UK Authorities Review IAG Joint Venture with AA, Finnair

 - October 11, 2018, 11:18 AM
A British Airways Boeing 747-400 arrives at Los Angeles International Airport. (Photo: Flickr: Creative Commons (BY-SA) by InSapphoWeTrust)

The UK’s antitrust regulator has launched an investigation into the Atlantic Joint Business Agreement between American Airlines, International Airlines Group (IAG) subsidiaries British Airways and Iberia, and Finnair ahead of the country’s exit from the EU in March 2019. The probe stands to create yet another headache for IAG, which continues to deal with the legal consequences of last month’s major cyber attack of BA’s website and the uncertainty of Brexit on that airline’s operations and ownership structure.  

The joint venture, which includes pricing, capacity, and scheduling coordination as well as revenue sharing of all passenger air transport services on routes between Europe and North America, gained approval from the European Commission in 2010 under certain conditions. As part of the commitments, the airlines agreed to make landing and takeoff slots available to competitors on Madrid-Miami and five routes from London—either London Heathrow airport or London Gatwick airport—to Dallas, Boston, Miami, Chicago, and New York. The undertakings were binding for 10 years and thus will expire in 2020.

“As five of the six routes subject to commitments are from the UK, and to prepare for the time when the European Commission may no longer have responsibility for competition in the UK, the Competition and Markets Authority (CMA) has decided to review afresh the competitive impact of the agreement in anticipation of the expiry of the commitments,” the UK regulator said Thursday.

The CMA said it is liaising with the European Commission and the U.S. Department of Transportation in relation to the investigation and stressed the case remains at an early stage. “No assumption should be made that the Atlantic Joint Business Agreement infringes competition law,” it said. Brussels could reassess the agreement in 2020, though no regulation requires it to do so.

IAG said only that it noted the CMA’s announcement and will respond to its review.

“Since 2010, British Airways and Iberia’s transatlantic joint business with American Airlines and Finnair has been bringing significant benefits to millions of travelers,” IAG stressed. “It provides them with improved access to cheaper fares and easier journeys to more destinations. During this period the joint business has launched 45 new routes including 14 between the UK and U.S.”