Competition & Markets Authority makes British Airways and American Airlines surrender slots

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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