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New Airline Mergers: What You Need to Know

American Airlines, British Airways, and Iberia just announced their new “joint business” deal, and the Department of Transportation approved antitrust immunity for United with ANA and American with JAL to pursue their interests in the Pacific jointly. Earlier arrangements pair Delta with Air France/KLM and United with Lufthansa. When announced, airlines in these hookups universally crow that the deals will be good for the lines involved and also “good for consumers.” Really? My take is that, yes, the deals have been or will be good for the corporations involved, but most consumers won’t even notice, and those that do will see a mixed blessing.{{{SmarterBuddy|align=left}}}Let’s take a closer look at how the AA/BA/Iberia deal is likely to affect you.

1. Most of you won’t notice. Obviously, the whole deal applies only to a limited range of international travel. AA, BA, and Iberia will be able to cooperate in setting fares and schedules, and in lots of mutual code-sharing. This really means little actual change, however, because through ticketing within the Oneworld Alliance has been possible for some time.

2. Fares to/from Europe will probably go up. That’s mainly because fares are going up, generally, however, not specifically due to the joint business deal. But despite the airlines’ earnest claims, it’s hard for me to see how the deal would lead to decreased fares anywhere.

3. Frequent flyer deals to/from London will improve, but only slightly. AA frequent flyers will be able to earn AA miles on BA flights to and from the United Kingdom. And BA or Iberia flyers will earn their line’s miles on all AA flights. That’s the main immediate benefit for consumers. But the effects on seat availability will be a zero-sum game: AA frequent flyers will have access to more flights on BA and Iberia, but they’ll be competing with BA and Iberia flyers for scarce AA seats.

4. The new flights announced to date are distinctly underwhelming. AA will start flying nonstop from New York/JFK to Budapest and from Chicago to Helsinki, BA will start flying nonstop from London to San Diego, and Iberia will fly nonstop from Los Angeles to Madrid. Although those new flights will be welcome, none has anything to do with the joint business—they’re flights that would have made just as much sense absent the deal.

5. At least for now, many potential AA-BA-Iberia connections will still be cumbersome. The public announcements tout “easier connecting journeys,” but that’s a stretch. For now, AA and the European lines use different terminals at three of their most important transatlantic gateways—Chicago, London, and New York—and many connections there require that you schlep between terminals, leave and re-enter security, or at least pass additional screening. Where possible, you’re better off making domestic-to-international connections at airports such as Atlanta and Dallas-Ft. Worth where all terminal transfers require only a short people-mover trip and remain within a single security area. I’m pretty sure that AA, BA, and Iberia will try to arrange common terminals at other points where they serve in common, but that could take several years.

6. Improved service, if any, will be confined to business class. Business-class traffic is what drives the transatlantic market, and you can expect to see some rationalization there. However, I see two intriguing questions about how closely the three lines will align their products:

  • Will AA and Iberia adopt premium economy? Apparently BA is happy with its premium product, but so far I’ve seen no indication that either AA or Iberia is interested.
  • Will AA and BA drop first class, as Iberia did some time ago, will Iberia again offer first class, or will each line go its own way, as in the past?

I see no improvements on the horizon for economy class. All three lines offer the usual cattle-car seating, and future changes, if any, will probably make it worse, not better.

7. All in all, this and the other pending arrangement are bigger deals for the corporations than for the customers. So what’s new?

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