KLM (aligned with Northwest, and now Delta) created a precendent of a multi-national combine. SkyTeam and Star Alliance now enjoy dominant positions at all major European hubs, including Heathrow, Frankfurt, Paris, and Amsterdam. They have also received antitrust immunity from the DOT, permitting Northwest, Delta, and KLM to do what AA/BA/IB would like to do—coordinate and streamline their operations.
With only two runways, Heathrow operates at full capacity, leaving little room for more flights. Many passengers who connect through LHR do so out of necessity. However, Madrid (MAD) has plenty of room to expand. According to IB, MAD could handle an additional 90 operations an hour. Such flexibility is a luxury in a major international market.
If anti-trust immunity is granted to AA/BA/IB, new US-Europe services could take advantage of this connection point where delays are rare—thanks to an absence of overcrowding—and a terminal that is both convenient and pleasant for the user.
For example, if you live in Washington, DC, and want to travel to Madrid, in order to use your status, earn, or redeem miles as an AA frequent flyer you would have to fly from DC to Miami, Florida, and board an AA flight to MAD. Under a new agreement, you could book your flight on AA, earn AA miles, use your elite status for upgrades and greater mileage earnings, yet fly on IB nonstop from Washington to MAD. (AA, BA, and IB would also add flights between each other’s hub cities to streamline connections.)
In addition, immunity could save money for travellers. Currently, if a trip is booked from the USA to Europe the passenger must travel both directions on the same airline. Thus, if BA had a lower return fare, but AA had a better outbound fare, there would be no way to combine the two to create a less expensive trip. With immunity in place, all three airlines would combine schedules and fares. The "immunized" airlines could also better plan schedules to meet demand.
While all three applicant airlines are cautiously optimistic about gaining DOT approval, the lone voice of dissension so far has been from Sir Richard Branson of Virgin Atlantic Airways. However, while objecting on the grounds of unfair market share into Heathrow, and that the establishment of another large alliance would be problematic, Virgin is at the same time interested to link with BMI (British Midland)—majority-owned by Lufthansa, the German giant with ownership interests in nearly 20 airlines.
Reproduced with permission by Airways magazine.
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