11-Mar-2010 9:37 AM

British Airways, American Airlines and Iberia offer to lease out London slot pairs

British Airways, American Airlines and Iberia jointly offered (10-Mar-2010) to lease slot pairs for other airlines to use on specified transatlantic routes from London to "enable the European Commission (EC) to conclude its investigations into their transatlantic joint business". Additional daily slot pairs could be required to be made available, should competitive conditions between London and New York change. The European Commission launched an investigation into the proposed trans-Atlantic cooperation agreement between the carriers in Apr-2009, which will also include other oneworld carriers Finnair and Royal Jordanian. The airlines also require US Department of Transportation (DoT) anti-trust immunity to operate their transatlantic joint business. The airlines received tentative approval from the DoT in a show cause order published on 13-Feb-2010. 

The airlines will make available:

The carriers also offered the possibility of:

  • Two daily pairs from Heathrow or Gatwick to New York.

The slots can be leased from the airlines' current slot portfolio and do not have to be slots currently used on the specified routes. The European Commission has agreed that the airlines should be compensated financially by those airlines wishing to lease slots.

BA, AA and Iberia also proposed to:

  • Provide access to their frequent flyer programmes on the relevant routes, allowing passengers of the qualified new entrants to accrue and redeem miles on the parties' frequent flyer programmes;
  • Allow fare 'combinability' and offer special prorate agreements in relation to the routes of concern, which would enable competitors to offer tickets on the parties' flights and facilitate access to connecting traffic;
  • Submit data concerning their cooperation agreement, which would facilitate an evaluation of the alliance's impact on the markets over time. To monitor the implementation of the commitments, a trustee would be appointed. [more - British Airways]

British Airways: "We've offered to lease slots to gain EC approval for our joint business which will bring benefits to our customers, shareholders and employees. It will also enable oneworld to compete on a level playing field with the other global alliances across the Atlantic. We're pleased that the EC has recognised that we should be compensated for leasing the slots. This reflects the fact that there is an active slots market in London where slots are generally traded for value," Willie Walsh,  CEO. Source: British Airways, 10-Mar-2010.

American Airlines: “The offer on the leasing of slots that we have outlined to the European Commission is another important step in the process towards gaining EC approval for our joint business,” Will Ris, Senior VP of Government Affairs. Source: BizJournals, 10-Mar-2010.

The EC stated it intends to launch a public consultation and investigate the opinions of other carriers into whether opening up take off/landing slots at London Heathrow and Gatwick and New York JFK airports would create greater competition on routes from New York, Boston, Dallas-Fort Worth and Miami to London. The EC is looking to "address concerns that [the] planned alliance may harm consumers on transatlantic routes." If the market test confirms that the proposed commitments remedy the competition concerns, the EC may adopt a decision making the commitments legally binding on the parties. The consultation period would be one month. [more - European Commission]

European Commission: “The Commission believes at this stage that the commitments address its competition concerns… If the market test confirms that the proposed commitments remedy the competition concerns, the Commission may adopt a decision...making the commitments legally binding on the parties,” European Commissioner for Competition statement. Source: European Commission, 10-Mar-2010.

Virgin Atlantic stated the offer was “woefully inadequate” to counteract the competitive weight of a combined BA and AA (AP, 10-Mar-2010). Virgin believes that the tie-up would see the carriers control 47% of slots at London Heathrow, operating 100% of capacity to Dallas-Fort Worth, 80% of capacity to Boston, 70% to Miami, 68% to Chicago O'Hare, 62% to New York JFK and 48% to Los Angeles.

Virgin Atlantic Airways: "I continue to question why the Commission is even considering these proposals to try and put right the consumer harm of this monster monopoly when it does not seem to have any evidence of concrete consumer benefits," Richard Branson, President. Source: Reuters, 10-Mar-2010.

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