BA-American deal seen a
Written on July 9, 2008
British Airways and American Airlines need to complete a transatlantic deal to link operations if they are to win the fight against high fuel costs and thwart rival alliances.
The two are close to agreeing a revenue-sharing agreement that would create a major force controlling over 50 percent of the lucrative flights between London and the United States, a source briefed on the matter has told Reuters.
The move is seen as a shot back at BA’s archrival Air France KLM, which has forged a transatlantic alliance with Delta and Northwest.
“BA has been totally left behind in terms of the global consolidation of the industry. They need to come to the party and participate,” Royal Bank of Scotland analyst Andrew Lobbenberg told Reuters.
BA and AA still need regulators to grant the combined entity anti-trust immunity which would allow them to collude on transatlantic routes and pricing alongside a third partner, Spain’s Iberia.
Four analysts polled by Reuters think there is a better than 50/50 chance an approval will be granted.
Fuel costs have soared as oil flirts with $145 a barrel, a trend likely to force all airlines to cut capacity and hike passenger fares to protect margins.
“This is a need to do deal,” said Andrew Fitchie, an analyst at Collins Stewart no fax payday advances. “The high oil price makes many airline operations unsustainable, (and) this sort of deal allows them to get to grips with supply of seats and pricing.”
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