Air Transport World

To phase or not to phase.(American Airlines, British Airways)

After 34 months, regulators continue to struggle with the AA/BA alliance while the carriers go their merry cooperative way

Open-skies agreements between the U.S. and Germany, Canada, Japan and France have an important common element: A phase-in period. That period supposedly was designed to give non-U.S. airlines and governments a chance to get used to the idea of freer entry, though the effect has been to give incumbents a head start.

Moreover, all phased agreements don't include all standard open-sides elements. Whatever the flaws, they are open-sides bilaterals and the U.K. is the only major U.S. trading partner in Europe missing from the list of 32 such agreements.

But 34 months ago, American Airlines and British Airways joined to form what their own officials acknowledge as "effectively a merger." They wanted the same U.S. antitrust immunity other alliances had received in return for their governments' agreeing to open sides.

At the time, the U.S. Department of Transportation thought the AA/BA move a gift from negotiating heaven. The EU, as well as other U.S. and British airlines, had different perceptions of the proposal. EU competition commissioner Karel van Miert used PA-BA as a launch pad to investigate alliances, including those previously ignored. BA VP Tony Fortnam says, "We woke a sleeping giant."

Other U.S. airlines, none of whom serves Heathrow except United, either opposed the deal or said they could be pacified if given enough slots to make them viable LHR competitors. Virgin Atlantic Airways opposed it too, though it later insisted it would accept the alliance if the U. …

Log in to your account to read this article – and millions more.