THE ISSUE – A FAILED BID FOR ANTITRUST IMMUNITY

In 2002, American Airlines (AA) and British Airways (BA) filed for antitrust immunity. Had their request been approved, they would have been free to work together to set more competitive flight schedules and fares. Unfortunately for the two airlines, no agreement has yet been reached with the US and EU regulatory authorities.

The question is: are consumers losing out as a result?

THE BACKGROUND – A LOT HAS CHANGED SINCE 2002

Back in 2002, the landscape of the EU-US airline market was very different. New entrants to the market were prohibited, and AA and BA practically had a monopoly hold on daily departures between London Heathrow and the US.

The new EU-US Open Skies accord has changed all that. Since the first phase of this agreement was reached in 2007, the doors have been opened for new market entrants to fundamentally change the competitive landscape at Heathrow and other European airports. Airlines such as Air France, Delta, US Airways and Northwest have begun to challenge established Heathrow-US carriers: an example of the healthy competition that comes from open markets.

ARGUMENTS FOR – MORE CHOICE FOR CONSUMERS

Ultimately, passengers now have a wider choice of carriers, service levels and new non-stop destinations than ever before. 

Plus, there is now a serious potential contender in the London-US market. Heathrow’s second largest airline BMI has been raising its profile to business travellers over the past few months, while Lufthansa has recently increased its stake in the airline.  So, could direct links to the US be far off for BMI, giving consumers even more choice when it comes to transatlantic flights?

Notably, both BMI and Lufthansa are members of the Star Alliance, which already operates with antitrust immunity and as a result is growing stronger and more competitive by the day. In all this, the consumer is once again the winner.

ARGUMENTS AGAINST – THE IMPACT ON GATWICK AND COULD BA/AA ‘MONOPOLY’ INFLATE FARES?

The past few years have seen other London airports such as Stansted and Luton experiment with transatlantic links – with mixed results. And in the wake of Open Skies, a near ‘mass Exodus’ of carriers shifting their operations to Heathrow has led to radical changes at Gatwick. These changes could, in fact, continue – but in new direction. If Virgin Atlantic wins its bid to buy the airport from the British Aviation Authority, it could potentially shift consumer preference away from Heathrow with a superior airport experience.

Unsurprisingly, it is competitors such as Virgin Atlantic that most strongly oppose the BA/AA bid for antitrust immunity. Along with several consumer groups, Virgin Atlantic claims that the result would be a ‘stranglehold’ on Heathrow-US services,  which would enable BA and AA to coordinate schedules enough to inflate demand and therefore fares.

OUR CONCLUSION – AA/BA ANTITRUST IMMUNITY MAKES SENSE

While antitrust immunity could arguably have some impact on frequency and schedules as BA and AA coordinate their services, consumer demand and pressure from new competitors will help keep fares in check. Most importantly, it will give passengers an alternative choice of carriers on a scale not previously available.

So, overall, we feel there is no cogent argument for opposing the AA/BA request for antitrust immunity: a request that has been granted to many other alliances in Europe and the US. Its approval can only help to level the playing field between airline alliances, increase competitive pressures – and ultimately benefit consumers.

It is therefore in all our interests to urge lawmakers to approve the BA/AA application sooner rather than later.