BA gets EU approval for Iberia merger and joint venture with AA

14 Jul 2010 by BusinessTraveller

British Airways has today received approval from the European Union for its merger with Spanish carrier Iberia. The European Commission has also approved BA’s transatlantic tie-up with Iberia and AA.

US regulatory approval for the BA-Iberia merger was received last month, and BA has described the EU approval as “another important step towards the completion of the merger which is scheduled to take place by the end of 2010”.

The British carrier has also received the go ahead from the European Commission for its proposed transatlantic joint business agreement with American Airlines and Iberia, similar to that already established by Delta, Air France and KLM (with Alitalia officially joining the agreement earlier this month).

A final decision on anti-trust immunity from the US Department of Transportation is due “shortly”. The three airlines plan to launch the joint venture this autumn.  

British Airways chief executive Willie Walsh said: “We await the DOT’s final decision but welcome this important and vital step forward. The high number of new services on London to US routes since the Open Skies agreement demonstrates that Heathrow is open. Between us, we have agreed to make available Heathrow slot pairs for our competitors to use on services to the US. This is a pragmatic decision so that we can get the joint business up and running as soon as possible. The slot commitments provide a further guarantee that there will be no possible loss of competition as a result of our joint business”. 

The BA press realease added that the commitment means slots will be made available if competitor airlines are unable to acquire them through the normal process. The London-New York slots will only have to be made available if the number of services on the route drops below the currently announced levels. 

Virgin Atlantic’s president Sir Richard Branson has long been opposed to the BA/AA tie-up, and today released the following statement:

“We have fought this monster monopoly for the past thirteen years and are still resolute in our belief that this decision is shameful and consumers will suffer greatly as a result of this deal. The European Commission has let consumers down by agreeing to paltry remedies which are wholly inadequate. 

“Luckily for the competition authorities, Virgin Atlantic will continue to compete to win passenger and corporate business despite this massively uneven playing field which we are forced to compete on.” 

Key to Virgin’s opposition to the joint venture is the dominance which the carrier says BA and AA will have on routes between Heathrow and the US. Virgin’s statement included the following key points, claiming that:

  • BA/AA will use their exemption from competition laws and their overwhelming dominance to destroy competition, raise prices and reduce choice
  • BA/AA will have a monopoly or be dominant on some of the busiest and most profitable routes between the US and Heathrow. 
  • In terms of capacity BA and AA would control

-LHR- BOS 80 per cent
-LHR-DFW 100 per cent
-LHR-JFK 62 per cent
-LHR–LA 48 per cent
-LHR-MIA 70 per cent
-LHR-ORD 68 per cent

  • Heathrow Airport is unique in Europe. Unlike other European hubs Heathrow is virtually full preventing competitors from challenging the dominance of BA and AA. BA/AA would have 47 per cent of slots at Heathrow. The airline with the next biggest slot holding is Lufthansa and bmi with 14.2 per cent. Virgin Atlantic currently holds 3 per cent. 

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Report by Mark Caswell

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