Richard Branson is Super Pissed Over the Proposed American and British Airways Partnership

February 16, 2010 at 4:00 PM | by Omri | Comments (5)

Fresh off their victory over Delta in the battle over Japan Airlines, American Airlines is shifting back into offense and turning eastward. The world's second largest airline is applying for permission to more closely cooperate with oneworld partner British Airways, the intention being to cut redundant routes and streamline costs. Everyone agrees that the venture would increase prices by a solid 15%, but nonetheless it looks like the Department of Transportation is ready to sign off on the deal.

There's a good argument to be made that American and BA are just getting priveleges that have already been extended to other airline alliances. Delta and Air France already coordinate closely under the SkyTeam umbrella, while Star Alliance has all kinds of cooperation between Continental, United, US Airways, and Lufthansa. And geez is Virgin's Richard Branson pissed over all this. He's been harping about the possibility of American/BA collusion for a while, but the most recent DOT decision sent him ballistic.

We're going to give you two paragraphs from the press release that Virgin issued almost immediately, subtly titled "BA/AA is a Kick In the Teeth For Consumers." It was impossible to choose just one, so delicious were both:

This preliminary decision beggars belief. The DOT last time said that in order to address the competitive harms hundreds of slot pairs had to be handed over permanently—absolutely nothing has changed since then. Four slots pairs is a complete joke and those responsible for this decision should hang their heads in shame.

The US Department of Justice, who are the experts in competition issues, called for strict remedies to protect the public interest, because the alliance will blatantly harm competition and the consumer. The Department of Transport has chosen to stick two fingers up at them. Millions of transatlantic travellers will be adversely affected if the alliance receives final approval.

Sticking up two fingers, also known as "The Vicky" in the West of Scotland, is the UK equivalent of giving someone the middle finger. Branson's accusing American officials of saying "F*ck You" to consumers. Keep in mind that this is ostensibly an official statement stating the position of a corporate entity. He really is magic, isn't he?

[Photo: Arpingstone / Wiki Commons]

Related Stories:
· BA/AA is a Kick In the Teeth For Consumers [Virgin]
· American Airlines [Jaunted]
· British Airways [Jaunted]

Comments (5)

Return to » Richard Branson is Super Pissed Over the Proposed American and British Airways Partnership

Time for Virgin to Join Star? United, Continental, Bmi and Virgin could take BA/AA hands down!

"Everyone agrees that the venture would increase prices by a solid 15%" Sorry but that statement is flat-out wrong and must have just been lifted straight from Virgin's press release. In reality, aside from Richard Branson, very few people in the industry believe the tie-up will result in higher fares. This is because most people understand that the 2008 Open Skies treaty - coupled with the parallel anti-trust immunity already afforded to SkyTeam and Star Alliance - has significantly liberalised competition on transatlantic air routes. There is nothing stopping Virgin from expanding its transatlantic routes, as several other carriers have done since 2008. I'm no huge fan of BA, but let's not just gobble down the claims made by Virgin without any scrutiny!

... comes from the Department of Justice, the result of their review re the effects of greater coordination between AA and BA. It reflects analysts' consensus and, as far as I know, was not even mentioned in the Virgin press release.

The DoJ report was met with deep scepticism by many people in the industry and has now largely been overruled by the DoT. It also specifically tied the 15 per cent hike to the presumption that no slots at Heathrow would changed hands. But under the new DoT proposals, four pairs of slots per week will be relinquished by BA - so the 15% estimate (and that's all it was, it was never a consensus) is redundant.

The DoT said 15% minus significant slot swaps or the elimination the 6 routes that would take a pounding. The "deep scepticism" with which the report was met - and you're overselling its depth, I think, more than a touch - was premised on those swaps taking place. I'd greet with deep skepticism the idea that anyone seriously considers those slots to be an abundant loss or to make the estimate of higher costs redundant. Just to take one example, the EC certainly seems to be underwhelmed.

Jaunted

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