Alex Brummer in London
The proposed alliance between British Airways and American Airlines, the two dominant carriers on the North Atlantic route, is becoming one of the most scrutinised deals ever hammered out.
The British Government’s Office of Fair Trading considers it a merger in all but name. By putting marketing, code sharing, frequent flyer plans and computer reservations systems together, BA/AA have many aspects of the business covered.
The deal will be examined by at least two other official bodies, the European Commission and the United States Justice Department. Moreover, it is hard to believe with a transaction this size that it will not be looked at, too, by the US Department of Transportation and the highly activist aviation committees on Capitol Hill.
At the very least, one supposes, BA may be forced to divest itself of its links with USAir, and both airlines may be required to give up some gates/slots to competitors seeking to break back into the international market place.
Whatever the commercial consequences for BA and AA — and the stock market plainly believes in the deal — the series of anti-trust inquiries on both sides of the Atlantic could prove highly illuminating.
At a time when there has been increasing globalisation of manufacturing and financial services, and when trade is being liberalised in the World Trade Organisation, the airline industry is a notable exception.
Deregulation in Europe is still in its infancy, as comparison with fares in the US demonstrates. Travel across the Atlantic, and for that matter the Pacific, is still largely regulated through bilateral deals. Remarkably, in an age of multilateral trading, aviation remains one of the few industries in which foreign ministries play as large a role as the enterprises and sponsoring transport authorities in its administration.
This is plainly out of step and it is no accident that the Organisation for Economic Co-operation and Development’s spring meeting in Paris put a globalised aviation agreement on the trade agenda.