American Airlines and British Airways describe the European Commission's preliminary ruling on its planned alliance as a welcome step forward, but legal experts believe the ambiguities and uncertainties of the ruling will only further prolong the approval process.
Most carriers opposing the alliance protest that the number of weekly London slots the Commission wants American and BA to give up - a maximum of 267 - is woefully insufficient. They also decry the idea that AA/BA should cut frequencies on major hub-to-hub routes over a six-month period rather than instantly.
American describes the call for reduced frequencies in certain markets as a 'kind of micromanagement of the marketplace' that it believes will be unpalatable to the US Departments of Transportation and Justice.
The Dallas-based carrier says it is most troubled by the Commission's separate ruling on the Star Alliance, which requires Lufthansa, SAS and United Airlines to give up only 108 Frankfurt and Copenhagen slots. 'We see this as demonstrating the continuing inequity in how they treat these two alliances,' says American's chairman and chief executive Donald Carty. The Star players take the opposite view and Lufthansa and SAS have threatened legal action.
Legal experts believe Carty's assertion that the alliance might be in place by October is wildly optimistic. They say that there must first be a 30-day comment period, that the DOT has yet to set a date for its hearings, and that approval remains linked to the still difficult US-UK open skies talks.
Washington analysts add that the DOT will be under political pressure to make the terms of approval for any alliance as strict as possible. Public interest in a competitive airline environment and in alliances is much keener in the US than in Europe, say the analysts.
But it is the uncertainty over how to interpret the Commission proposals that is prompting experts to say the ruling poses more questions than answers. American points out there is no indication that explicit slots should be given up, so it would look to relinquish the least productive slots, such as those used by BA out of Heathrow for short-haul services. BA also feels that the Commission's approach to slots is flexible. 'Our understanding is that they are accepting that people will be able to get slots under the normal process and we would not have to make them available,' says Chris Allen, BA's head of competition and industry affairs.
It is not clear whether either of those interpretations would satisfy Brussels or Washington, although the Commission has reiterated its previous statement that slots made available to competitors must be 'valuable'. Further, demand for those 267 slots is certain to be overwhelming, but there is no indication of how the slots would be shared out.
The Commission says AA/BA would have to reduce their frequencies between London and Dallas, Miami and Chicago 'if requested by a competitor'; the same applies to United/Lufthansa/SAS from Frankfurt to Washington and Chicago. Yet there is no mention of how large this cut should be or for what period.
Brussels also wants the UK, German and Scandinavian authorities to allow all European Economic Area carriers access to their transatlantic markets, but the US attitude to this idea remains to be seen.
The Commission says its draft proposals on the other alliances, Northwest Airlines/KLM and the Swissair group, can be expected by year-end.
Source: Airline Business
