Virgin Atlantic Says Joint Venture Should Be Blocked

In the face of record fuel prices and a plummeting global market, airlines that were once rivals are now increasingly willing to let bygones be bygones, in the mutual interest of surviving these tough times. We've already seen the proposed merger between Delta and Northwest, and the recent "strong alliance" proposed by Continental and United.

It now appears another US carrier, American Airlines, is close to choosing a pair of new dance partners. The world's largest carrier is close to applying for antitrust immunity for a three-way alliance with British Airways and Spain's Iberia, reports The Financial Times.

All three are current members of the "OneWorld" alliance, but protections and benefits under that code-sharing agreement don't apply to transcontinental flights. The new deal would change that, allowing American and BA to reap the benefits of sharing costs on trans-Atlantic routes, as well as a new link between Europe to Latin America.

This is familiar territory for BA and American. Both carriers applied for similar anti-trust immunity in 1997, and again in 2001... but each submission was struck down by regulators, who said the only way such a deal could happen would be for both airlines to give up valuable landing slots at London Heathrow... a deliberately high price.

But that was then, and this is now. Both carriers say the recent "Open Skies" agreement between the US and European Union has already loosened regulatory restrictions, and freed up slots for Continental, Delta, Northwest and US Airways at Heathrow.

Other recent mergers, proposed mergers and fledgling alliances have also strengthened American's and BA's biggest rivals.

One of those rivals, Virgin Atlantic, called such an alliance "anti-competitive," and urged regulators to go for the trifecta in blocking the deal.

"We would oppose this attempt," the airline said Thursday. "It would form a dominant mega-power on transatlantic air routes from two of the largest EU members, forcing up ticket prices for passengers and restricting choice. BA/AA/Iberia would together dominate slots at Heathrow Airport and use that power to block new entrants onto key routes in Europe and across the Atlantic.

"The current crisis in aviation must lead to survival of the fittest, not protection for the fattest," Virgin added. "Regulators must block this attempt to create such a giant champion of anti-competitive behavior."

FMI: www.aa.com, www.ba.com, www.iberia.com