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British Airways, Iberia, American Airlines – Joint business agreement

British Airways, American Airlines and Iberia have applied to the US authorities for permission to co-operate on transatlantic flights. Below you will find the key things you need to know.

Information on the joint business agreement

Choose one of the following topics for more information:

British Airways, American Airlines and Iberia – What’s it all about?

British Airways and American Airlines, with Iberia, have applied to the US authorities to be able to co-operate on transatlantic flights on the same basis as other airline groups do already.

The deal would allow the three carriers, all oneworld alliance members, to offer customers greater access to discounted fares, more convenient connections and better access to a global network of more than 500 destinations.

It would also allow oneworld to compete on more equal footing with the Star alliance (which includes Lufthansa and United) and SkyTeam (Air France/Delta/Northwest).

These two alliances have the largest shares of transatlantic traffic and have been granted 'anti-trust immunity' by the US. We want the same legal status to enable us to strengthen real competition.

Benefits for our customers

1. A combination of BA, AA and Iberia would bring more access to discounted fares.

If a customer is travelling from Heathrow to JFK return and can find a cheaper outbound fare but there are only more expensive inbound fares, they would be able to search the other airline's flights as well to find a cheaper return ticket.

2. It would create a bigger and better network, supporting routes not otherwise viable.

By working together to provide links for connecting passengers, the airlines can expand customer choice by supporting routes that would not be economically viable for the individual airlines.

3. It would co-ordinate schedules, meaning more convenient connections.

The airlines can work together to ensure that their individual schedules complement each other making it easier for transfer passengers to connect between the different carriers.

4. It would help keep down fares by enabling cost savings.

The joint business agreement will enable the airlines to reduce costs and attract new customers.

5. It would mean more effective competition with the two big airline alliances, Star and Skyteam.

Our application is intended to enable oneworld to compete more effectively with the other major airline alliances, Star and Skyteam, who already have transatlantic anti trust immunity.

It will improve competition and enable oneworld members to strengthen their businesses at a time when record fuel bills and the economic slowdown have created the most difficult trading environment that aviation has ever faced.

6. It would mean fair play for the UK - by giving the same status to British Airways' alliance as has been given already to the alliances of Air France and Lufthansa.

We are applying for EU - US anti trust immunity (ATI) and the market is highly competitive with 42 airlines operating between the EU and US.

The Star alliance, which includes Lufthansa, has 35 per cent of this market and Skyteam, which includes Air France/KLM, has 28 per cent. Both alliances have transatlantic anti-trust immunity.

oneworld has 21 per cent. It is the only global alliance not to have been granted ATI.

7. It would let us take proper advantage of the opportunities of Open Skies.

The competitive environment has changed fundamentally since our last ATI application with AA in 2001. Following the implementation of stage one of EU US Open Skies agreement in March 2008, any EU or US airlines can fly any route it chooses between Europe and America. The old restrictions are gone and the Star and Skyteam alliances are making the most of the new regulatory environment.

8. It would let us take up the opportunities of an open Heathrow.

Since Open Skies came in to effect, five new airlines have begun transatlantic flights from Heathrow to the US. Of the nine carriers operating to the US from Heathrow, six have transatlantic anti trust immunity. British Airways, AA and Virgin the airlines do not. The Star alliance is moving in to Heathrow in a big way with Lufthansa taking over bmi which was the airport's second biggest airline.

9. It would mean a stronger business that can invest in better customer services.

This agreement would generate revenue enhancements and cost efficiencies, which will give each airline a greater ability to invest in improved products and services for customers.

10. It would let us move with the times.

Close cooperation between airlines is happening all over the world. The Open Skies agreement between the EU and US has transformed the regulatory and competitive environment. We don't want to turn the clock back. We want to embrace these new opportunities to build a stronger business - for the benefit of our customers and all our stakeholders.

Q & As

What does the joint business agreement between British Airways, American Airlines and Iberia actually mean?

It is an agreement to share revenue and reduce costs, co-ordinate 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.

Why have you launched this joint business agreement?

British Airways, American Airlines and Iberia tailfins.

The joint business agreement will improve customer service with better connections, network, frequency, and frequent flyer benefits. It will also enable the airlines to operate more efficiently, reducing costs and increasing their ability to invest in new products and services.

The deal is dependent on the US authorities granting anti-trust immunity (ATI) approval to the applicant carriers. This would enable them to compete more effectively with the Star and Skyteam alliances who already have ATI across the Atlantic.

Will each airline keep its own identity?

Yes.

What do you mean by providing access to more discounted fares?

If a customer is travelling from Heathrow to JFK return and can find a cheaper outbound fare but there are only more expensive inbound fares, they will now be able to search the other airline's flights as well to find a cheaper return ticket.

What are the benefits of this joint business agreement for the UK economy?

The approval of the joint business agreement with AA and Iberia will enable us as a leading member of oneworld and the UK's only global network carrier, to compete more effectively with Star and SkyTeam which have been able to integrate their operations at Frankfurt, Amsterdam and Paris.

It will provide a wider network of routes and increased connections to enable British businesses to compete more effectively in the global marketplace and strengthen Heathrow's position as an international hub airport.

What has changed since 2001 and why are you filing for ATI now?

Transatlantic flying has been consolidated around two powerful alliances - Star and SkyTeam - both of whom have anti-trust immunity on North Atlantic routes.

They have both added transatlantic services between Heathrow and the US 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 current economic crisis is putting tremendous pressure on the entire industry and makes the need to remain competitive even more essential.

What did the Open Skies agreement change?

The agreement enables EU and US carriers to fly between any point in the US and any point in the EU - including removing the restrictions on which airlines could fly from Heathrow to the US.

Will you surrender slots at Heathrow this time?

We do not believe that is necessary given the number of new entrants with services to the US from Heathrow.

This demonstrates that slots are available through the open market and intra-alliance transfers.

Will this lead to BA and AA being dominant in the transatlantic market out of London/UK?

No. Heathrow is no longer restricted and is now open to any EU or U.S. airline wishing to operate between London and the U.S. Nine airlines fly between Heathrow and the US compared to four before Open Skies was implemented. (Five new airlines are Delta, Continental, NorthWest, US Airways and Air France).

The UK - US market is highly competitive with 16 airlines competing non-stop between the two countries. In addition, there are 42 airlines competing non-stop between the EU and US.

British Airways has 41 per cent of slots at Heathrow, considerably less than other EU and US network carriers at their home bases. For example, Lufthansa has 61 percent at Frankfurt, Air France has 58 percent at Charles de Gaulle and KLM has 58 percent at Amsterdam.

The other alliances that operate across the north Atlantic, Skyteam and Star, have antitrust immunity which airlines in oneworld do not. Obtaining ATI would enable oneworld to compete more effectively and increase interalliance competition.

Will the regulators approve this application?

We are optimistic that regulators will see the advantages this immunity would provide customers and the airlines. The antitrust protection enjoyed by our rival alliances Sky Team and Star sets an encouraging precedent. Giving oneworld the ability to compete effectively with other alliances is a compelling benefit for customers and will help ensure continued competition.

Do the airlines need European Union approval?

The EU's Director General for Competition will review the joint business agreement. Unlike the U.S, there isn't a formal filing that takes place in the EU.

What will this application mean for the oneworld alliance?

It will enable oneworld to compete better on the world stage by offering customers smoother, more convenient travel.

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, oneworld is at a distinct disadvantage versus Sky Team and Star, each of which enjoys antitrust protection.

Will the US Department of Transportation's request for more information, delay the process for reviewing your anti-trust immunity application?

The DOT's request is standard procedure during the review process. We don't anticipate any difficulty in responding to the request nor do we expect it to cause any delay.

Our response to claims made by Virgin Atlantic and its president

There are 42 airlines flying between the EU and the US. Only one has expressed outright opposition to our application - Virgin Atlantic.
Virgin is using the same arguments it used against previous applications in 1996 and 2001. Even the slogan is the same.
Virgin has no new arguments to address the facts that Open Skies has transformed the regulatory environment and the Star and Skyteam alliances have already been granted the legal status we want for our alliance with American Airlines.
Virgin uses market share figures that are not relevant.
Virgin has double standards. In the UK, it criticises anti-trust immunity but, in Australia, it is in favour. The Virgin Blue Airlines group has applied for ATI for a planned collaboration with Delta Airlines on routes between the US and Australia and the South Pacific. Virgin says this plan will improve competition "by offering consumers greater choice of destinations, frequencies and schedules" - echoing what we have said about our ATI application.
Virgin Atlantic is 49 per cent owned by Singapore Airlines, a leading member of Star, and has commercial relationships with six other Star airlines. Star has a major presence at Heathrow. Virgin did not oppose the ATI applications of Star or Skyteam.
Virgin talks about monopolies - which it understands very well. It has been running a monopoly on fast trains between London and Manchester for the last decade.