American and BA finally live transatlantic JV dream

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Fourteen years in the making and with a markedly different looking global picture, oneworld partners British Airways and American Airlines today formally unveiled their long-sought transatlantic joint venture in London. The co-operation formally began at the start of the month following this summer’s clearance from European and US regulators and is part of a three-way business joint venture also including BA’s European merger partner Iberia.

“Today we are talking about a very significant merging of the transatlantic businesses,” American Airlines chief executive Gerard Arpey said during a press conference to mark the joint venture in London today. “If you look at the size of the business we are creating across the North Atlantic – it is an airline that is somewhere between $7-8 billion in annual revenues, that is a very significant merging of our businesses.” Indeed the joint venture would rank just inside the top 20 airline groups based on this year’s Airline Business annual rankings.
 

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Hands-on partnership: chief executives Arpey, Walsh and Vazquez mark the formal launch off the transatlantic joint venture (all pictures Billypix)
It signals the end of American and BA’s long quest to secure antitrust immunity across the Atlantic. Having baulked at earlier conditions on divesting slots attached to previous rulings, the regulatory environment has since changed as competitions between alliances took centre stage in regulators’ minds. Indeed the oneworld partners found themselves playing catch-up with their Star Alliance and SkyTeam rivals, both of whom have implemented their own transatlantic joint ventures.

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"Now we’re working together, we can improve schedules to provide more choice from the start of the summer 2011 season next March."
Willie Walsh, British Airways chief executive 
“We are creating a new entity that will be able to provide greater competition with the other two alliances who have been operating across the transatlantic with anti-trust immunity,” explains Walsh, insisting there will be no negative impact for consumers on competition. “There are 40 airlines operating between Europe and the US, it is the most competitive market in the world, it has always been competitive and will always remain competitive. I think you are going to witness a new era of competition on the transatlantic.”

While no figure is being given on the bottom line benefits of the link up, Walsh says the gains come predominantly from the revenue side. “This joint business is largely, not solely, but largely about generating revenue synergies. It is about enhancing the customer proposition, making us more attractive, retaining existing customers and attracting new customers. There maybe some cost synergies available to us, but not anywhere near the same degree identified in the merger of BA and Iberia.”

Under the tie-up American is placing its code on 322 BA and Iberia flights, while BA will add its code to 2,063 American and Iberia flights. The Spanish carrier’s code will feature on 354 flights operated by BA and American. Oneworld adds there will be further opportunities to increase codeshares in future.

The carriers also announced plans to open four new routes next April as part of their new transatlantic joint venture. American will operate New York JFK-Budapest and Chicago-Helsinki, connecting the US gateways with the bases of oneworld members Malev and Finnair. Iberia will open Madrid-Los Angeles, while BA will operate London Heathrow-San Diego.

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"The growth potential of our joint business and the extra capacity Madrid offers will enable Barajas airport to become one of the main gateways for flights between North America and Europe in the very near future.Terminal 4 at Madrid Airport gives"
Antonio Vazquez, Iberia chief executive.
"Connoisseurs of the BA route network may know that this is the third time that we have launched this particular route," says Walsh. "I think that serves to highlight the benefits of the joint business – the route did not deliver a profitable return for BA in isolation but we are extremely confident that, by working together with our colleagues, it will."

Iberia chief executive Antonio Vazquez adds: "Now we are able to offer our customers new routes that probably we could never operate without this joint business. In the case of Iberia, our presence in the North Atlantic will increase significantly, as we will start flights from Madrid to Los Angeles in April next year. And this is just a starting point. We hope to open new routes in the future thanks to our joint business."

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"We are certainly not done strengthening our [the oneworld] alliance and we intend to build on and accelerate our momentum."
Gerard Arpey, Amercian Airlines chief executive
Alongside announcing American's new routes to Budapest and Helsinki, Arpey also revealed work is going on with the Port Authority of New York and New Jersey on initial designs for an expansion of New York JFK Terminal 8 as well as the recall of around 800 American staff; including 250 pilots and 550 flight attendants. "A number of factors contributed to our ability to recall our valued employees, including capitalising on our business opportunities with British Airways and Iberia and continuing to strengthen our cornerstone hubs," says Arpey. "This is exactly the kind of growth we’re looking for and my hope is that trends like this will continue."

For more on the regulatory picture covering joint venture, see our recent analysis here