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Joaquín Almunia Vice President of the European Commission responsible for Competition Policy British Airways, American Airlines and Iberia transatlantic alliance Press conference – Berlaymont press room Brussels, 14 July 2010

Commission Européenne - SPEECH/10/389   14/07/2010

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SPEECH/10/389

Joaquín Almunia

Vice President of the European Commission responsible for Competition Policy

British Airways, American Airlines and Iberia transatlantic alliance

Press conference – Berlaymont press room

Brussels, 14 July 2010

Today the European Commission has decided to close its investigation on the transatlantic joint venture between British Airways, American Airlines and Iberia; the three airlines that are members of the oneworld alliance.

We have reached this decision on the basis of the commitments the airlines have given.

We have analysed 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.

Our analysis of the case was conducted in close cooperation with the US authorities, in particular the US Department of Transportation.

Our decision today makes these commitments legally binding on the airlines for the next 10 years.

This is good news for the three airlines, whose partnership joins the two other transatlantic joint ventures – Star and SkyTeam – which have been in operation for some years.

More importantly, it is good news for passengers, who will benefit from a broader choice of flights and will continue to enjoy the benefits of competition.

The Commission's investigation identified six transatlantic routes where the alliance might harm competition.

To address the Commission's concerns, the three airlines have agreed to create the conditions for other airlines to enter the routes and expand their offer of services, so as to increase the competitive pressure on the alliance.

Let me briefly list the main commitments taken by British Airways, American Airlines, and Iberia:

First, they will make landing and take-off slots available at London Heathrow or London Gatwick airports for flights to Boston, New York, Dallas, and Miami.

For the London-New York route, slots will also be freed at the JFK airport in New York if necessary.

Second, competitors will be allowed to offer potential customers a greater choice of frequencies by concluding so-called fare-combinability agreements with the alliance partners.

This will enable them, effectively, to carry passengers one-way on their own planes and sell tickets for the other leg of the journey on BA, AA and Iberia's flights.

Third, competitors will be allowed to offer tickets on the three airlines’ flights. This makes access to connecting flights a lot easier.

For instance a competing airline will be able to take a passenger from Manchester to London on a flight operated by BA and then connect to its own London-New York flight. These are the so-called pro-rate agreements.

Finally, if competitors do not have a frequent flyer programme comparable to the parties, they can offer members of the parties' programmes to earn miles when flying with them on these routes.

The parties have also pledged to keep the Commission informed on their cooperation. This will allow us to evaluate the impact of their alliance on the markets over time.

London Heathrow is the single most important aspect in today’s story.

With about 50 million annual passengers, traffic between the EU and US represents the largest international air transport market. And flights from Heathrow to the US account for around a quarter of that total.

The landing and take-off slots that will become available under the terms of the commitments will allow competitors to operate as many as 7 new return flights a day or 49 a week – as they are measured in the industry – between London and the four US destinations.

This is good news for the around 2.5 million passengers that each year use the six transatlantic routes covered by our decision.

Ladies and gentlemen,

Over the past few years, our policy has been to accept joint ventures and other forms of integration that bring advantages to airlines while making sure that integration does not come at the expense of consumers, who should not suffer in terms of choice, prices, and overall service.

I believe that our decision strikes the right balance between the interests of the industry and those of the passengers that travel between the EU and the US.

A word on the history of this alliance.

Some of you may remember that BA and AA tried to establish an alliance in the past; first, in the late 90s and again at the beginning of the last decade.

You may be tempted to compare the antitrust conditions set then and now.

But market conditions have changed fundamentally. Until two years ago, only two European airlines (BA and Virgin Atlantic) and two US carriers (AA and United Airlines) were allowed to operate between London Heathrow and the US.

The EU-US Air Transport Agreement liberalised access to London Heathrow as of end March 2008, which resulted in 12 new daily services by other European and US airlines between Heathrow and the US by the end of 2009.

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

Today's reality is therefore one of increased competition, compared to 1998 and 2002.

Today’s reality is also one of increasing consolidation in the sector due to the difficulties and changes that the sector has had to cope with.

Difficulties linked to the traffic perturbations because of terrorist attacks or threats, the global economic crisis and, recently, the closure of the European skies provoked by the volcanic ash cloud.

At the same, the commitment to reduce CO2 emissions also means that the favourable tax treatment they have enjoyed until now is coming to an end.

Europe has been no stranger to the consolidation trend. We have had the acquisition of KLM by Air France, Lufthansa's acquisitions of SN Brussels, Austrian and bmi, and the BA/Iberia merger, which we also examined and cleared today.

In the US you have had Delta and Northwest some time ago, and now the planned merger of Continental and United, for which we have until July 27 to rule on.

Mergers between EU and US carriers are still impossible due to ownership restrictions – mostly in the US – which the second-stage EU-US Air Transport Agreement, signed on 24th June, has not removed.

That's why we have transatlantic joint ventures, instead, which – to all intents and purposes – allow airlines to operate as single entities on routes between Europe and North America.

We will continue to examine the mergers and alliances with an open mind as we have always done, and against the policy approach confirmed only last week by the European General Court in its judgement in the Ryanair/Aer Lingus case.

Thank you.


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