CMA consults on BA and American Airlines commitments*
British Airways and American Airlines have offered commitments to resolve the CMA’s competition concerns over an agreement about airline routes between the UK and US.
The airlines will make slots available at London Heathrow or Gatwick airports as part of a wider package of measures to resolve competition concerns regarding their joint business on certain routes between the UK and US.
This year will see the expiry of a set of binding commitments that the European Commission accepted in 2010 after a competition investigation into the Atlantic Joint Business Agreement (AJBA). Five airlines are currently signed up to the AJBA: three members of the International Airlines Group – British Airways (BA), Iberia and Aer Lingus – and American Airlines (AA) and Finnair. Under the terms of the AJBA, these airlines have agreed not to compete on routes between the UK and the US. BA and AA are the key UK and US parties to the AJBA.
Ahead of the expiry of the commitments, the Competition and Markets Authority (CMA) launched an investigation into the AJBA in October 2018, reflecting the fact that 5 of the 6 routes subject to commitments are from the UK and to prepare for the time when the European Commission would no longer have responsibility for competition in the UK. The CMA examined the impact on customers on UK-US routes from the loss of competition due to the AJBA. It assessed the competition from other airlines on each route and the benefits that the AJBA may deliver including improved schedules, connections and new routes. It identified potential competition concerns on routes between London and each of Boston, Chicago, Dallas, Miami and Philadelphia.
As a result of the CMA’s investigation, BA and AA have offered measures to try to resolve the concerns. The proposed package, includes:
- Releasing additional take-off and landing slots at London Heathrow or Gatwick airports to enable competitors to begin or increase non-stop flights between London and Boston, Dallas and Miami.
- Measures to support competing services on these routes as well as on the London to Chicago and London to Philadelphia routes, including access to connecting passengers on preferential terms.
The next step is for the CMA to seek views on the proposed package, but this comes at a time when the coronavirus (COVID-19) pandemic is having a major impact on the aviation sector. In the CMA’s discussions with airlines, they have emphasised the importance of certainty about the future availability of slots, due to the imminent expiry of the 2010 commitments. The CMA is therefore proceeding to market test the proposed package but is also giving additional time for responses if required. In addition, the commitments allow for the CMA to review the AJBA if competitive conditions are different in the future, for example, when the sector is expected to have emerged from the pandemic.
Ann Pope, Senior Director, Antitrust at the CMA, said:
The CMA launched this investigation because we were concerned that, with the expiry of the current commitments, consumers might lose out since – without some kind of mitigation - the Atlantic Joint Business Agreement reduces competition on key routes between the UK and the US. On some of these routes there are either few or no other airlines offering direct flights to passengers.
We therefore welcome the offer from BA and American Airlines to find a way of addressing the CMA’s concerns. Their suggested resolution has the potential to increase competition and deliver lower fares for customers, while also preserving the benefits that joint airline agreements offer passengers. We are acting now as the current commitments expire this year, but can review the agreement in the future if the market does not return to its pre-COVID state.
The CMA is consulting interested parties before taking a decision on whether to accept the commitments. The consultation runs until 5pm on 4 June 2020. Given the current exceptional circumstances the consultation may be extended if organisations require more time to respond.
More information on this investigation can be found on the case page.