BA tie-up to hit fares, says Virgin
Mr Ridgway's comments are the first in what will be a bitter war between the two airlines which are major competitors, particularly for the lucrative transatlantic market. Virgin Atlantic is now calling on the European Commission - which has yet to make its final judgement on the tie-up and the anti-trust immunity that would be offered BA and American - to block the deal.
Asked if the DoT agreement would mean higher fares for passengers, Mr Ridgway said: "I think it will ultimately.
"Those two airlines could then control and co-ordinate their schedules and their pricing. We have less than 3pc of slots at Heathrow after 20 years whereas BA already has well over 40pc and if you put it together with American and Iberia it will take them up to 50pc. If you control the market you are going to charge accordingly."
The DoT said that, as part of the anti-trust deal, BA and American would have to give up four pairs of slots at Heathrow to other carriers not included in the tie-up. Mr Ridgway said that earlier judgements, for example from the US Department of Justice, had demanded that BA make greater sacrifices.
"If eight years ago the regulators were saying that it needed at least 16 pairs of slots to address the competitive imbalance, why has it suddenly come down to four?" Mr Ridgway said. "Nothing has changed. BA is just as dominant as it was, in fact you would argue more so.
"When you've got an airport like Heathrow that is completely full and BA already dominates the peak slots how is there possibly an argument for them to be given more control and more share over those markets?
"BA argues strongly that they need to have this because Air France has it in
Paris and Star has it in Frankfurt with Lufthansa but BA on its own out of London
is already bigger than those alliances put
together in those two gateways. The Europeans have been stronger in recognising
there is a competitive issue here in terms of consumers being harmed and damaged
and I think Europe needs to be far more robust."
Virgin Atlantic is now putting together its objections to the DoT's findings which it is likely to file by the end of the month.
BA, which could be close to a deal with the unions on a threatened strike, says that without the tie-up it is put at a disadvantage to Air France and Lufthansa.
It also says that there are slots available at Heathrow and that, with seven carriers between the UK and America, there is plenty of competition.
A spokesman for BA said: "It would allow oneworld to compete on an equal footing with the other main global alliances, Star and Skyteam, which have larger shares of transatlantic traffic and have been granted anti-trust immunity (ATI) already. The deal would create the opportunity to generate revenue benefits and savings."
Mr Ridgway said that the economic recovery was still fragile and that airlines still had a long way to go to get back to profitability.
He said that, beyond the BA-American deal, fares would have to rise more widely because airlines were still feeling the effects of the recession and that price cuts during the financial crisis had gone too far.
"We have come out of a very, very brutal year," he said. "Last year was unparalleled in terms of the steepness of the decline. We've seen load factors improve [but] fares are nowhere near where they need to be to put the industry back into profit.
"The industry is going to post horrendous losses for last year and almost cetainly post losses again for this year, so that will be three years of pretty awful losses."
(7th March 2010)
Copyright AirportWatch, 2004