BA poised to give up Heathrow slots

[August 11th 2008]

British Airways is believed to be ready to sacrifice valuable landing slots at Heathrow airport in order to be able to form an alliance with American Airlines.

When BA last tried to form an alliance with AA in 2002 the American regulators asked the airline to give up 16 pairs of the highly prized take off and landing slots at Heathrow in order for the deal not to breach competition guidelines. BA decided not to then, but the economic climate has now changed and airlines are much keener to form strategic alliances in order to achieve economies of scale.

In response rival airline Virgin Atlantic is reported to be launching a multi-million pound advertising and lobbying campaign. Virgin Atlantic chairman Sir Richard Branson has written to US presidential candidates Barack Obama and John McCain voicing his concerns that a tie up between BA and American Airlines would be anti-competitive.

“Airlines everywhere are struggling with the current price of oil, but the solution to their problems should not lie in an anti-competitive agreement, which would inevitably lead to less competition and higher fares,” Branson writes in the letter.

Branson argues that together BA, Iberia (the Spanish airline now in merger talks with BA) and American would own almost half of the take off and landing slots at Heathrow. According to Virgin figures, BA-AA’s market share in terms of capacity on key routes between Heathrow and the US would be 63% to New York JFK, 66% to Chicago, 72% to Miami, 82% to Boston and 100% to Dallas Fort Worth.

“BA-AA would have a combination of high frequencies and a transatlantic network that could not be replicated by any other airline/alliance, and which would make it impossible for other carriers to compete for time-sensitive corporate or business travellers,” Sir Richard writes to the UK presidential candidates.

The Independent newspaper quotes a ‘source close to BA’ as responding: "If we submit this application and if it's approved, there will be nine airlines operating across the Atlantic and Virgin will be the only one without antitrust immunity. They have got to recognise that the whole competitive climate has changed instead of just making the same arguments they did eight years ago."

Written by: Nick Purdom

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