It is an agreement to share revenue and reduce costs, coordinate route networks and schedules and co-operate commercially on routes between the EU, Norway and Switzerland and the U.S./Canada/Mexico/ and US territories in the Caribbean.
Each airline has a unique two-letter code (such as AA for American, BA for British Airways and IB for Iberia). Codesharing is an arrangement where one carrier displays its code on another carrier’s flights and markets the service as its own. Under DOT rules, the identity of the operating carrier must be disclosed to consumers. Codesharing facilitates seamless service between two carriers.
Antitrust immunity, or ATI, allows airlines to coordinate schedules, pricing, yield management, and other functions so the public benefits from expanded and coordinated route networks and efficiencies. Since 1993, DOT has granted antitrust immunity to more than 25 alliances, allowing them to share information and coordinate efforts without the risk of antitrust enforcement.
A core requirement for US antitrust immunity is that the foreign carrier’s homeland must have an open skies agreement with the United States.
Through this joint business agreement, the airlines will tightly integrate schedules and services but also share revenues on transatlantic operations. Customers will have increased access to more discounts, more convenient schedules, shorter connection times, and far more routing flexibility and enhanced frequent flyer benefits.
Fares are determined in a competitive marketplace, and are driven mainly by supply and demand characteristics on particular routes. Once the ATI application is approved and greater interalliance competition occurs, oneworld’s ability to coordinate route networks, pricing and yield management worldwide would increase consumer access to discounted and combinable fares.
Customers will be able to earn and redeem miles seamlessly with any of the participating oneworld carriers, including on transatlantic flights.
We consider the ability to earn and redeem miles on transatlantic routes to be an enhancement to each participating oneworld carriers’ mileage program. There are no additional changes to be announced at this time. Currently, members of the American Airlines AAdvantage program, British Airways Executive Club and Iberia Plus program have reciprocal frequent flyer agreements. Under the Joint Business Agreement, members of the American Airlines AAdvantage program and British Airways Executive Club will be able to earn and redeem miles on each airline's flights between the U.S. and the UK, thus making all routes flown by American Airlines, British Airways and Iberia eligible for earning and redeeming AAdvantage miles.
Lounge reciprocity exists today. Qualified customers may have greater opportunity to benefit from lounge reciprocity due to the expanded codesharing and the metal neutrality that will result from the Transatlantic JBA.
To compete and win on the world stage, we must be able to offer customers a level of seamless global connectivity that is impossible for any single airline to deliver on its own – and difficult for any combination of airlines that does not operate under broad-based antitrust immunity. We view this arrangement as our best chance to do that.
It will allow the airlines to offer customers greater choice and flexibility and enable oneworld to compete more effectively.
Employees of each airline are expected to benefit because it will create a stronger more financially sound airlines that have a greater ability to compete and offer employees more stability, long-term job security and growth potential.
This transaction is expected to increase revenue, increase the competitiveness of the participating oneworld carriers, offer consumer benefits and is expected to, result in cost savings. All of these things are good for shareholders.
The five airline request for ATI will strengthen oneworld and enable it to compete more effectively with Star and SkyTeam. The closer cooperation allowed by antitrust immunity will be beneficial to all five airlines, even if Finnair, Royal Jordanian are not in the JBA.
Transatlantic flying has been consolidated around two powerful alliances – Star and SkyTeam – both of whom have antitrust immunity on North Atlantic routes. Both have added transatlantic services since Open Skies became effective. A third strong alliance with equal regulatory footing is needed to ensure customers receive the benefits envisioned by Open Skies.
The Summer 2008 schedule shows more than 120 new weekly transatlantic flights between the U.S. and Heathrow have been added already; 91 of these are by oneworld’s competitors.
The increased price of fuel is putting tremendous pressure on the entire industry and makes the need to remain competitive even more essential.
The agreement enables EU and US carriers to fly between any point in the US and any point in the EU – including Heathrow.
It eliminated Bermuda II’s restrictions on one-stop pricing. Now, pricing for one-stop itineraries over Heathrow are likely to become much more competitive with nonstop pricing.
No, the global aviation market is highly competitive. This transaction puts the oneworld Alliance on equal footing with SkyTeam and Star and increases interalliance competition to benefit consumers.
We are optimistic that regulators will see the advantages that antitrust immunity would provide to the participating oneworld carriers and to our customers. The antitrust immunity protection enjoyed by our rival alliances Sky Team and Star sets an encouraging precedent. Giving the oneworld Alliance the ability to compete on equal footing is a compelling benefit for customers and will help ensure continued competition.
The Department of Transportation (DOT) has the authority to immunize alliances between U.S. and foreign airlines from the U.S. antitrust laws. The members of such an alliance file an application with DOT in a public docket. Other interested parties are allowed to comment on the ATI application, and DOT issues a decision granting or denying ATI immunity to the oneworld Alliance.
The EU’s Director General for Competition will review the joint business agreement. We will proactively engage the Director General for Competition and other relevant EC Directorates who will open a consultation for interested parties. Unlike the U.S, there isn’t a formal filing that takes place in the EU.
Our plans to pursue an immunized global relationship will enable the oneworld carriers to better compete on the world stage by offering customers a greater level of seamless global connectivity through coordinated route networks.
This is impossible for any single airline to deliver on its own and difficult for any combination of airlines that does not operate under broad-based antitrust immunity. At the moment, the oneworld alliance is at a distinct disadvantage versus Sky Team and Star, each of which enjoys antitrust immunity protection. With antitrust immunity, the oneworld alliance would be able to compete more effectively with SkyTeam and Star, increasing interalliance competition.
We expect that this agreement will generate significant revenue enhancements and cost efficiencies, which will give each oneworld carrier a greater ability to invest in improved products and services for our customers.
We believe the up front investment will be minimal.
The combination of enhanced revenue opportunity combined with the cost reduction opportunities would enable all participating airlines to better offset fuel expenses.
British Airways and Iberia have announced that they are in talks about a possible merger. Under current ownership regulations, BA or Iberia could not merge with AA.