British Airways and American Airlines merger closer
February 16th, 2010 by elisa

The US Department of Transportation gave a nod in favour of a merger between British Airways and American Airlines this weekend, however it has been condemned by Virginboss Sir Richard Branson as a “kick in the teeth”.

Responding to the Department’s proposal to grant immunity from antitrust competition laws to American Airlines, Sir Richard said “consumers would pay the price for years to come” and it would “blatantly harm competition”.

Antitrust laws exist in the US to stop airlines from fixing prices and schedules but airlines can be granted immunity if it is thought that the end user will actually benefit from airlines working more closely.

The Department of Transportation said this weekend that it thought the merger would boost competition in the industry “by creating competition with the existing Star Alliance and the SkyTeam alliance, which already have been granted immunity.”

The Department said that if the merger gets final approval, the alliance partners which include Iberia, Finnair and Royal Jordanian Airlines, “would be able to more closely coordinate international operations in transatlantic markets.”

This proposed merger will only be approved if the airlines give up four pairs of the valuable transatlantic slots at Heathrow. Sir Richard said: “The US Department of Justice, who are the experts in competition issues, called for strict remedies to protect the public interest, because the alliance will blatantly harm competition and the consumer. The Department of Transportation has chosen to stick two fingers up at them. Millions of transatlantic travellers will be adversely affected if the alliance receives final approval.”

A spokesman said: “As verified by the DOT, their closer cooperation, made possible by antitrust immunity, will benefit customers with more travel choices and convenient schedules, expanded opportunities to earn and redeem frequent flyer miles, and greater availability of lower fares.”

Talks have already started in Madrid about improving the liberalisation of transatlantic air travel. European speakers will argue that the route is still dominated by US carriers and that European airlines should be able to merge with US carriers in order to benefit from the lucrative route. At the moment, US law prevents non-American companies from owning more than a quarter of the voting stock of American airlines.

To see my original blog regarding the merger, click here.

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