British Airways and American Airlines will be asked to surrender some of their flight slots in London Gatwick or Heathrow in the interest of competition. A review, published today, has found that there is not enough diversity on these non-stop routes. The method of surrendering key slots on select routes between the UK and the US should address this issue.
British Airways and American Airlines lose out to the competition
In 2018, the Competition & Markets Authority (CMA) began an investigation into the competition on UK-US routes operated by Atlantic Joint Business Agreement (ABJA). ABJA is comprised of five airlines, of which BA and American are two. Alongside these airlines are Finnair, Iberia and Aer Lingus.
The Competition & Markets Authority conducted its investigation on seven routes between the UK and the US. However, it found just five on which to focus its research. During its study, it found the following concern; that there was not an even distribution of competition on non-stop routes from London to:
- Miami, and
As a result of these findings, both British Airways and American Airlines will be forced to give up precious slots at either London Gatwick or Heathrow. This will provide a fair and much-needed opportunity for rival airlines to take advantage of this profitable route.
What are the agreement terms?
The CMA has today laid out the terms of its proposition. British Airways or American Airlines must surrender one pair of slots per day on routes between London and Boston, Dallas, Miami, and Philadelphia. Where routes are profitable, finding a suitable rival interested in these slots should not be a problem.
However, in the case of Dallas and Philadelphia, the CMA foresees that this will be much harder. For that reason, the authority has suggested that British Airways and American Airlines fulfill a minimum seat requirement. Between London and Philadelphia, BA and American must satisfy a minimum of 635,300 seats per year. Between London and Dallas, BA and American must have at least 870,000 seats per annum.
Despite these numbers, the thought of surrendering slots must be tough news to take. Particularly knowing that competitors will profit from them instead. A representative at American Airlines told us:
“We have reached an agreement on proposed new Commitments with the CMA …The Commitments consist of the continued release of daily slot pairs at LHR for use on non-stop routes to Miami, Boston, and Dallas, plus under certain conditions also Philadelphia. These are challenging times around the world, including for our industry, but these Commitments allow us to extend the legal certainty regarding the operation of the joint business and, most importantly, allow the parties to move forward and focus on getting back to serving our customers and making travel as convenient as possible.”
Who will take BA and American’s slots?
The CMA thinks that these slots between London and the US will be popular. It expects that it won’t be long before a rival carrier takes the opportunity to expand their network in Boston. After all, Delta has a hub in Boston and invested a lot at the tail end of 2019 to develop from there. In October 2019, Delta announced that it would be offering a new summer route between Boston and Rome as part of its trans-Atlantic expansion plans.
Another keen buyer could be JetBlue. It has Boston down as one of its focus cities.
However, making those adjustments won’t happen just yet. It’s not until July 2020 that the CMA will make its final decision on the Commitments, according to its timeline. However, despite what seems to have been a smooth investigation and resolution, there is, of course, an issue.
How does the competition analysis work around COVID-19?
When the COVID-19 pandemic took hold, the CMA was already in the throes of its investigation. However, it now has to make allowances for the changing climate of the industry. While the Commitments set out by the CMA should have been binding until 2030, the authority now reserves the right to re-open the investigation in as little as two years should airlines fold or be slow to recover.
This could perhaps relax the slot restrictions on BA and American Airlines.
What do you think about this story? Who will pick up the slots in the other US cities? Let us know your thoughts in the comments.