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Steve Chiotakis: A European Union decision this morning means, essentially, that British Airways and American Airlines will function as one on their trans-Atlantic routes. That means when you book a flight on one airline, you could very well be flying on the other. Marketplace’s Europe correspondent Stephen Beard is with us live from London to talk about why this is such a big deal. Hi Stephen.
Stephen Beard: Hello, Steve.
Chiotakis: So the two airlines are already in an alliance, right? I mean what’s new with today’s decision?
Beard: This will get them working even more closely together, coordinating flights and fares, running joint frequent flier programs, for example. They say they need to do this to cut costs at a time when many airlines are still losing money. The U.S. regulator, by the way, still has got to have its say, but it’s expected to give its blessing.
Chiotakis: And why is that? Why do we need regulatory approval for this? Why couldn’t they just sign a deal on their own?
Beard: BA’s rivals argue that this alliance will be anti-competitive. They say it’ll push up trans-Atlantic airfares and so is a subject for the regulator. BA says this is nonsense — there have been similar trans-Atlantic alliances running for some years now. Air France and Delta for example; Lufthansa and United. So they say it would be illogical to block this alliance. Airline industry observers say if this was virtually any other global industry which needs to consolidate, there would be trans-Atlantic mergers. I mean BA would be taking over American or vice versa. But David Learmount, editor of Flight Global Magazine, says that isn’t going to happen soon:
David Learmount: At the moment, the world still has not got its head around that idea. And the biggest opponent of the idea of having airlines which are not national is the United States of America.
Chiotakis: Mmm. Now Stephen, s this just a first step? Could we see a trans-Atlantic merger?
Beard: Well, you tell me, I mean you’re where the opposition is. I mean the U.S. feels that airlines based in the U.S. need to be American for security reasons. Many Europeans however say that’s not the case — in time of a national emergency, for example, any government can commandeer any airline operating in its territory.
Chiotakis: Marketplace’s Stephen Beard, reporting from London. Stephen, thanks.
Beard: OK, Steve.
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