British Airways and Spain’s Iberia are in talks to create the world’s third-largest airline and inject some “long-overdue” consolidation in the industry, in the words of BA CEO Willie Walsh.
Where would a combined BA-Iberia leave American Airlines, which was in talks to form a transatlantic alliance with the two airlines? Would a BA-Iberia merger scuttle American’s chances at an alliance?
The argument for forming an alliance and seeking an antitrust waiver was that the “Open Skies” agreement — which frees up restrictions on carriers flying between the United States and Europe — is set to increase transatlantic competition among airlines. That’s a harder pitch to sell if a BA/Iberian merger, creating Europe’s largest airline, shrinks the number of major players in the market.
Getting regulatory approval for the alliance was uncertain to begin with. An immunized alliance between American, the largest U.S. airline, BA, Europe’s third-largest carrier, and Iberia, Spain’s largest airline and the biggest operator of flights to Latin American player, would create the most extensive network between Europe and the Americas.
To make things even more complicated, British Airways has 40 percent of takeoff and landing slots at Heathrow, by far the largest share of any airline. In 2006, BA and American held over half the capacity between Southeast England and the United States between them.