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Wednesday, July 8, 1998 Published at 14:35 GMT 15:35 UK

Business: The Company File

What next for consumers and competitors?

British Airways has high hopes for the deal

Even after the European Union clearance, the final go-ahead for the British Airways - American Airlines pact is still months away.

As well as final UK government approval, the US government still has to o.k. the deal. That is likely to involve an open skies agreement, whereby British airports are opened up to American carriers and vice versa.

The alliance could still falter. In May a report from the US Justice Department, which deals with competition concerns, suggested that 336 slots should be given up or it would consider blocking the alliance.

The deal has to be sanctioned by the US Department of Transportation too.

Blow to smaller companies

If the alliance goes ahead it will create one of the biggest airline networks the world has ever seen. Customers will only have to buy one ticket to use flights of both airlines to fly to destinations around the world.

The EU decision is a blow to smaller airlines such as Virgin Atlantic that have campaigned vociferously against such an alliance.

They are concerned that together BA and American Airlines will monopolise routes between Britain and the US. Together the airlines are estimated to account for 40% of all flights between Europe and America, and 60% of all flights between the UK and America.

Higher prices?

So if the alliance does go ahead, will it mean airline customers are faced with higher prices?

The UK Consumers Association fears that the alliance will increase the price that customers will have to pay for flights by reducing competition in the market.

The argument goes that the two airlines will use their dominance in the transatlantic airline market to squeeze extra profits from their flights.

Other commentators suggest that the fact that BA and American airlines will be forced to give up take-off and landing slots could put a lid on prices.

Travel Editor Simon Calder: "The biggest impact could be on travel within the UK"
Simon Calder, travel editor of The Independent, believes the price of club class and first class seats could come down.

An opening up of British airports to American carriers may bring more competition into the market.

But the impact on prices will not really be known until BA and American Airlines determine which slots they intends to give up and how those slots are carved up between competitors. Analysts believe that the really important negotiations are only about to begin, with the two airlines seeking to limit the damage by getting rid of some of their less profitable routes.

That could have the effect that BA and AA reduce their services to less popular destinations in the UK.

But consumers are unlikely to see any changes in the near future. It could take as long as two years for the airlines to give up their slots.

Wider consolidation

The deal between BA and American Airlines is part of the rapid consolidation of the world's airline industry with a host of rival carriers clubbing together to form international networks to carry passengers.

In June 1996, when they first announced their plans, their alliance was unique.

But since then more and more airlines have joined forces.

The alliance between Germany's Lufthansa, United Airlines and Scandinavian Airlines System was also approved by the European Commission.

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