With close to 500 typewritten pages and 61 boxes of supporting documents, the application by American Airlines and British Airways for antitrust immunity for their alliance, announced early in January, appears to be an attempt to either bowl over or bore US regulators into approving it. US Department of Transportation officials, with the prodigious stack in tow, are said to be mulling over the creation of the Crandall-Ayling Centre for the Bureaucratically Sensitive.
Coincidentally, the application was announced on the day that the comment period closed for a report on the competitive impact of the alliance by the UK Office of Fair Trading. This much-discussed document, which says that the UK government will approve the alliance as long as the parties give up 168 slots on a phased basis over two years, is not to be confused with the UK's negotiating position in the next round of US-UK open skies talks, scheduled for February: UK negotiators have steadfastly refused to make slots and their allocation part of air service agreement talks.
Nonetheless, since the US won't permit antitrust immunity without open skies, it goes without saying that the UK report deserves the attention it has received.
So, just how likely is it that US transportation officials will immunise the American-BA partnership in exchange for the equivalent of 12 daily Heathrow services a week? 'Not a chance,' says a US official close to the proceedings. 'There is no way the [US Department of Transportation] could grant immunity to BA-American on the basis of that report.'
In Washington, the notion that UK negotiators would even consider proposing such a low number is considered preposterous. Not only is the number low, but the phasing of the slot transfer riles US officials (unless, perhaps, a phased open-skies agreement is brokered). Then there is the additional caveat that almost a third of these slots have been earmarked as 'recoverable,' meaning they could go back to BA after their equivalent number have been allocated under the normal Heathrow allocation process.
The multi-partied opposition to the American-BA linkup - led by Continental Airlines, Delta Air Lines, United Airlines and Virgin Atlantic - has also opposed BA's demand that it be allowed to sell the slots it will have to give up, probably for millions of dollars each. Says Delta: 'These carriers should not be rewarded for giving up assets that are necessary to ensure meaningful competition at Heathrow.' And the US official adds: 'This simply doesn't do it.'
The OFT report is, however, probably a good starting point. Amidst all the bluster about the right number of slots to give up or the cost of each slot or the phase-in period, there is an undercurrent of expectation that the BA-American alliance, and a US-UK open skies bilateral, are getting closer to becoming a foregone conclusion - at least in the US. Barring a complete unravelling of the agreement between American and BA (always a possibility) or, perhaps, some drastic change in the US' aeropolitical course (highly unlikely) there is little in recent historical precedent that suggests that the US will do anything but strive for broader liberalisation.
This can be heard in the rhetoric from all sides, with the primary if not only exception of Virgin. Major US carriers may not be arguing in support of the BA-American alliance, but there is now little talk about disallowing it.
Even USAir, whose lawsuit against BA for breach of contract in the breakup of their former alliance is still paying out attorneys' fees, is somewhat contrite, suggesting that it wants the BA-American deal to open the way for its own presence at Heathrow.
As for the complaints over BA selling slots, they are, of course, de rigueur airline industry disingenuousness. Not only are government-granted slots at the four US slot-constrained airports bought and sold on a continuous basis, but airlines have been putting government-granted international aviation rights on their balance sheets as assets for years. (Delta's comments notwithstanding, it is a fair bet that most US carriers would be happy to put down $2 million for a Heathrow slot; it might just appreciate in value.) European Commission compliance is, of course, another thing altogether.
It would be incorrect to assume that access to Heathrow is the only issue left to be resolved in the coming months between the US and UK. Fifth freedom rights, conflict resolution language and UK carrier access to the Fly America programme are proving to be intractable problems. Still, Heathrow predominates in importance for the US, and will dominate February's talks.
Source: Airline Business
