American Airlines Inks 3-Way Deal

Reaches Agreement With British Airways And Iberia SA On North American And European Flights

(AP)  British Airways PLC, American Airlines and Spain's Iberia SA said Thursday they have signed a joint business agreement on flights between North America and Europe.

The three airlines said that they planned to file for worldwide antitrust immunity from U.S. authorities for the deal later Thursday. They will also notify European regulatory authorities.

A deal between the trio has long been anticipated - rival carrier Virgin Atlantic earlier this week sent a pre-emptive letter to both U.S. presidential candidates warning that a deal would be anticompetitive on the lucrative trans-Atlantic route.

BA, AMR Corp.'s American and Iberia argued that a closer relationship on pricing and seat capacity will benefit customers by providing improved connections and flight schedules.

Under the joint business agreement, the three airlines will cooperate commercially on flights between the U.S., Mexico and Canada, and the European Union, Switzerland and Norway while continuing to operate as separate legal entities.

They will expand their codeshare arrangements on flights within and beyond the EU and U.S., significantly increasing the number of destination choices that the airlines can offer customers.

"We believe our proposed cooperation is an important step towards ensuring that we can compete effectively with rival alliances and manage through the challenges of record fuel prices and growing economic concerns," said AMR Corp. chairman and chief executive Gerard Arpey. "In addition, we believe we will be more effective competitors with greater ability to invest in our products and services."

Strict airline ownership laws in the U.S. all but rule out a full combination between BA and American Airlines. However, an exemption from anti-competition laws could allow the pair to run their trans-Atlantic operations as a single company, with cooperation on pricing and schedules - adding to the flight capacity and airline facilities they already share in the "oneworld" alliance.

BA and American have failed in the past to win an exemption from U.S. competition laws to work more closely together because of their dominance at London's Heathrow Airport, where the pair have more than half the capacity to and from the U.S.

However, they are expected to argue that the competitive situation has changed since the "open skies" agreement between the U.S. and the European Union came into force in March, allowing airlines to fly to and from any point in the U.S. and any point in the EU.

Virgin Atlantic Airways president Richard Branson said earlier this week that he had written to Senators Barack Obama and John McCain to warn that the proposed alliance between British Airways PLC and American Airlines would severely damage competition on trans-Atlantic routes.

Branson said that a closer relationship between the two carriers would result in higher prices for customers and job losses on both sides of the Atlantic, adding it was "very dangerous" to believe that consolidation was the best response to the current difficult economic conditions.

"Just because life is tough out there, you shouldn't rid yourself of competition," Branson told BBC radio.

[phantomfire3]

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