Cyclic Hotline
18th Dec 2001, 09:21
Justice Dept. Says BA-AA Alliance Should Cede Slots
By Peter Kaplan
WASHINGTON (Reuters) - The U.S. Justice Department on Monday urged the rejection of a proposed alliance of British Airways and American Airlines unless rival U.S. carriers are granted slots for at least nine daily round trips to London's Heathrow Airport from New York and Boston.
The department's antitrust division said the Transportation Department should require the new slots, along with ''substantial new air service from other U.S. cities,'' before letting the two airlines consummate the deal.
American Airlines, a unit of AMR Corp., and British Airways, are seeking antitrust immunity to closely coordinate their schedules and jointly set prices on flights between the United States and Britain.
The Transportation Department has said it would like to make a final decision on the alliance by early next year.
But the Justice Department's antitrust division said the proposed transatlantic alliance "threatens a substantial loss of competition which would likely result in higher air fares and reduced service.''
To keep the New York-Heathrow and Boston-Heathrow service competitive, the department said, the transportation officials should require the companies to divest enough "slots and related facilities'' to allow rivals to operate seven daily round trips from New York and two from Boston.
The divestments would amount to 126 weekly take-off and landing slots.
Even if those conditions were met, antitrust officials said, the Transportation Department should still withhold any antitrust immunity for flights between Dallas and London and Chicago and London because American and British Airways have hub airports at both ends of those routes.
In their original application to U.S. authorities, the two carriers did not offer to divest any Heathrow slots.
British Airways and American said in a joint statement afterwards that the Justice Department's requirements were ''inappropriate.''
The companies complained that the department had underestimated the availability of slots at Heathrow and "the competitive advantages already being enjoyed by other global alliance networks.''
But the companies said the requirements were not as objectionable as the ones the department recommended in 1998, the last time they applied for antitrust immunity. In that case, the department said they should divest at least 24 daily round trip slots at Heathrow.
Another source close to the deal characterized the Justice Department comments as "an aggressive, outside position'' for talks with the Transportation Department. They expect that agency to take a softer line, according to this source.
A spokesman for Continental Airlines applauded the comments.
"They still say that the alliance threatens competition; they still say that there will be higher airfares and reduced service; they still say consumers will be harmed,'' said Hershel Kamen, staff vice president for international and regulatory affairs at Continental.
Another vocal critic of the alliance, Virgin Atlantic, said the department should have called for the divestment of even more slots.
"From our point of view, the DOJ's proposed compensation is inadequate and there should be a higher penalty,'' Virgin said in a statement.
United Airlines spokeswoman Chris Nardella said the company applauded the department's comments on its own alliance with British Midlands. But she declined to comment on the department's position regarding the BA/AA alliance.
Only four carriers currently fly directly between Heathrow and U.S. cities under the 1991 revision of the 1977 Bermuda II treaty between the United States and Britain -- BA, American, Virgin Atlantic VA.UL and UAL Corp.'s United Airlines.
At issue is whether steps to allow more airlines to serve U.S. cities directly from Heathrow can justify a companion proposal for the two biggest carriers already serving that market to form an alliance with antitrust immunity.
The U.S. and British governments are keen to liberalize their aviation treaty after years of fruitless talks, heartening supporters and energizing opponents who charge it will boost the power of already dominant airlines.
Adding urgency to the task is a looming European court decision, which is widely expected to outlaw bilateral air negotiations by individual European Union member states. A ruling is expected sometime next year.
The Transportation Department rejected a similar 1997 petition from British Airways and American in 1999, citing insufficient access to Heathrow, the world's busiest international airport.
By Peter Kaplan
WASHINGTON (Reuters) - The U.S. Justice Department on Monday urged the rejection of a proposed alliance of British Airways and American Airlines unless rival U.S. carriers are granted slots for at least nine daily round trips to London's Heathrow Airport from New York and Boston.
The department's antitrust division said the Transportation Department should require the new slots, along with ''substantial new air service from other U.S. cities,'' before letting the two airlines consummate the deal.
American Airlines, a unit of AMR Corp., and British Airways, are seeking antitrust immunity to closely coordinate their schedules and jointly set prices on flights between the United States and Britain.
The Transportation Department has said it would like to make a final decision on the alliance by early next year.
But the Justice Department's antitrust division said the proposed transatlantic alliance "threatens a substantial loss of competition which would likely result in higher air fares and reduced service.''
To keep the New York-Heathrow and Boston-Heathrow service competitive, the department said, the transportation officials should require the companies to divest enough "slots and related facilities'' to allow rivals to operate seven daily round trips from New York and two from Boston.
The divestments would amount to 126 weekly take-off and landing slots.
Even if those conditions were met, antitrust officials said, the Transportation Department should still withhold any antitrust immunity for flights between Dallas and London and Chicago and London because American and British Airways have hub airports at both ends of those routes.
In their original application to U.S. authorities, the two carriers did not offer to divest any Heathrow slots.
British Airways and American said in a joint statement afterwards that the Justice Department's requirements were ''inappropriate.''
The companies complained that the department had underestimated the availability of slots at Heathrow and "the competitive advantages already being enjoyed by other global alliance networks.''
But the companies said the requirements were not as objectionable as the ones the department recommended in 1998, the last time they applied for antitrust immunity. In that case, the department said they should divest at least 24 daily round trip slots at Heathrow.
Another source close to the deal characterized the Justice Department comments as "an aggressive, outside position'' for talks with the Transportation Department. They expect that agency to take a softer line, according to this source.
A spokesman for Continental Airlines applauded the comments.
"They still say that the alliance threatens competition; they still say that there will be higher airfares and reduced service; they still say consumers will be harmed,'' said Hershel Kamen, staff vice president for international and regulatory affairs at Continental.
Another vocal critic of the alliance, Virgin Atlantic, said the department should have called for the divestment of even more slots.
"From our point of view, the DOJ's proposed compensation is inadequate and there should be a higher penalty,'' Virgin said in a statement.
United Airlines spokeswoman Chris Nardella said the company applauded the department's comments on its own alliance with British Midlands. But she declined to comment on the department's position regarding the BA/AA alliance.
Only four carriers currently fly directly between Heathrow and U.S. cities under the 1991 revision of the 1977 Bermuda II treaty between the United States and Britain -- BA, American, Virgin Atlantic VA.UL and UAL Corp.'s United Airlines.
At issue is whether steps to allow more airlines to serve U.S. cities directly from Heathrow can justify a companion proposal for the two biggest carriers already serving that market to form an alliance with antitrust immunity.
The U.S. and British governments are keen to liberalize their aviation treaty after years of fruitless talks, heartening supporters and energizing opponents who charge it will boost the power of already dominant airlines.
Adding urgency to the task is a looming European court decision, which is widely expected to outlaw bilateral air negotiations by individual European Union member states. A ruling is expected sometime next year.
The Transportation Department rejected a similar 1997 petition from British Airways and American in 1999, citing insufficient access to Heathrow, the world's busiest international airport.