British Air, Iberia, American Air, Plan Joint Venture

British Airways is said to be close to seeking clearance from competition authorities for a three-way operational merger with American Airlines and Iberia, according to the Times of London and the Financial Times.

British Airways planes parked at Heathrow Airport.
Kirsty Wigglesworth
British Airways planes parked at Heathrow Airport.

The deal would allow the three airlines to combine nearly all aspects of their operations, including sales, purchasing and marketing, leading to lower costs and greater economies of scale, the Times of London says. Legal sources in the United States said that a submission to the US Department of Transport was expected as soon as next week.

AMR Corp.'s American Airlines say they've been speaking with British Airways on a number of issues, but would not comment on this.

The Financial Times says the airlines aim to reach an accord on profit and revenue sharing this
month, the paper said, citing the executives of the three airlines.

American and BA are likely to argue a case with U.S. regulators that the competitive landscape has been changed by the "open skies" accord. The open skies agreement between the United States and the European Union entered into force in March, allowing airlines to access any U.S. city from any point in the EU and vice versa.

The agreement promises to increase competition between carriers, cut ticket prices and to eventually pave the way for transatlantic mergers to create the first global airlines.

BA and American are also expected to argue that the recent wave of mergers and new alliances has strengthened many of their biggest transatlantic rivals, which already have antitrust immunity with their partners across the North Atlantic, the Financial Times said.

BA was until two months ago, in talks with AA and Continental, another American carrier, about creating an alliance, but Continental has since walked away.

BA and AA have continued their discussions and are believed to have invited Iberia - in which BA has a 13 per cent stake - to be the third member. BA said last night that its talks with AA were continuing but a decision had yet to be made, the Times of London says.