U.S. DOJ recommends changes to AMR, BA bid

WASHINGTON Mon Dec 21, 2009 8:23pm EST

American passengers look for their bags at Chicago's O'Hare International Airport November 25, 2009. REUTERS/John Gress

American passengers look for their bags at Chicago's O'Hare International Airport November 25, 2009.

Credit: Reuters/John Gress

WASHINGTON (Reuters) - American Airlines, a unit of AMR Corp, and British Airways PLC should agree to concessions to secure approval of a bid to deepen their transatlantic alliance, the U.S. Justice Department said on Monday.

Antitrust officials said in a filing with transportation regulators that the airlines' application to waive antitrust rules would "result in competitive harm" on certain transatlantic routes -- most servicing London.

Fares on those flights, the Justice Department said, could increase by up to 15 percent under the plan for so-called antitrust immunity for members of the 10-member Oneworld alliance, which is led by American and British Airways.

The agency identified six routes serving 2.5 million passengers annually that the carriers would unfairly leverage if allowed to proceed without conditions under the joint venture.

Officials recommended they divest takeoff and landing slots or take other steps to carve out routes to increase opportunities for other airlines to serve those markets.

Routes in question include: Boston-London; Chicago-London; Dallas-London; Miami-London; Miami-Madrid and New York-London, which is coveted for business travel. Four are hub-to-hub routes.

Access to London's Heathrow airport, despite a U.S.-EU agreement that has liberalized transatlantic service, is a major sticking point. Two previous immunity bids by American and British Airways in 1997 and 2001 foundered over regulatory questions about Heathrow.

"The applicants claim substantial benefits will flow from an expanded alliance but they have not shown that immunity is necessary to achieve these benefits," the Justice Department said of American and British Airways, which have a code-share arrangement to sell tickets on each others' flights.

The Transportation Department will determine whether American and British Airways receive immunity and at what cost. The agency is expected to act swiftly now that antitrust officials have weighed-in.

Immunity permits carriers to share pricing, scheduling and other information on specific routes, and has become a substitute for mergers in recent years.

Transportation officials had no comment on the recommendation by the Justice Department, which usually reviews immunity applications.

Such applications are regularly approved, often with conditions.

American, which is shepherding the application through the U.S. regulatory process, said it disagreed with the recommendation and planned to "respond fully" to the findings.

"American looks forward to rebutting the points made by DOJ and expects that the U.S. Department of Transportation will approve our alliance in a timely manner," the airline said in a statement.

American and British Airways contend that their immunity grant is necessary for them to compete effectively over the Atlantic with the SkyTeam and Star alliances.

(Reporting by John Crawley; Editing by Steve Orlofsky and Richard Chang)

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