BA, American, Iberia to cede airport slots

[March 10, 2010]  BRUSSELS (AP) -- British Airways, American Airlines and Iberia have offered to give away takeoff and landing slots at London and New York airports to soothe European Union antitrust worries, EU regulators said Wednesday.

The European Commission said it would ask other airlines whether freeing up slots at London Heathrow, London Gatwick and New York's John F. Kennedy airports would be enough to create more competition and entice rivals to start new routes from those airports to New York, Boston, Dallas and Miami.

EU spokeswoman Amelia Torres said the offer could see rivals start two extra daily flights each from London to New York and from London to Boston and one more daily service from London to Dallas and from London to Miami.

If rivals are supportive, regulators said they would move to make the three airlines' offer legally binding and drop an antitrust case that could have racked up millions of euros (dollars) in fines.

One rival, Virgin Atlantic, said the airlines' offer was "woefully inadequate in counteracting the anticompetitive harm of a combined BA/AA," claiming that it would hurt consumers by raising prices and destroying competition.

The three airlines currently coordinate how they sell and operate flights between the 27-nation EU and the United States. They now want to expand their oneworld alliance to jointly manage schedules, capacity and pricing on flights from Canada, Mexico, Puerto Rico, Norway and Switzerland as well.

That triggered antitrust investigations in the EU and the U.S. as regulators worried that combining the services into new territories would limit competition and hike fares on lucrative trans-Atlantic routes.

BA, American and Iberia claim that the planned new alliance would reduce fares and give passengers more convenient connections and better access to some 500 destinations.

Virgin said BA and American would have a monopoly or be dominant on some of the busiest and most profitable routes between the U.S. and London Heathrow, where they would control 47 percent of slots.

From Heathrow, the two would control all flights to Dallas Fort Worth, 80 percent of capacity to Boston, 70 percent to Miami, 68 percent to Chicago O'Hare, 62 percent to New York JFK and 48 percent to Los Angeles.

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

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.

The airlines seem to have soothed antitrust concerns this time with their new offer. British Airways chief executive Willie Walsh said he was pleased that EU regulators would allow them to be paid for leasing the slots, which can cost up to 30 million pounds a pair at Heathrow.

BA, American and Iberia are also promising to open up their frequent flyer program for those routes, allowing passengers on the new services to gain or redeem air miles on their points programs.

They also said they would help new services to connect with airlines on their own networks and would regularly tell regulators about their cooperation to help the EU evaluate how the alliance is affecting competition. A trustee will be appointed to monitor the offer.

The EU executive said it has been in "close contact" with the U.S. Department of Transportation, which is also investigating the airlines' deal.

The Department of Justice said in December that the tie-up would cause competitive harm and hike prices unless the airlines surrendered some takeoff and landing slots.

[Associated Press; By AOIFE WHITE]

Associated Press writer Jane Wardell in London contributed to this story.

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