View Full Version : AA/BA Is it All Over?

25th Jan 2002, 19:35
DoT Gives Tentative Approval of AA/BA... But is the price too high?

224 Slots Looks like its too much for AA or BA to give up. BA thought they had it in the bag and had won the argument with the UK Government at least...



The Department of Transportation today tentatively approved antitrust immunity covering the alliances of air carriers American Airlines and British Airways, and United Airlines and bmi, a decision that will significantly benefit consumers by expanding service to a host of U.S. cities; encouraging additional price competition; and increasing passenger choice.

Final approval of antitrust immunity, which depends on several conditions yet to be met, will greatly enhance competition in the nation’s largest overseas market by allowing four new U.S. carriers to enter the London Heathrow market, and providing passengers with 17 new roundtrip services between the U.S. and Heathrow Airport for a total of more than 6,200 new flights per year.

The Department’s analysis and tentative conclusions for approving anti-trust immunity are largely in line with the recommendations of the Department of Justice. Tentative approval of antitrust immunity is based on several conditions yet to be met, including the divestiture by American and British Airways of 224 take-off and landing slots for flights by new competitors between U.S. cities and Heathrow airport.

The Department’s order tentatively allocates those slots as follows:. . 5 daily roundtrips to Continental (3 of which must be served from Newark) . . 6 daily roundtrips to Delta (3 of which must be served from New York’s JFK. .Airport, and 1 from Boston). . 3 daily roundtrips to Northwest. . 2 daily roundtrips to US Airways . . bmi would be required to provide slots to United for a daily round trip from Boston.

Final approval also hinges on the finalization of an open skies agreement between the U.S. and U.K. The nation’s existing aviation agreement with the U.K., one of its most restrictive, limits where U.S. carriers can fly, how many flights they can operate, and what prices they may charge, providing minimal consumer choice for the almost 18 million passengers traveling the route every year. The latest round of open skies talks are expected to begin in Washington on Monday, January 28.

A copy of the order can be obtained by visiting: <a href="http://dms.dot.gov//reports/reports_aviation.asp" target="_blank">http://dms.dot.gov//reports/reports_aviation.asp</a>

[ 25 January 2002: Message edited by: oncemorealoft ]</p>

25th Jan 2002, 19:54
No-one seems to know if you go by the volatility in BA's share price today - its been all over the place

25th Jan 2002, 19:57
Interesting that all slots should go to US carriers. Poor bmi has to give up slots to allow UA to operate flights, when they have all along wanted to operate themselves from LHR to the US. Sir Michael may be crying into his soup now!

25th Jan 2002, 20:12
If I understand correctly, if BMI refuse to give up a slot for United than the deal can not go ahead. Don't see why that should be, but I can't see any reason why BMI would want to do that, and their Star Alliance partner is unlikely to put pressure on them if it means quashing the BA/AA get together.

Seems like good news for Michael Bishop to me.


25th Jan 2002, 20:23
So does this mean that bmi will get any flights to the US from LHR?

25th Jan 2002, 20:34
I remember when AA paid TWA somewhere in the neighborhood of 300 million for those LHR slots back in 91 and now CAL,DAL,US are getting slots for free. AA is the worlds undisputed leader at pissing away cash!

25th Jan 2002, 21:02
raas 767

They haven't got them yet and won't unless AA & BA agree to the proposal.

25th Jan 2002, 21:10
How about building more runways and adding terminal capacity at LHR, or has someone thought of that already..

Hold at Saffa
25th Jan 2002, 21:59
Not quite, Raas (hi, btw! <img src="smile.gif" border="0"> ). . [quote]AA is the worlds undisputed leader at pissing away cash! <hr></blockquote>. .The Belgians take a lot of beating!

25th Jan 2002, 22:13
It is a joke!

Having worked at LHR over the summer logging departing flights, I calculated (roughly) that the percentage of LHR slots held by Star Alliance airlines is in the region of 37%, and the percentage held by One World airlines is in the region of 43%.

This strikes me as strange. BA is considerably larger than BMI, and holds considerably more slots than BMI, yet still Star has nearly the same number of slots even though BMI can hardly be called a major member of the alliance.

Also, bare in mind that at AA's main hub in Dallas/Fort Worth, AA has over 80% of the slots, and NorthWest has over 90% of the slots at its main hub in Minneaspolis (spelling??).

Is this fare?? I think not. Why does the UK government insist on trying to damage a major British company's business in order to improve competition for US companies?

Also, why is there so much red tape over essential improvements at LHR. The government should be approving terminal 6 not still wasting time on terminal 5, and a third runway should be built. It is too late to try and build another London airport.

25th Jan 2002, 22:22
No comprendo...224 slots = 112 T/O's and 112 LDG's. These numbers are way in excess of the round-trips "awarded" to new competitors, assuming each round-trip involves one landing and one take-off at LHR, which are listed in the 1st entry in this thread. What happens to all the other slots? (I imagine there is a simple answer to this, which will make my question look very stupid...but I would like to know it)

25th Jan 2002, 22:30
Miss Chief

My calculator reckons..... .5 x 7 + 6 X 7 + 3 X 7 + 2 X 7 = 112

As these are round trips that 224 take-off and landing slots.

25th Jan 2002, 22:57
I guess it will be up to AA and BA to figure out if the increase in revenue generated by an immune alliance will offset the increase in competition and loss of slots. I don't know but I would be surprised if BA or AA goes for it. I think there is more lobying in the future before we here the end of this.

25th Jan 2002, 22:58
splonguk: not too sure how relevant your stats are.

These don't take into account the fact that a significant percentage of BA shorthaul work has shifted to LGW, whilst bmi are still fighting the good fight to get into the bravos and charlies.

Can't quite work out whether this announcement is exactly what Sir Mickey would have liked, what with more 330's on the way soon and no where to fly them. Doesn't sound too good to me from bmi's point of view <img src="confused.gif" border="0">

25th Jan 2002, 23:11
Oh dear, oh dear..... IT IS ALL OFF AT THIS PRICE!!!

<a href="http://www.american-britishairways.com/newsroom/releases/012502pm.htm" target="_blank">http://www.american-britishairways.com/newsroom/releases/012502pm.htm</a>

<img src="mad.gif" border="0"> <img src="eek.gif" border="0"> <img src="frown.gif" border="0"> <img src="mad.gif" border="0"> <img src="eek.gif" border="0"> <img src="frown.gif" border="0">


What I can't understand is why BA/AA have had so many restraints put on them and the likes of Delta, Air France etc etc haven't....WHY???

26th Jan 2002, 00:03
Welcome to US government policy.

Tariffs, WTO, GATT, everything the US government gets involved in, you can rest assured that US corporations will NEVER be disadvantaged and the majority of the time they will be advantaged.

When will the United States government realise that IMPERIALISM was supposed to have died with Queen Victoria!

26th Jan 2002, 00:11
Actually, there's many on both sides of the pond who feel the deal may have stood a better chance if BA didn't think and behave like it was the preferred tool of the Holy British Empire! <img src="rolleyes.gif" border="0">

26th Jan 2002, 00:29
they can be, and are most certainly a tool

26th Jan 2002, 01:01
&gt;&gt;&gt;When will the United States government realise that IMPERIALISM was supposed to have died with Queen Victoria!&lt;&lt;&lt;

to everything, spin, spin, spin! why is it that a proposed virtual merger is viewed as consumer friendly!

seems just the opposite to me? but I could be wrong. the suggested slots give away did nothing to even the field, yet BA couldn't even imagine letting a bit of competition onto the field.

shame isn't it?

Joystick Incider
26th Jan 2002, 01:01
The slots BA hold seem to be the only assets left having sold off most of the family silverware. I just cannot see BA chucking away so many valuble slots especially to the Atlantic competitors. Mind you with 'Future Size and Shape' looming who knows what RE maybe thinking! <img src="rolleyes.gif" border="0">

26th Jan 2002, 02:19
A couple of small points here;

If the alliance goes ahead, and bearing in mind that most of the airline's income is from 1st and Business class passengers, the alliance will have a 100% monopoly from DFW, 82% from Miami and over 50% from New York (JFK and EWR), Boston and Chicago. I could go on, but spewing numbers is like watching grass grow. Point is, where's the competion here ??

As for Northwest owning Minneapois etc., it's all pre-arranged. American in DFW and ORD; USair in CLT; CAL in EWR and Houston, UA in ORD, DEN and SFO as well as Delta in Atlanta and SLC. Obviously, no collusion here. Just an old-boys agreement that if you don't fly here, I won't fly there. Thank God for the likes of Alaska, Southwest, Jet Blue and Airtran. Otherwise, nobody could ever afford to fly...at least when they want or have to.

Rant officially over..

. .Whatshouldiuse

26th Jan 2002, 03:08
Avarice all round, U.S.A and BA the usual culprits. You got what you deserve, representatives of the greed "culture". Sad to see that other nations/airlines seem to be able to do things so much better.

26th Jan 2002, 03:16
Its over, AA and BA have walked away from the deal as the slot divestiture is too expensive. I got this from Yahoo news.

. . . .Friday January 25, 5:00 pm Eastern Time. .Airlines Call Off Proposed Alliance. .American Airlines, British Airways Reject Transportation Dept. Conditions, Call Off Alliance. .By JONATHAN D. SALANT . .Associated Press Writer. .WASHINGTON (AP) -- American Airlines and British Airways on Friday walked away from a proposed alliance rather than give up takeoff and landing slots at London's Heathrow Airport.. .

The decision marks the second time in five years that the two airlines dropped their request to set rates and routes together and sell each other's tickets because federal regulators insisted that they give up the coveted slots as part of the deal.

"We will not do this deal at this price,'' American Chairman Don Carty and British Airways Chief Executive Rod Eddington said in a joint statement. "We made it clear from the start that we would not conclude the deal if the regulatory price was too high. Regrettably this has proved to be the case.''

The two airlines said they would still try to work together within existing rules.

Transportation Department spokesman Leonardo Alcivar said the airlines' decision means the agency will not act on the carriers' current application for an alliance. The airlines could come back with a new plan, Alcivar said.

The department earlier Friday tentatively agreed to give antitrust immunity for an alliance if the airlines gave away 224 takeoff and landing slots for travel between U.S. cities and London's Heathrow Airport.

Transportation Secretary Norman Y. Mineta said the ruling was based on a Justice Department recommendation. Both the Justice Department and Congress' General Accounting Office had said the proposed American-British Airways alliance could reduce competition and drive up fares.

"The conditions parallel those suggested by the U.S. Department of Justice and are intended to ensure that consumer interests and competition would be protected in the important North Atlantic aviation market,'' Mineta said.

The two airlines also called off a proposed alliance in 1999 rather than give up slots at Heathrow, which the GAO called "the pre-eminent airport in the United Kingdom.''

"American Airlines and British Airways probably concluded that the status quo was better than the U.S. terms and conditions for the alliance,'' said David Stempler, president of the Air Travelers Association, an advocacy group representing airline passengers.

The Transportation Department's ruling would have allowed four additional U.S. airlines to fly to and from Heathrow -- doubling the number of airlines on the coveted routes and significantly increasing the number of flights, especially from the Northeast.

Currently, only four airlines -- American, British Airways, United Airlines and Virgin Atlantic -- fly between the U.S. airports and Heathrow.

Under the rejected plan, there would have been 6,200 new flights between U.S. cities and Heathrow Airport per year, about 25 percent more than the current 25,000 flights. The new slots would have gone to Continental, Delta, Northwest and US Airways.

"It would make perfect sense that American and British Airways would not want to give up that much of a competitive edge,'' said Dean Headley, associate professor of marketing at Wichita State University and co-author of an annual study on airline quality. "The airlines don't want to have good healthy competition.''

As part of the deal, the department also tentatively approved a marketing alliance between United Airlines and bmi british midland. The British airline would have to give up slots to allow United to fly roundtrip between Boston and Heathrow.

And the entire deal was contingent on the United States and United Kingdom agreeing to drop restrictions on flights between the two countries. Negotiations on a so-called "open skies'' agreement, scheduled to resume next week, have been postponed, Alcivar said.

Both Mineta and a spokesman for the United Kingdom's Department of Transport said they wanted to work toward allowing more airlines to fly between the two countries.

"We will continue working with the United Kingdom to achieve our long held mutual objective of open skies,'' Mineta said.


On the Net:

Transportation Department order: <a href="http://dms.dot.gov//reports/reports--aviation.asp" target="_blank">http://dms.dot.gov//reports/reports--aviation.asp</a>

American AirlinesBritish Airways statement: <a href="http://www.amrcorp.com" target="_blank">http://www.amrcorp.com</a>

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26th Jan 2002, 04:40
It ended officially:

[quote] From BBC News Online, 25 Jan 2002. .British Airways proposed alliance with American Airlines appears to have collapsed, after the two airlines said regulatory terms set out by the US government were too tough. . .American Airlines at a glance . .World's biggest airline by passenger numbers. .2000 revenues $19.7bn. .Destinations served 242. .Countries served 52. .Aircraft 725. .Founded 1926 . .Earlier on Friday the US Department of Transportation gave the go-ahead for the deal, but only on condition that the two airlines surrendered more than 200 of their take-off and landing slots at Heathrow.

The two airlines said they would not go ahead if the regulatory price was too high.

"Regrettably this has proved to be the case," British Airways' chief executive Rod Eddington and American Airlines chairman Don Carty said in a joint statement.

"The conditions laid down by the US government do not make sense for either company."

"We will not acquiesce to unrealistic, and in our view, unnecessary demands. For us the price is just not right."

Open skies talks off

The US Department of Transportation said the two airlines would be allowed to coordinate their ticket pricing and flight schedules, provided they surrendered 224 of their lucrative Heathrow landing slots to US carriers.

British Airways at a glance . .World's fifth biggest airline by passenger numbers. .2000 revenues $8.9bn. .Destinations served 230. .Countries served 94. .Aircraft 341. .Founded 1919 (earliest origins)

US officials added they would withhold final approval until the US and the UK governments sign an 'open skies' agreement, committing both sides to liberalising the market for air travel between the two countries.

Talks on a transatlantic open skies deal were due to resume between US and UK officials on Monday, but have now been postponed.

"We still want to work with the Americans towards a full and genuine liberalisation of the UK/US market," the UK Foreign Office said in a statement.

"Ministers have told their US counterparts that we hope to re-engage with them soon."

More talks?

Some analysts reckoned the airlines would try and persuade the US Transport Department to ease the conditions.

"This may just be posturing by the airlines as part of their effort to get an alliance on their terms," said Richard Gritta, an airline finance professor at the University of Portland.

"I think they will go back to the negotiating table and try to reduce the conditions and keep more slots," said ABN Amro airlines analyst Ray Neidl.

But he warned "it'll be a long drawn-out process. Both sides have started to dig in."

'Waste of money'

Sir Richard Branson, the boss of rival airline Virgin Atlantic, was sharply critical of both British Airways and the government.

"This deal was never going to be acceptable to the regulators," he said.

"BA has wasted five year's of everyone's time."

He added that questions should be asked as to why BA had been allowed to "waste such a colossal amount of taxpayers' money."

"Both Conservative and Labour administrations have failed to secure a UK/US open skies deal because all recent proposals were based on the narrow, anti-competitive interests of one British company."

He called for open skies talks to be handed over to the EU to enable a deal to be struck between Europe and the US.

11 September fallout

BA and AA have both been hit hard by a slump in passenger numbers since the 11 September attacks.

BA, which reported 98% drop in profits for the three months to September last year, is carrying out a number of cost-cutting measures in a bid to avert major losses.

City analysts say the airline could lose as much as 750m by the end of the financial year in April.

Two weeks ago, American Airlines' parent company AMR said it lost $800m during the final three months of 2001.

BA shares closed 10.25p lower at 217.25p on Friday, off earlier highs of 240p. . . <hr></blockquote>

Go here for the article and a few multimedia things (one of which is Richard Branson sharing his views!) <a href="http://news.bbc.co.uk/hi/english/business/newsid_1782000/1782166.stm" target="_blank">BBC News Story</a>

. .SFly

[ 26 January 2002: Message edited by: SFly ]</p>

26th Jan 2002, 06:02
In my opinion both AA and BA are posturing in the hope that a better deal with respect to the loss of slots will be the eventual outcome.

It isn't over yet.

. .Regards. .Exeng

26th Jan 2002, 19:11
Does this mean that bmi will only ever be able to go Transatlantic from LHR when BA finds an offer acceptable? How long have we got - after all it only took 5 or 6 years this time around. Who knows what will happen if the EC takes over the 'Open Skies' discussions.

Are BA/AA being unreasonable in refusing to give up the 224 LHR slots pw bearing in mind they have nearly 200,000 per year between them? Or is Tricky Dicky right to call the US DOT proposal 'ineffectual' and 'inadequate'? We seem to be planets apart and poor old bmi is stuck in the middle with no-where to go.

Got this from the FT:

"The decision leaves BA in limbo on the international stage. The eight-airline Oneworld alliance it jointly created with American Airlines is now also in danger of imploding. . .It comes at a bad time for BA, which is already reeling from the crisis gripping the aviation sector and is facing the biggest full-year loss since privatisation 15 years ago. . .Oneworld has already been left behind by the rival Star alliance grouping, led by Germany's Lufthansa and United Airlines of the US, and SkyTeam, led by Air France and its US partner, Delta Air Lines. . .Both these alliances have US antitrust immunity and are starting to produce real benefits. "Antitrust immunity represents a considerable step up in the value of the customer proposition and the efficiency of the commercial operation," said Leo Mullin, Delta's chief executive. "Some 80 per cent of the benefits from any of the global alliances comes on the transatlantic."

. .How about a BA/bmi code share? Now that would be BAMI.

[ 26 January 2002: Message edited by: THR IDL ]

[ 26 January 2002: Message edited by: THR IDL ]</p>

26th Jan 2002, 20:24
Correction to the newspaper article. AA (including the TWA acquisition) now has about 840 aircraft.

With regards to the deal with BA . . . . I haven't seen the fat lady sing yet.

28th Jan 2002, 13:44
The small print of the DOT tentative approval specifically excludes Dallas and Chicago to London. ie those routes would not have anti-trust immunity even if everything else went ahead. That's for BA/AA at both and BD/UA at Chicago.

dallas dude
28th Jan 2002, 17:30
My two cent opinion...

I'm sure the ether was abuzz this weekend with the US airines' CEO's all realizing they'll get zero access to LHR if AA/BA fails. No AA/BA likely means no open skies which means status quo ante bellum.

Serious horse trading probably will mean a modified agreement with fewer slot give backs.

If only Branson spent as much time and effort running his train set properly!


28th Jan 2002, 20:01
This whole issue is very complex, but one has to wonder what will happen to Oneworld with both the other alliances performing better. One wonders if a move to allow the EU to negotiate with the USA will be better for the UK as a whole, not only VS and bmi. I suppose the only winner from this is VS as they now have no increase in pressure on their premium routes. What will bmi do? Collaborate with VS or BA or go it alone on other longhaul routes. At least at the moment bmi are not missing out on much as not many are travelling transatlantic anyway. BA must be wondering what the hell to do. Pressure on the shorthaul, and busy shooting themselves in the foot with longhaul. As with bmi, the cost base is too high and the savings are all being targeted from the wrong areas.

I think all sides could do with being brought together and having their collective heads banged together. We need to sort UK aviation out otherwise we will end up like our highly efficient public transport system! The issues of lack of runways / slots are vital components to get sorted out now, not in three years when CDG etc have taken all the pax. <img src="eek.gif" border="0">