BA in ‘co-operation’ talks with American and Continental
01.05.08
British Airways said yesterday that it is in 'co-operation' talks with US airlines American and Continental, understood to be about a potential alliance. The airline said in a brief statement: ‘British Airways is exploring opportunities for co-operation with American Airlines and Continental Airlines.'
American confirmed it was in talks with BA, saying only that: ‘AMR is exploring opportunities for cooperation with British Airways.' A spokeswoman for Continental said the Houston-based airline was aware of BA's statement but declined to comment on it.
American and BA already have an alliance through the 10-member Oneworld alliance, and have twice tried and failed to win immunity for closer links from the US government. Immunity is required if the partnerships are not to be seen as collusive.
Bloomberg has reported that BA and American are in talks to broaden their Oneworld alliance to add Continental Airlines and seek antitrust immunity to set prices and schedules. The airlines may create a joint venture as part of the expanded alliance, it claims.
US airlines are seeking mergers in order to combat soaring fuel costs and an economic downturn. An alliance - allowing the three airlines to sell seats on each other's flights, sharing some of the revenue - could help them cut costs and boost profits. It would also help the airlines compete against Delta and Northwest, who won US approval this month to collaborate with Air France - KLM.
These airline partnerships can give airlines 80 percent of the benefits of a merger without the worries of meshing workforces or combining fleets, Ray Neidl, a Calyon Securities analyst in New York, said.
Air travel restrictions were eased under a US - EU 'Open Skies' agreement that took effect in March, which opened up new transatlantic routes for more airlines. This allowed more airlines to serve Heathrow (if they can find slots), which could ease regulatory objections to a new BA / American / Continental agreement.
However Virgin Atlantic founder and president, Sir Richard Branson, a vehement opponent of any BA - American alliance, said his company would ‘fight tooth and nail to ensure that regulators say "no way BA/AA/Continental," adding: ' When BA and AA first tried to get together nearly 10 years ago, the regulators ruled it was against the consumer interest. Nothing has changed.'
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