MIAMI – British Airways (BA) and American Airlines (AA) have offered competition-based commitments to the UK Competition and Markets Authority (CMA) following an upcoming expiry of binding commitments that were accepted by the European Commission.
These binding commitments came following an investigation into the Atlantic Joint Business Agreement (AJBA) consisting of BA, Iberia (IB), Aer Lingus (EI), AA, and Finnair (AY).
British Airways and American Airlines came into the spotlight of the AJBA due to both carriers being the key UK and US parties to the accord.
Under the deal, these airlines agreed not to compete on routes between the UK and the US, whether it would be through codesharing arrangements or direct scheduled flights.
The agreement also stated that slots were made available to competitors at London Heathrow or Gatwick Airport, binding for 10 years, which is where we are at today.
Unfair Monopolistic Competition?
Such markets flagged up potential competition concerns on these routes, due to there not being enough slots for competitors such as Virgin Atlantic (VA) to operate on fairly.
This would have been portrayed as a contravention of Chapter I of the Competition Act of 1998 as well as Article 101 of the Treaty on the Functioning of the European Union.
The UK CMA was clear in 2010 when their reports stated that “no assumption should be made that the Atlantic Joint Business Agreement infringes competition law.”
The initial investigation came from the UK CMA back in October 2018 due to the European Commission no longer having any jurisdiction on five of the six routes subject to commitments when the United Kingdom leaves the European Union.
The report itself looked at the competitive nature of the Boston, Chicago, Dallas, Miami, and Philadelphia markets from London Heathrow.
An Opportunity for Fair Play?
As a result of the preliminary investigative reports, British Airways and American Airlines had agreed to do two things.
The first was to release more take-off and landing slots at London Heathrow or Gatwick to enable competitors to bring in or increase non-stop flights between London and Boston, Dallas, and Miami.
Both carriers had also offered measures that would support competing services on those same routes as well as to Chicago and Philadelphia, where access to connecting passengers would be given to other competitors away from the agreement, but on preferential terms.
This would open up opportunities for competitors out of London Heathrow and Gatwick, with more passengers to potentially snap up and the ability to generate further revenues and operations that could prove to make or break the success of airlines out of those hubs.
COVID-19 Delaying Decisions
The CMA did admit on May 7 that the ongoing Coronavirus pandemic is having a significant effect on the sector.
Not just that, but it would also place an effect on its decision to see whether any contraventions in law had been made.
The government body will “market test” the proposals set out by BA and AA but will give “additional time for responses if required” because it would be testing the package at a quieter time for passenger travel.
If the Coronavirus hadn’t come about, then the package would be tested against the demand that was seen in 2019 and before that.
Either way, the CMA appears to be allowing some sort of flexibility at this stage of the pandemic and is looking at forecasts for when the UK has officially come out of lockdown and resumed the process of normality.
A Much Needed Level Playing Field
Overall, it remains clear that these slot allocation changes may actually benefit competitors more, and would also give healthy challenges that the consumer will need, especially when the industry recovers from the Coronavirus pandemic.
More competition means lower fares, which will effectively mean more passengers as the decade progresses.
COVID-19 will most definitely continue to slow industry growth, but fairer competition when we come out of this crisis will make the sector a more healthier one.