JUSTIN WASTNAGE / LONDON
Membership of global grouping comes with series of conditions, including loan guarantee tied to Heathrow slot swap
British Airways has laid out astrict set of conditions that Swiss International Air Lines must meet as part of its entry into the Oneworld alliance.
BA, which concluded a commercial agreement alongside the alliance entry for Swiss last week, has limited the growth of long-haul routes from Zurich and tied a loan guarantee to slots at London Heathrow. BA has agreed to guarantee a credit line of SFr50 million ($36 million) in return for options to acquire the titles of eight Swiss slots at BA's hub and eight at Zurich. As each option is exercised, the value of the loan guarantee diminishes, but Swiss's cash reserves grow. This asset flow will enable Swiss to borrow from banks more of the SFr500 million it is understood to need to complete its restructuring package over the next two quarters.
Airline analyst Chris Tarry of Aviation Industry Research and Advisory, says the SFr50 million reflects the market price for the slots, as Swiss inherited some of the best timed slots in Heathrow from now-defunct Swissair. "BA never overpays for anything. It wants slots and traffic, not a full merger," he adds. Swiss will also feed potentially high-yield passengers into BA's North Atlantic and Oneworld partner Iberia's South Atlantic networks, but is understood to be limited to BA-approved route expansion eastwards and banned from adding capacity.
André Dosé, Swiss chief executive, says it is not a straight slot trade deal, as closer cooperation with BA will lead to more efficient services on the route, requiring fewer slots. However, BA is said to be keen to remove any risk from a tie-up with the Crossair successor.
Dosé says the limited scope agreement will lead to an eventual equity swap. He says public opinion in Switzerland preferred Oneworld membership to full merger with Lufhansa, which had been under negotiation since February. Codeshares will start on all routes between Switzerland and the UK from 26 October and full migration to common systems and frequent flyer programmes should be complete within five months.
Swiss, with antitrust immunity over its commercial agreement with Oneworld US carrier American Airlines, expects to receive approval from European Commission and Swiss monopoly authorities within the next month.
Geneva-based EasyJet Switzerland has lodged a request for Swiss's Zurich slots in anticipation of a negative ruling.
Source: Flight International
