Joint venture fever catches hold

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Oneworld transatlantic joint venture finally begins as Air Canada and United unveil transborder plans, writes Graham Dunn in London

Airline appetite to co-operate on immunised joint ventures shows no sign of abating. Soon after oneworld's long-awaited partnership on the transatlantic started, Star Alliance carriers Air Canada and United Airlines unveiled plans to team on Canada-US transborder flights.

October saw the formal start of the American Airlines, British Airways and Iberia joint venture pact across the Atlantic. For American and BA it has been 14 years in the making, after previous efforts to secure anti-trust authority broke down over slot divestiture conditions attached to approval.

BA chief executive Willie Walsh says: "Now we're working together, we can improve schedules to provide more choice from the start of the summer 2011 season next March." The carriers underlined their intentions by unveiling four new routes for next summer.

"We are talking about a very significant merging of the transatlantic businesses," says American Airlines chief executive Gerard Arpey. "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 billion and $8 billion in annual revenues."

The joint venture would rank just inside the top 20 airline groups based on this year's Airline Business annual rankings.

European and US anti-trust approvals were granted earlier this year amid a changed regulatory landscape that has already seen Star Alliance and SkyTeam carriers secure approvals for their own transatlantic joint ventures.

"We are creating a new entity that will be able to provide greater competition with the other two alliances which have been operating across the transatlantic with anti-trust immunity," says Walsh, insisting there will be no negative impact for consumers on competition. "There are 40 airlines operating between Europe and the USA. It is the most competitive market in the world, it has always been competitive and will always remain competitive."

While not detailing the bottom line benefits of the link, Walsh says the gains are driven from the revenue side. "This joint business is largely about generating revenue synergies. It is about enhancing the customer proposition, making us more attractive, retaining existing customers and attracting new customers."

Arpey adds: "We are certainly not done strengthening our [oneworld] alliance and we intend to build on and accelerate our momentum." That includes a transpacific joint venture deal between American and Japan Airlines, after the latter reaffirmed its commitment to oneworld.

US regulators have proposed granting anti-trust immunity to applications from both American and JAL, as well Star partners All Nippon Airways and United-Continental. Final approval is subject to last year's Japan-US Open Skies deal being signed.

A stream of new joint venture pacts, particularly among global alliance partners, have been set in motion as carriers seek some of the partnership benefits that now largely elude them because of the regulatory complications of cross-border consolidation.

The latest of these saw Star Alliance partners Air Canada and United-Continental in October sign a memorandum of understanding establishing principles for a revenue sharing joint venture covering US-Canada transborder flights.

The carriers say that Air Canada's 59 US cities will be strengthened by United's presence in 210 airports. The transborder joint venture is expected to take effect in early 2011, subject to requisite regulatory approvals. "This joint venture will provide many benefits and revenue synergies on this important market allowing us to compete more effectively," says Air Canada chief executive Calin Rovinescu.

It comes as all three alliances continue to recruit; oneworld adds Russian carrier S7 in November; Ethiopian Airlines hopes to join Star Alliance within the year and SkyTeam will secure its first Latin America member after an agreement with Aerolineas Argentinas in October.