BA announces partnership with AA and Iberia

British Airways (BA) has announced a partnership with American Airlines (AA) and Spanish carrier, Iberia.

The joint agreement will allow the carriers to share revenues and costs on transatlantic flights as well as fixing fares.

The three airlines will co-operate on flights between the US, Mexico and Canada and the EU, Switzerland and Norway, but will continue to trade as separate legal entities.

However, the carriers will have to persuade the US that the deal does not break US rules on foreign ownership of airlines.

The airline industry has been hit hard recently with soaring aviation fuel costs and passenger numbers down due to the slowing economy. As a result, airlines have been exploring ways to slash costs.

Commenting on the new deal, Gerard Arpey, chairman and chief executive of AMR Corp, the parent company of American Airlines, said the proposed alliance is a major step towards ensuring that we can compete effectively with rival alliances, as well as seeing through the difficulties of economic concerns and soaring aviation costs.

However, the deal has met with criticism from Sir Richard Branson, Virgin Atlantic’s chief. Earlier this week, he wrote to US presidential candidates, Barack Obama and John McCain, warning against the proposed merger.

Paul Charles of Virgin said the end result will be to snuff out competition, increase prices and become even more dominant.

BA’s chief executive, Willie Walsh, said by providing consumers with easier journeys to more destinations, the partnership will strengthen competition.

Mr Walsh added that this is good news for consumers but might not be so good for Richard Branson.

The airlines have announced their intention to apply to the US Department of Transportation for immunity from US anti-competition rules and they would also notify European regulators.

The IATA recently warned that the airline industry faced a grim outlook and passenger numbers would be affected by surging fuel costs and the deteriorating economic situation.

25 airlines have gone out of business this year including ATA Airlines, Aloha Airgroup, EOS, Maxjet, Silverjet and Skybus Airlines.

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