European regulators back American Airline's joint venture

-- July 15--With only a final OK from U.S. regulators to go, American Airlines Inc. and two of its Oneworld partners are nearly set to launch their joint venture across the North Atlantic. The European Commission on Wednesday...


July 15--With only a final OK from U.S. regulators to go, American Airlines Inc. and two of its Oneworld partners are nearly set to launch their joint venture across the North Atlantic.

The European Commission on Wednesday approved the partnership of American, British Airways PLC and Iberia. That gives the carriers antitrust immunity so they can collaborate on pricing, scheduling, marketing, frequent-flier programs and other areas.

The carriers, all members of the Oneworld airline alliance, plan to greatly expand code sharing, or selling their partners' flights under their own name and flight number. That will give American more cities to sell flights to and from in Europe and beyond. Iberia and British Airways would be able to tap American's extensive network in the United States, Canada, Mexico and the rest of the Americas.

"We have long wanted to work more closely with our Oneworld partners in order to offer more products, services and value for our customers, our employees and our shareholders," said Gerard Arpey, American's chairman and chief executive.

"We await final action by the U.S. Department of Transportation on our proposal that will result in more competition in the trans-Atlantic marketplace and thus provide significant public benefit," he said.

Transportation officials gave a preliminary thumbs-up on Feb. 13 to the proposed joint business agreement, complete with antitrust immunity. The department is expected to give its final blessing late this week or early next week.

The European Commission, which raised questions last year about whether the carriers' agreement would be anti-competitive, accepted some concessions offered by the partners. With that, the EC is closing its investigation.

"We have analyzed these commitments, we have consulted other players in the market, and we have concluded that the remedies the airlines have introduced will secure for passengers the benefits of the alliance together with the prospect of additional services provided by other operators," said Joaquin Almunia, European Commission vice president for competition policy.

The commission set in stone for 10 years the offer from American, British Airways and Iberia to:

--Surrender enough slots to allow rivals to operate up to two daily flights from London's Heathrow Airport to New York Kennedy, two to Boston, one to Dallas/Fort Worth and one to Miami.

--Let the competitors' passengers on flights on those routes earn miles in the applicants' frequent-flier programs.

--Allow competitors to feed passengers to and from their own flights to the U.S.-London routes operated by the partners and to pro-rate the revenue from airfares.

While the proponents have touted the benefits of their alliance, opponents warned that the applicants would have a monopoly or virtual monopoly in a number of markets.

Those include the route between Heathrow and Dallas/Fort Worth International Airport, where only American and BA offer nonstop flights.

Almunia said the key point was Heathrow, which accounts for about one-fourth of the 50 million passengers each year between the United States and European Union countries.

He noted that American and British Airways had withdrawn two previous applications to form a partnership, one in 1998 and the other in 2002. They would have been forced to surrender many slots at Heathrow to ensure competition, he said.

"But market conditions have changed fundamentally. Until two years ago, only two European airlines, BA and Virgin Atlantic, and two U.S. carriers, AA and United Airlines, were allowed to operate between London Heathrow and the U.S.," he said.

A 2008 "open skies" agreement between U.S. and European Union negotiators allowed all comers into Heathrow as long as they could acquire the necessary slots. Almunia said carriers added 12 U.S.-Heathrow flights by the end of 2009.

"This is close to the total number of slots required by competition authorities in the 1998 and 2002 proceedings," he said.

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