British Airways, Iberia and American Airlines announce new routes under transatlantic deal

Wednesday, October 6, 2010

BA, Iberia and American Airlines launch tie-up

LONDON — American Airlines, British Airways and Spain’s Iberia unveiled new routes and promised passengers better prices and flight flexibility as they launched an $8 billion transatlantic joint business on Wednesday.

The trio are strengthening their existing oneworld alliance ties — but stopping short of a full financial merger because of strict U.S. laws that bar foreign ownership in the airline industry — as many airlines struggle to stay airborne in the wake of the global financial crisis.

The three carriers announced four new flight routes and codeshares on more than 2,600 additional flights as part of the new deal that is aimed at taking a chunk of business from the larger Star alliance.

American Airlines signaled its confidence in the deal by announcing that it was recalling around 250 furloughed pilots and 550 flight attendants.

Gerard Arpey, the Chief Executive of AA’s parent AMR Corp., said a recent rebound in business traffic and growing signs that the United States would avoid a double-dip recession were both encouraging, but also sounded a note of caution about economic recovery.

“This is exactly the kind of growth we’re looking for and my hope is that trends like this will continue,” he said at the launch of the trio’s new deal in London. “But I would have to describe the recovery as fragile.”

Under the trio’s arrangement, passengers will be able to buy tickets for a route network that serves more than 400 destinations in 105 countries on each of the carrier’s websites — customers will be able to mix and match flights between the three carriers for the first time.

The new arrangement follows BA’s merger with Iberia this year that created Europe’s third-largest airline — a development that angered rivals such as Virgin Atlantic Airways that have complained about BA’s dominance at Heathrow Airport.

BA Chief Executive Willie Walsh, who has long been an advocate of greater consolidation in the airline industry to cut costs, dismissed concerns that the deal could increase prices by reducing competition on the transatlantic route.

“I think you are going to witness a new era of competition,” he said. “Consumers flying transatlantic have never had more choice.”

Walsh declined to put a figure on potential revenue gains or cost savings from the strengthening of the trio’s relationship, saying that the deal was largely about “generating revenue synergies.”

Arpey, the CEO of AMR, said the deal effectively created a transatlantic airline that would bring in revenues of $7-8 billion each year.

Walsh said that minor cost savings would come from the airlines combining desks and lounges at airports, but said they would be nothing close to the euro400 million ($554 million) projected savings from BA’s $7.5 billion merger with Iberia.

The three airlines will coordinate their call centers as well as websites and will also create new oneworld customer transfer desks at key airports.

BA, AA and Iberia had been hammering out the new deal since receiving regulatory approval from U.S. and EU authorities in July.

Walsh said coordinating schedules has allowed the airlines to change flight times to offer customers a wider range of options and better connecting journeys. The four new routes are: New York to Budapest, Chicago to Helsinki, London to San Diego and Madrid to Los Angeles.

Iberia Chief Executive Antonio Vazquez said that Madrid’s Barajas airport still had a lot of excess capacity and he expected the hub to become one of the main gateways for flights between North America and Europe “in the very near future.”

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