Restrictions On Foreign Ownership May Be Eased
The reports around the Dallas-Fort Worth metroplex started
quietly earlier this week, but have since grown more adamant.
Despite growing speculation of a potential merger between Ft.
Worth-based American Airlines and British Airways, however, a
spokesman for AA vigorously denies the rumor.
DFW's NBCi-5 states the merger speculation grew from reports
American wished to 'enhance' its current partnership with the
British carrier.
"I know some people who are involved in looking, very
tentatively, at a merger, and not just between American and British
Airways, but some other big carriers and some foreign carriers,"
aviation consultant Denny Kelly told the television station.
Fueling the rumor is a report in next week's Forbes magazine,
which states it may take a foreign carrier's resources to bail out
American's parent company AMR Corp. The company lost $861 million
in 2005, and will only be marginally profitable this year... if at
all.
Despite its financial woes, however, AMR's stock price increased
more than any other major US carrier through the end of 2005.
American, the largest US airline, has previously asserted the
carrier's fortunes would have been much better had fuel prices not
shot up last year -- in fact, the carrier states it would have made
money. Unfortunately, those fuel prices don't appear to be
going down any time soon.
Current AMR Chief
Executive Gerard J. Arpey has tried a variety of cost-cutting and
revenue-enhancing measures since taking over from former CEO Don Carty in 2003 -- dropping
Saturday-night-stay requirements on low-cost fares, eliminating
almost all free meal service and charging for such services as
curbside check-in and ticket sales over the phone.
Some have been more successful than others... but Forbes states
the overall cost benefits have been negligible. That may make a
merger with a foreign carrier more attractive to American, which
despite such woes has still managed to avoid bankruptcy in the
turbulent times following 9/11.
British Airways has had its eye on American for some time, and
both airlines attempted to merge their operations at
London-Heathrow in 2002 -- but decided against the move by a
ruling that the carriers would have to give up a combined
224 slots at the airport to stay on the right side of anti-monopoly
rules.
As a rule, foreign ownership of air carriers has been
discouraged through a series of caps and restrictions by US and EU
regulators. The regulators are reportedly looking to ease those
restrictions, though, on reports the Bush administration wants to
lift the current 25 percent cap on voting stock allowed to foreign
investors in American companies.
Additionally, Forbes reports lawmakers are looking at several
international deregulation measures, including removing
restrictions to allow foreign airlines to fly between US
cities.
Besides the potential ramifications to American and British
Airways, such moves would also clear the way for additional mergers
between US and foreign airlines. Could we someday see United
Airlines & Lufthansa merging operations? How about Northwest
and Air France/KLM? Stay tuned... this may get interesting.