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Justice opposes AA-BA pact
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December 17, 2001: 5:29 p.m. ET
Urges DOT to block alliance between American and British Airways.
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NEW YORK (CNN/Money) - The Justice Department weighed in against the proposed alliance between American Airlines and British Airways, urging the Transportation Department to require the carriers to divest takeoff and landing slots and other assets before it gives the two airlines approval to work together more closely.
Justice's statement said the alliance would reduce competition, since the two carriers are both major players in the trans-Atlantic air market. The DOJ said that would likely result in higher air fares and reduced service.
It proposed that the two carriers be required to give up the slots needed for other airlines to have nine round-trip flights a day between the United States and Britain in order to win DOT approval.
The Justice statement said that the scarcity of landing slots at London's popular Heathrow Airport makes it unlikely another airline could start service between the two countries unless the divestiture is required by regulators, even if the two nation's governments successfully negotiate a so-called "open skies" agreement to liberalize travel between the nations.
British Airways and American Airlines issued a joint statement that they are hopeful that European regulators and the U.S. DOT, which has the final U.S. say on the alliance, have a more positive view of the proposed pact between the carriers, especially considering recent progress towards an open skies agreement.
"It's not unexpected from our standpoint," said British Airways spokesman Jeff Angel. "Traditionally Justice has taken the hardest line in previous airline competition matters. We'll continue to push forward with DOT."
Angel said that an open skies agreement between Britain and the United States is closer than ever but would only happen with approval of the American-British Airways alliance.
The airlines' joint statement said they are encouraged that the number of slots at Heathrow that Justice is looking for is less than the last time the proposal was considered. But the statement said they object to giving up even nine round-trip flights a day.
"DOJ underestimated the commercial availability of slots at Heathrow and the competitive advantages already being enjoyed by other global alliance networks," said the statement.
Justice has continually clashed with American Airlines, a unit of AMR Corp., the world's largest airline company, over issues of competition and access to markets. While it approved AMR's purchase of TWA earlier this year, it has continued to pursue an antitrust case charging American with suppressing competition at its Dallas hub by cutting fares to force out smaller low-cost competitors.
The proposed alliance needs the approval of transportation department regulators before the airlines can discuss pricing, schedules and marketing plans.
An earlier proposed alliance was blocked by the DOT in 1999 due to regulators' demand for greater access to Heathrow by other carriers. Talks about reviving the plans for a closer link between the two nation's largest airline companies started in June.
The two carriers are part of what is known as the oneworld alliance, which allows them to book passengers on each others' planes. But without approval from regulators they don't have the freedom of some of the competing global airline alliances.
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Shares of American Airlines parent AMR Corp. (AMR: Research, Estimates) lost 62 cents to close Monday trading at $22.50 following the late-afternoon announcement. Shares of the American depositary receipts of British Airways (BAB: Research, Estimates) closed down 65 cents at $28.70. 
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