American British Continental: easy as ABC, but does it add up in the sky, asks CAPA

07 May 2008

Mumbai: As the US network airline industry flounders to find a miracle solution, British Airways has started to look a lot more attractive than its recent reflection in the windows of Heathrow's Terminal 3, according to a report by Centre for Asia Pacific Aviation (CAPA).

American, says CAPA, is unique among US majors in that it has not relied on Chapter 11 bankruptcy to restructure, and has long been a bilateral partner of British Airways (BA) in the Oneworld alliance.

Continental on the other hand, which has extensive experience with bankruptcy reconstruction, has been sidelined by the Skyteam group, at a time when Delta and Northwest try to pursue their merger plans. Apparently, there apparently isn't enough room for three US airlines there, nor, even for two, say analysts.

Now, having evaluated and rejected a merger with rival Star Alliance's United, Continental is left with only Oneworld as an option, which is led in Europe by BA. This, according to CAPA, is the leading negotiating point for BA.

The British carrier has been left behind by its continental rivals, Lufthansa and Air France, in European expansion and is starting to look somewhat fragile as a global competitor. However, says the CAPA report, when it comes to dealing with US airlines, BA's biggest liability also becomes its greatest asset; the carrier's Heathrow base was last week described by American Airlines' CEO as the worst airport American operates to in Europe.

However, Heathrow Airport has not remained popular because it is a pretty place, but because it remains the most valuable US gateway to Europe, and British Airways holds 42 per cent of all slots at the hub. American and Continental would add another 3 per cent or so, but a close, antitrust-free alliance would have a considerably greater impact on US-Heathrow slots. That makes for the second negotiating point for BA.