Page last updated at 11:00 GMT, Friday, 29 August 2008 12:00 UK

EU to investigate BA-AA alliance

AA and BA tailfins
The airlines say their tie up will allow them to compete more effectively

The European Commission has opened an anti-trust investigation into a revenue-sharing deal between British Airways, American Airlines and Iberia.

"It is not a merger investigation and has no specific deadline," a European Commission spokesman said.

Jonathan Todd said the EU initiated the investigation, which will consider if the deal breaches competition rules. It did not follow a specific complaint.

Virgin Atlantic has voiced concern about the deal.

The tie-up is the closest alliance possible under US airline laws, which forbids foreign ownership of major US carriers.

The BA alliance with American Airlines will allow the two carriers to agree fares, routes and schedules together. The move will also include Spain's Iberia, which is merging with BA.

The three airlines say it would enable them to compete more effectively but Virgin Atlantic said it would create "a dominant mega-power" on routes between Europe and the United States.

Cutting costs

British Airways and American Airlines already work together as partners in the One World alliance which lets member airlines share flight capacity and airport facilities.

If approved, a new deal would see them work much more closely to try to reduce costs in areas such as technology, ticketing and administration.

With aviation fuel prices at record levels, airlines are looking for ways to cut costs.

BA suffered an 88% drop in profits between April and June and said the industry faced its worst ever period.

It also said it would cut 3% of flights this winter to reduce overheads.

Other US airlines such as Delta and United, are also in code-sharing deals with their European partners Air France and Lufthansa.

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