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Friday, October 23, 1998 Published at 10:43 GMT 11:43 UK

Business: The Company File

Take-off for BA's global airline

The pioneers of the global alliance face criticism from competitors

British Airways has announced the creation of the biggest airline network in the world.

BA Chief Executive Bob Ayling talks about how the alliance will affect customers
BA and its US partner American Airlines (AA) are forming alliances with airlines around the world, including Qantas of Australia, Canadian Airlines International and Cathay Pacific of Hong Kong.

However, the alliance has prompted criticism from competitors that they will be sqeezed out with passengers paying more with lower service standards.

Together the new network, "oneworld", will become a dominant force in the global airline industry.

[ image: Cathay Pacific is set to land a place in the new global network]
Cathay Pacific is set to land a place in the new global network
Six other airlines, Japan Airlines, Iberia of Spain, Maersk Air of Denmark, GB Airways of the UK, Finn Air and American West, are expected to be involved in the partnership.

The five main partners will serve around 800 destinations and fly more than 160m passengers a year.

Customers will only have to purchase one ticket to use different airline networks to get to destinations across the world.

The airlines will also be able to co-ordinate their schedules to create "seamless" travel for passengers.

Blow for competition

The creation of such a dominant industry force could pose a serious threat to smaller airlines, unable to compete effectively with the new network.

Virgin Atlantic's Richard Branson: 'Is it really in the interests of the consumer?'
The creation of this large alliance, with many more airlines, may find opposition among competition regulators and lengthen the investigation into an even tighter alliance already proposed by BA and American Airlines.

Richard Branson, head of Virgin Atlantic, says the alliance deals are effectively mergers and will not be in the interest of the airline consumer.

"Cathay Pacific and British Airways control 83% of the Hong Kong-London route. Qantas, Cathay and BA are getting together and that means there will be no competition on the Australian route.

"If there is no competition they can set fares as they wish, cut staff, cut costs, its certainly not in the consumer's interests.

He called on governments to make sure airlines had to compete or there will end up being no competion in the aviation market.

[ image: The Airline executives of Oneworld insist the customers will benefit]
The Airline executives of Oneworld insist the customers will benefit
However, BA chief executive Bob Ayling said oneworld would be competitive on ticket prices: "We will compete on price unless, as in the case of BA and AA, we have antitrust immunity not to compete.

"Our customers have told us they want airlines to work together to raise standards of service across the world. oneworld will do just that," he said.

Qantas chief executive James Strong said the frequent flyer programs of the four major partners would be linked to provide seamless benefits on all their routes.

Sky wars

The latest move is part of the rapid consolidation of the airline industry.

BA has already established links with Air Liberte of France and Deutsche BA of Germany.

BA's move is a bid to take on the Star Alliance, a consortium of airlines set up 18 months ago by United Airlines of the US and Lufthansa of Germany.

However the new alliance may take some time to come to fruition.

AA and BA announced their own proposed alliance in 1996 but they have yet to win final regulatory approval from UK and US authorities.

Peter Mandelson, the UK Trade Secretary, is not expected to make a decision on whether to sanction the tie up between BA and AA before November.

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