What will airline tie-up mean for holidaymakers?

15 February 2010

Sir Richard Branson has described the proposed tie-up between British Airways and American Airlines as a "kick in the teeth" for consumers.

Shares in British Airways surged to the top of the risers' board after the lucrative tie-up between the struggling carrier and its potential partner moved a step closer.

The US Department of Transportation has proposed granting the "oneworld" alliance immunity from anti-trust competition laws, as long as they give up four pairs of take-off and landing slots at Heathrow. This is much lower than the 16 pairs of slots specified by the regulator last time the airlines attempted to join forces.

However, Virgin's Sir Richard Branson claimed the tie-up.

"The US Department of Justice, which is the expert in competition issues, called for strict remedies to protect the public interest, because the alliance will blatantly harm competition and the consumer," he said. "The Department of Transportation has chosen to stick two fingers up at it."

Other airlines now have 45 days to respond to the department's decision.

The airlines have been fighting for 12 years to win immunity from anti-trust laws, allowing them - and their commerical partners, Iberia, Finnair and Royal Jordanian Airways - to co-ordinate schdeules, cross-sell tickets and pool revenues.

In theory, this means lower fares on more routes, increased services, better schedules and reduced travel and connection times for passengers. It could also help to turn around the fortunes of embattled British Airways, which is struggling under a huge pension deficit and looming strike action. It is on track to report record losses this year.

Bob Atkinson, travel expert at travelsupermarket.com, says the move is beneficial to customers as it will make flight options more flexible.

"This tie-up will allow the airlines to co-ordinate schedules so frequent and business travellers will get a far better service overall - an hourly service to New York is one possibility," he adds.

"Passengers will also be able to swap and book over both airlines, so fly out with one and back with the other."

Prices are also likely to remain competitive, according to Atkinson, as there will still be plenty of choice of routes. If British Airways was to hike prices, he thinks it likely that customers will "march with their feet".

The decision - which is still subject to EU approval - would give both airlines more than 47% of the market between the US and UK, controlling 80% of flights from London Heathrow to Boston and 62% of flights from Heathrow to New York JFK.

In contrast, Virgin owns 21%. However, in the wider US to EU market, the group would only have a 22% share compared to Star Alliance's 32% and SkyTeam's 29%.

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