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American, British Air, Iberia in Joint Venture

The Financial Times is reporting that American, British Airways, and Iberia plan to join forces to create "one of the most powerful forces in the transatlantic aviation market."

The centerpiece of the three-way relationship would be anti-trust immunity, allowing the airlines to operate as a single carrier, cooperating in the setting of prices, sales, and marketing of flights between the U.S. and Europe.

American, British Airways, and Iberia are already partners through their participation in the oneworld global alliance. And AA and BA also cooperate on non-transatlantic routes.

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Because of the potential for anti-competitive behavior, especially when it comes to pricing, approval for anti-trust immunity must be sought and received from government regulators on both sides of the Atlantic before the venture may proceed.

Still, with anti-trust immunity already enjoyed by other groups of transatlantic airlines, and a new open-skies policy in effect since March, it will be hard for regulators to deny the newest applicants the same right.

The consolidation of power among three of the largest transatlantic airlines will almost certainly result in increased ticket prices, especially between the U.S. and both the U.K. and Spain. Ironically, that will inevitably offset to some extent the expected benefits of the open-skies agreement: more competition and lower prices.

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