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American, Iberia and BA to form transatlantic team

Latest update : 2008-08-16

American Airlines, British Airways and Iberia of Spain plan to cooperate on flights between North America and Europe to help overcome soaring fuel costs.

LONDON (AFP) — American Airlines, British Airways and Iberia of Spain said Thursday they had signed a commercial agreement to cooperate over flights between North America and Europe to help overcome soaring fuel costs.

The three-way deal also comes as airlines worldwide seek to take advantage of the newly launched "open skies" agreement that has loosened restrictions on carriers flying between the United States and Europe.

American Airlines, British Airways and Iberia on Thursday filed for worldwide anti-trust immunity from the US Department of Transportation over their tie-up, adding that they would also notify European Union regulators.

The three companies already form part of oneworld, an alliance comprising ten global airlines working to cut overheads. But the new deal was aimed at widening the scope to run more cost-efficient operations.

Oneworld said that it "warmly welcomed and strongly supports the application for anti-trust immunity."

It added in a statement: "Anti-trust immunity between oneworld's transatlantic partners would enable them to unlock even more of oneworld's potential, enabling us to operate under the same rules as our alliance competitors" SkyTeam and Star.

American Airlines, BA and Iberia said in a joint statement that their new alliance would allow them to "expand customer choice by supporting routes that would not be economically viable for the individual airlines."

The statement added: "The joint business agreement will enable the airlines to reduce costs and attract new customers, helping to mitigate pressure on fares from record fuel costs.

"This means that the airlines will have greater ability to invest in their products, services and fleets. Employees and shareholders will also benefit from the agreement," the trio added.

In a separate statement of its own, British Airways said "there is no reason why fares should rise if this agreement is approved" by regulators.

However BA's fierce British rival, Virgin Atlantic, immediately warned that the tie-up would create "a monster monopoly" leading to higher air fares for passengers.

"Make no mistake, if this monster monopoly is approved it will be third time unlucky for consumers," Virgin boss Richard Branson said in a company release, noting that this was BA's third attempt at securing an extensive tie-up with American Airlines.

The aviation sector is consolidating as airlines battle against the surging cost of jet fuel. Kerosene is refined from crude oil, whose prices rocketed to record highs above 147 dollars a barrel last month.

British Airways announced at the start of August that its net profits had plunged by 90 percent during the company's first quarter, hit by surging fuel costs and a wider economic slowdown.

Last week, EU regulators approved a takeover by Delta Airlines of the United States for its smaller rival Northwest, smoothing the way towards the creation of the world's biggest carrier.

BA and Iberia are also discussing separate plans for a multi-billion-dollar merger.

Meanwhile US airlines Continental and United, as well as German carrier Lufthansa and Air Canada, have together requested approval to establish a transatlantic joint venture "to create a more efficient and comprehensive" network.

American Airlines, BA and Iberia said that under their agreement, the three would "cooperate commercially on flights between the United States, Mexico and Canada, and the European Union, Switzerland and Norway while continuing to operate as separate legal entities."

Date created : 2008-08-15

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