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BRANSON
SLAMS US DEPARTMENT OF TRANSPORTATION DECISION ON BA/AA
Sir
Richard Branson, Chairman of Virgin Atlantic Airways, today slammed
the US Department of Transportation’s
(US DOT) decision to give approval for the anti-competitive
alliance between British Airways and American Airlines to proceed.
The
US DOT’s approval has been given despite criticism of the alliance
from a number of significant US government bodies including both the
US Department of Justice and the US General Accounting Office.
Sir
Richard said:
“The
US Department of Justice found that a BA/AA alliance would result in
‘immediate competitive harm’ and ‘a substantial loss of
competition and higher prices for a large number of consumers’. The
US DOT’s proposed remedy (of the divestiture of 224 slots on seven
of the proposed nine routes – of course for US airlines only!) would
be both ineffectual and inadequate when compared with the
anti-competitive impact of this alliance.
“If
the UK Government agrees a new Open Skies deal on this basis it will
simply be selling out to the US.
British aviation is bigger than BA and the interests of British
consumers are not the same as those of BA’s beleaguered
shareholders.
“No
one is more committed to genuine Open Skies than Virgin Atlantic but
only if that means full liberalisation of all regulations governing
air services within and between Europe and the US. Among other
benefits to consumers it would give US carriers the right to fly
within Europe and British carriers like Virgin the right to fly within
the US.
“This
is only a prelude to the battle for true “Open Skies” and I’m
confident that the Office of Fair Trading and the European
Commission’s decisions on this alliance will be more rigorous.
I expect both to agree that this proposal is profoundly
anti-competitive and should not be allowed to proceed without more
substantial and significant remedies.”
Sir
Richard outlined Virgin Atlantic’s main objections:
-
If BA and AA are given anti-trust immunity to operate on some of the
busiest sets of routes on the planet they will collude to use their
overwhelming dominance to:
-
destroy competition
-
raise prices, and
-
reduce service.
-
American and BA will form a dominant force in the
trans-Atlantic market, with over 60% of all Heathrow-US services, and
over 50% of all passengers travelling between the US and the UK.
In 2000, AA and BA between them carried nearly 9 million
passengers between the UK and the United States. The
next largest airline carried less than 3.5 million.
-
When coupled with their dominance at their respective hubs,
BA/AA will have the effect of eliminating competition. BA/AA have
nearly 200,000 slots per year at Heathrow. Virgin Atlantic has less than 11,000.
-
The sheer scale of this merger will mean that its effect will
not be felt solely in the trans-Atlantic market, but globally.
-
The position of joint dominance that oneworld, the BA and
American led alliance, and Star, the alliance involving United and bmi,
would enjoy at Heathrow, when coupled with the undeniable fact that
Heathrow is full, means that carriers outside of these alliances will
not be able to mount an effective competitive challenge unless the
regulators require these groupings, and BA in particular, to give up a
greater number of slots at Heathrow than required by the US DOT.
Between them oneworld and Star operate 85% of all Heathrow-US
services, and control nearly three-quarters of the slots at Heathrow.
Past experience suggests that this will produce a cosy duopoly
rather than intense competition.
He
also gave the airline’s position on Open Skies and slot reform:
“The
key argument in this entire debate is Heathrow access.
Open Skies is being held up as a panacea by American and BA in
this respect. Any form of
liberalisation of outdated bilateral agreements should be welcomed,
and no-one has lobbied stronger than Virgin Atlantic to replace the
current restrictive Bermuda II agreement governing air services
between the US and the UK by a truly open competitive regime.
But in respect of Heathrow-US services Open Skies will make no
difference at all. Put
simply Heathrow is full and there are no prospects of capacity
increases in the foreseeable future.
“In
order for Virgin Atlantic and the US carriers to compete effectively
in trans-Atlantic markets more slots are needed at Heathrow, and the
associated terminal facilities that go with the slots.
But the slots are simply not there.
Not from the slot pool; not from partner airlines; and not on
the open market. If slots
were available, then Virgin would not have had the struggles that it
has had to obtain more slots in recent years.
“The
only way that the regulators can ensure access to Heathrow is to
divest American and BA of significant numbers of slots at the airport.
And not just any old slots.
They must be slots at the optimal times for trans-Atlantic
travel – not at the margins of the day.”
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