American Airlines boss hopes for full merger with BA / IAG
01.08.11
The boss of American Airlines has raised the prospect of a full merger with British Airways and Iberia in a move that would create the world's largest airline, the Wall Street Journal reports. Tom Horton, the American Airlines president, said he believed that restrictions on the foreign ownership of US airlines would be relaxed before he retires - he is 50.
International Airlines Group (IAG), which owns the BA and Iberia, was given regulatory permission to form a transatlantic alliance with American last year. The joint venture allows them to co-operate on schedules, sell each others flights and share revenues from transatlantic operations. But that is currently as far as the co-operation can extend because the US restricts foreign ownership in domestic airlines to 25 percent, although Washington is under pressure from the European Union to relax these rules.
Mr Horton told the newspaper: ‘This alliance with BA and IAG is effectively a synthetic merger. Over time - I think in my working lifetime - foreign ownership rules in the US will become more flexible. This alliance could form the basis of a cross-border merger between our airlines.’
While a full merger remains a possibility for the future, Mr Horton said that American and IAG were working on plans to develop their existing alliance. They have already coordinated schedules so that AA and BA do not have flights leaving at the same time. That has allowed them to create a shuttle service from New York to London, with flights leaving every 30 minutes to 60 minutes during the evening.
The partners are also considering how to price their products to offer passengers as many options as possible. For example, BA's business class is widely regarded as superior to AA's and this creates the option to have a premium-priced business class and a cheaper option.
Mr Horton said: ‘The alliance with BA is a huge deal and is really just now getting traction. We are looking at putting as much product on the shelves as we can. In BA's business class, the beds are fully flat and selling that at a different price to our business class is under discussion.’
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