COLIN BAKER LONDON
American Airlines and British Airways are turning up the heat in their bid for antitrust immunity backed by UK-US open skies. Analysts are looking for a deal before a November deadline.
The new urgency comes from a pending hearing in the European courts over whether the European Commission (EC) has power to negotiate air-service agreements over the heads of member states. The legal action dates back to 1998 when Brussels attempted to overturn the mass of US open skies deals arguing that they were incompatible with the single European air market. Brussels is thought likely to win the case, with November set as a target date for a ruling.
This has put pressure on European governments to act. The French, whose open skies deal with the USA is due to be phased in by 2003, could attempt to speed things up. This could see Air France and Delta Air Lines apply for antitrust immunity before Brussels wins a mandate to renegotiate.
For the UK, the hearing could represent the first time that there has been a hard deadline for reforming the Bermuda II bilateral, which still restricts the US presence at London Heathrow to two carriers. "The court case should be a very real catalyst for change. It should concentrate minds and get compromises made," notes Chris Avery, airline analyst at JP Morgan. The UK has traditionally been a fierce opponent of ceding what it sees as key negotiating rights to Brussels
As UK-US open skies talks come back onto the agenda, American and BA are also reviving their push for the antitrust immunity element of any deal. They last attempted this in 1996, but the regulatory price was too high. Washington was mooting that the partners give up 206 weekly slots at Heathrow, while Brussels effectively killed the deal with a figure of 267 and more at Gatwick.
Since then the landscape has changed dramatically. KLM/Northwest and Star partners Lufthansa/United Airlines are operating joint ventures on the transatlantic, while SkyTeam's Air France and Delta are moving towards this same goal. Most significantly, bmi british midland's decision to join the Star Alliance has changed the competitive environment at Heathrow. While oneworld has over 46% of slots, Star now also has nearly 25%. By comparison Lufthansa alone has over 60% of the slots at its Frankfurt hub.
In addition to the changed competition environment, Chris Tarry, analyst at Commerzbank, argues that development within the alliances means that slot requirements could be met by transfers between partners. "Consequently, the price to BA and American would be small," he argues. "As competition is clearly now between alliance groupings and the networks that they offer, it is reasonable that any analysis of slots should be based on the pool available to each alliance group."
BA chief executive Rod Eddington and his counterpart at American, Don Carty, recently met the new US transportation secretary, Norm Mineta. Observers believe that they discussed at least an outline of their plans and an acceptable price. KLM's recent statements that the carrier could be available to join BA, albeit only if BA were to abandon American, could nevertheless indicate that "something significant is at hand" says Tarry.
"I am realistically optimistic that at last a way may be found that results in an acceptable agreement that will enable BA and American to begin to develop their long-intended alliance," he adds.
Hints that a resolution to this long-running saga may be forthcoming have caused others to step up the pressure. bmi has said it would seek full antitrust immunity for its pact with United Airlines on transatlantic routes, while Continental, Delta and Northwest have jointly written to Mineta saying that a new deal must "include an iron-clad mechanism to guarantee the availability of Heathrow slots".
Source: Airline Business
