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American Airlines and British Airways forced to surrender slots by Competition & Markets Authority

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The Competition & Markets Authority has today published its provisional findings into its 18 month review of the ‘UK to US’ part of the transatlantic joint venture operated by British Airways, American Airlines, Iberia, Finnair and (soon) Aer Lingus.

This is a difficult time to publish such a report.  The review was conducted on the basis that Norwegian and Virgin Atlantic were ‘going concerns’.  At present, Norwegian will not operate any services from London Gatwick to the US until at least April 2021, whilst the future of Virgin Atlantic is uncertain.

This has caused problems for the CMA, which has spent 18 months working on a set of competition assumptions which may no longer be valid.

You can read the CMA’s full report here.

It finds that:

“The CMA’s view is that the AJBA gives rise to competition concerns in respect of the Routes of Concern and that the Parties have failed to demonstrate that the consumer benefits identified are such as to outweigh these.”

and

“the CMA has significant doubts about the robustness of the Commitments Parties’ econometric evidence”

What is the CMA proposing?

In summary, it finds that there is not (even with Norwegian and Virgin Atlantic operating) enough competition on some routes between London and the United States.

Should these provisional findings be accepted after a consultation period, AA and BA will be forced to surrender certain flights to competitors.

The CMA has reserved the right to re-open the investigation after two years should the competitive environment change (ie Norwegian and/or Virgin Atlantic fail).

Which flights must American Airlines and British Airways surrender?

Here are the findings:

London to Boston

AA and BA to surrender, between them, one pair of slots per day

London to Dallas

AA and BA to surrender, between them, one pair of slots per day

Until a rival airline agrees to operate this service, AA and BA must operate a minimum of 870,000 seats per year on the route

London to Miami

AA and BA to surrender, between them, one pair of slots per day

London to Philadelphia

AA and BA to surrender, between them, one pair of slots per day subject to certain specific conditions

Until a rival airline agrees to operate this service, AA and BA must operate a minimum of 635,300 seats per year on the route

Interestingly, although it has never been taken up, both the existing and new agreements force BA, AA, Iberia and Finnair to allow a new entrant to issue its customers with frequent flyer miles and tier points in their programmes if it had no frequent flyer scheme of its own.  Effectively, the joint venture members would be legally obliged to welcome a new entrant as a full partner in their programmes.

These commitments were meant to secure UK Government approval for the joint venture until 2030.  Due to the risk of permanent changes in competition in the aftermath of coronavirus, the Competition & Markets Authority has reserved the right to open a new investigation at any point between 24 and 60 months from when this agreement comes into force.

You can learn more in the full report here.  You are welcome to submit a representation until 4th June.

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Comments (53)

  • Anna says:

    I admit I don’t really understand how this works but MAN would really benefit from direct flights to MIA and BOS, possibly even IAD. Any chance that this might cause BA to consider these routes. Also Virgin goes under that’ll be services to NYC badly impacted as well.

    • insider says:

      Very little chance. BA has a MAN-LHR flight so you can connect to the US that way. The economics of MAN-US routes is marginal

    • Kip says:

      MAN already has direct flights to BOS with VS/DL and plenty of flights to Florida already. MIA is only really useful for connecting to Central America and the Caribbean so I’m not sure further demand is there. As for IAD, every time I’ve flown from LHR the planes have been half-empty anyway so if London can’t fill them then there’ll be no market elsewhere.
      And BA have no interest for long-haul other than LHR. Regional UK airports have the same status as Tallinn or Athens to BA.

      • Anna says:

        I didn’t know VS flew MAN-BOS (though for how long?) But plenty of people use MIA for Florida holidays these days as MCO was becoming unaffordable (not far off £1k pp in economy in school holidays). Also MAN is not well served for the Caribbean apart from the busiest islands, and northerners have actually discovered Latin America!

        • Kip says:

          It’s a Delta flight to Boston. I believe Miami is an AA hub so it would most likely have to come from them. And they’re down to one US flight a day to PHL so I just can’t see it. The first priority for MAN is to maintain what they have and see how things pan out. LGW’s relative demise might provide an opportunity for MAG – who knows? If the Government decide on the 14-day quarantine then everybody’s screwed and the whole aviation industry will have to start again from scratch.

    • Baji Nahid says:

      United AIrlines are rubbing their hands when VS goes under, and expect them to jump on the MAN-NYC market!

  • Voltron says:

    Never heard of the term “going concerns” before, had to Google it, thought it was a typo for growing concerns lol

  • AJA says:

    Excuse my ignorance but what does “one pair of slots” mean? Is the pair a landing slot at LHR and a landing slot in the US airport in other words one flight a day in either direction? Or is it an arrival slot and a departure slot at LHR, meaning 2 flights a day lost.

    Do BA / AA get to choose which slot they relinquish? So for example if there is a 10am, a 2pm and a 6pm departure from LHR they can choose to give up the 10am slot rather than the 2pm one?

    I am not sure how this helps us as consumers since it means we now potentially have fewer departures per day on BA/AA to choose from. Is the assumption that another airline will compete on price and force the fares down? What’s to stop the new airline simply charging substantially the same as BA/AA?

    • marcw says:

      to operate a refular flight, you need a slot to land and then a slot to take off. At both airports. Whenever they say slot pairs they refer to landing and take off slot at the airport in question.

      In theory consumers gain from having more options/choices… doesn´t mean it´s good for Avios collectors.

      • AJA says:

        Thank you marcw. But what’s in place in the rules to stop the new airline from simply using the slots to fly to a completely different destination?

        • marcw says:

          They HAVE to use those slot for the destinations listed. After, I think, three years, the airline is free to change destinations.

  • Nick says:

    These are BETTER conditions than they’ve had for the last 10 years – compare it with the previous result which was essentially up for renewal (albeit handled last time by EU authorities instead). They have got off about as lightly as they could have… champagne corks will be popping at BA.

    • NigelthePensioner says:

      If Walsh has anything to do with it, it will be Aldi Prosecco!!

  • AmandaB says:

    What happens to flights already booked on BA metal if these slots are relinquished to another airline?

    • Rhys says:

      Passengers will be offered rebooking on another flight etc

      • RussellH says:

        So probably bad for passengers.
        Some at least will have chosen a particular flight because to dep and/or arr time, which they are going to lose.
        Increased competition is not always a good thing.

        • Rhys says:

          Bad in the short term. Once BA loses the slots it will obviously stop selling the flight. It’s only the people with existing bookings who would be affected.

  • RWJ says:

    Wonder whether our LHR-BOS flights in Oct will be affected by this… hopefully not. Then again, chances of us being able to take them anyway seem rather small!!