BA plans merger with American Airlines

published 19 February 2010

British Airways has won preliminary approval for an alliance with American Airlines from America's Department of Transportation (DoT). This will allow it to collaborate on pricing and services. Two previous attempts to cement ties were thwarted in 1997 and 2001. The DoT will give its final ruling in two months' time after hearing objections. The EU is also set to rule on the deal.

What the commentators said

Having finally secured approval after 13 years of trying, BA and AA only had to give up four pairs of slots at Heathrow, said Alex Brummer in the Daily Mail. That's "relatively minor", considering their "domination" of North Atlantic routes. In 2001 the mooted number was four times higher. The DoT recognised that the competitive landscape has shifted, said Anthony Hilton in the Evening

Standard. In 2007 an agreement between the US and the EU deregulated the transatlantic market and opened up Heathrow BA's "trump card in attracting American traffic". And rival airline alliances have already been allowed to deepen transatlantic co-operation.

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BA, which is heading for a £630m loss this year, now stands to benefit from synergies of around £200m a year, said Lex in the FT. Not to mention its share of the £400m of synergies expected from the planned merger with Spain's Iberia. Nonetheless, "investors should not get too carried away". The savings estimates could prove optimistic.What's more, there's still a potential cabin crew strike and a massive pension deficit to grapple with. "Fasten your seatbelts and cross your fingers."

BAY: 207p; 12m change 42%