European Commission approves British Airways - Iberia deal

British Airways, Iberia Airlines and BA franchise partner GB Airways have been given approval by the European Commission for an alliance which the carriers say will deliver significant benefits to international air travellers and to their businesses.

Following a three month consultation period that ended today, the EU has granted the airlines, exemption from competition legislation for six years, subject to conditions necessary to maintain competition on four UK-Spain routes.

The exemption allows extensive cooperation, including,

- Joint network planning and coordinated capacity and pricing
- Joint sales operations
- Use of profit-sharing or other economic co-operation
- Joint pricing, management, sales and handling of cargo

British Airways’ chief executive, Rod Eddington, said: “This is a sensible step forward in our efforts to progress consolidation in Europe. The alliance will give customers access to more destinations and more convenient schedules. It will also bring significant cost benefits which will be passed on to customers in lower fares.”

Iberia’s president, Fernando Conte, said: “This agreement is a major step forward in our already solid relationship with British Airways which will make us more competitive in today’s difficult environment, while offering our customers a larger range or services, frequencies and destinations. The aim of this cooperation model is to achieve synergy benefits while preserving the separate identities of the two companies.”

The regulatory conditions set by the EU under Article 81 (3) of the Treaty of Rome include an undertaking by the airlines to provide:

- Enough slots at Gatwick and Madrid airport to allow a competitor to operate a maximum of four daily return services from London Gatwick to Madrid.

- Slots at Gatwick to allow a competitor to operate one daily return service to Bilbao.

- Slots at Gatwick to allow a competitor to operate a daily return service to each of Valencia and Seville, subject to growth and demand.

- A freeze on frequencies from London to Madrid, Barcelona, Bilbao, Valencia and Seville for two seasons following handover of the slots (until March 2005 for Barcelona).

- BA, Iberia and GB Airways to enter into an interline and frequent flyer agreement with a competitor, if requested, on London Heathrow to Madrid, Bilbao, Valencia and Seville.