EU: trans-Atlantic airline alliance may be illegal

BRUSSELS — European Union regulators said Friday they have warned British Airways, American Airlines and Iberia that their plans to share more of their lucrative trans-Atlantic routes may break antitrust rules.

The European Commission said it sent a formal charge sheet to the three airlines last month, warning their cooperation may violate rules that forbid companies striking deals that shut out rivals.

It said the charges involve the carriers’ plans to expand their oneworld alliance, which already coordinates how the companies sell and operate flights between the European Union and the United States.

Regulators said they were investigating plans to expand the alliance to jointly manage schedules, capacity and pricing on flights from Canada, Mexico, Puerto Rico, Norway and Switzerland on top of the U.S. and 27-nation EU.

BA, American and Iberia can now defend themselves in writing and at an oral hearing before the EU takes a final decision that could fine them up to 10 percent of global annual turnover if it finds them guilty of forming an illegal cartel.

The three airlines said in a joint statement that the charges were not a surprise and they looked forward to defending “the substantial benefits for consumers that would result from our trans-Atlantic joint business.”

They say the planned new alliance would reduce fares and give passengers more convenient connections and better access to some 500 destinations.

The EU executive said it would also examine how the airlines plan to share revenues on those services.

Parallel investigations into other airline alliances are still under way, it said.

The EU is also looking into the Star Alliance run by Lufthansa, Continental, United and Air Canada as well as SkyTeam which combines Air France/KLM and Delta/Northwest.

It said it was only looking at member airlines that fly trans-Atlantic routes and the antitrust probe would not affect the other members of the alliances. The charges target plans to expand the oneworld alliance, not the way it works at the moment.

The EU has long been suspicious about how airline alliances such as oneworld and Star Alliance affect prices for flying between Europe and the United States.

Airlines do not compete directly against other alliance partners on some routes and instead may share a code for the same flight and pool some staff and services to lower costs. Such alliances emerged because many national rules discourage airlines from merging for fear of losing exclusive rights to flying routes.

American Airlines and BA have tried twice in the past decade to form a closer alliance, but the carriers withdrew those bids after regulators insisted that they give up sought-after landing and takeoff slots at London’s Heathrow Airport, Europe’s largest air hub.

U.S. regulators are still considering the airlines’ current bid for antitrust immunity, which would let them cooperate on setting prices and schedules on some international routes.

The three airlines say oneworld should be granted immunity “to compete on a level playing field with Star and SkyTeam” which also have an antitrust exemption for larger and increasing shares of trans-Atlantic air travel.

“Those alliances carry more traffic out of the UK regions to the US than oneworld does,” they said in a statement. “We merely want the same legal status to enable us to strengthen real competition.”

Rival Virgin Atlantic said oneworld’s new plans would create a “monster monopoly” that would allow BA and American to “increase their stranglehold at Heathrow by setting prices and agreeing schedules.”

It said it expected the EU to find that oneworld would damage competition on all six routes from Heathrow to the U.S. that BA and American operate. It said the two airlines would control 62 percent of capacity on the Heathrow to New York JFK route with “an unassailable grip on time-sensitive premium passengers.”