EU regulator: Atlantic airline alliance is illegal

[October 02, 2009]  BRUSSELS (AP) -- European Union regulators said Friday they have charged British Airways, American Airlines and Iberia with breaking antitrust rules by sharing lucrative trans-Atlantic routes.

The European Commission said it sent a formal charge sheet to the three airlines last month, warning their cooperation violates rules that forbid companies striking deals that shut out rivals.

It said the charges involve the carriers' oneworld alliance, which coordinates how the companies sell and operate flights between the European Union and the United States.

BA, American and Iberia can now defend themselves in writing and at an oral hearing before the EU takes a final decision that could fine them up to 10 percent of global annual turnover if it finds them guilty of forming an illegal cartel.

British Airways said the charges were not a surprise and it looked forward to defending "the substantial benefits for consumers that would result from our trans-Atlantic joint business."

It says the alliance reduces fares and gives passengers more convenient connections and better access to some 500 destinations.

American Airlines said Thursday it had also received the "routine" charges. It did not give further comment.

Regulators said they were also investigating plans to expand the alliance to jointly manage schedules, capacity and pricing on flights from the Canada, Mexico, Puerto Rico, Norway and Switzerland as well as the U.S. and EU.

The EU executive said it would examine how the airlines plan to share revenues on those services.

Parallel investigations into other airline alliances are still under way, it said.

The EU is also investigating the Star Alliance run by Lufthansa, Continental, United and Air Canada as well as SkyTeam which combines Air France/KLM and Delta/Northwest.

It said it was only looking at member airlines that fly trans-Atlantic routes and the antitrust probe would not affect the other members of the alliances.

The EU has long been suspicious about how airline alliances such as oneworld and Star Alliance affect prices for flying between Europe and the United States.

Airlines do not compete directly against other alliance partners on some routes and instead may share a code for the same flight and pool some staff and services to lower costs. Such alliances emerged because many national rules discourage airlines from merging for fear of losing exclusive rights to flying routes.

American Airlines and BA have tried twice in the past decade to form a closer alliance, but the carriers withdrew those bids after regulators insisted that they give up sought-after landing and takeoff slots at London's Heathrow Airport, Europe's largest air hub.

U.S. regulators are still considering the airlines' current bid for antitrust immunity, which would let them cooperate on setting prices and schedules on some international routes.

BA says oneworld should be granted immunity "to compete on a level playing field with Star and SkyTeam" which it says have been granted antitrust immunity for larger and increasing shares of trans-Atlantic air travel.

"Those alliances carry more traffic out of the UK regions to the US than oneworld does," it said in a statement. "We merely want the same legal status to enable us to strengthen real competition."

In July, the U.S. Transportation Department granted antitrust immunity for Continental Airlines Inc. to work with other carriers, including United, on international routes. The decision largely overruled objections raised by the Justice Department, which said broad antitrust immunity would drive up fares and reduce competition.

[Associated Press]

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