Monster monopolies don’t benefit anyone

TravelMole Guest Comment by Virgin Atlantic chief executive Steve Ridgway 
 
 
It’s difficult to deny that our biggest competitor, British Airways, wants to get even bigger.

The drawing board is getting pretty full at BA headquarters, with plans to merge with Iberia, Qantas and American Airlines. As BA gets bigger, its dominance increases on some of the busiest routes in the world.

Iberia and Qantas would certainly enable BA to grow stronger, but it’s the planned alliance with American Airlines that would create a monster monopoly detrimental to the very concept of competition.
 
Virgin Atlantic is against BA/AA because if the application goes ahead, the new entity would have a stranglehold and insurmountable monopoly on the busiest routes between Europe and the US.

The two airlines, effectively working as one, would operate 80% of all capacity between Heathrow and Boston and 64% between Heathrow and JFK. Not to mention the 100% pure monopoly between Heathrow and Dallas. They would also be highly dominant on several other Heathrow to the US routes.

We all know what monopolies do, as the case of airport owner BAA has shown clearly. Monopolies gouge consumers, who don’t get any value, and hike fares due to their dominance in a market. Competitors don’t get a look-in because they simply do not have the firepower to compete with a player that has such substantial sway in the market.

BA and AA would have us believe that EU/US ‘Open Skies’ has brought a raft of new competition between Heathrow and the US.

The numbers show that is not the case. Air France and Delta Northwest have, within months of starting, pulled off serving LA and Seattle from Heathrow.

No-one has free and unfettered access to Heathrow. The rare slot that does emerge does not enable carriers to compete on transatlantic routes.
 
BA argues that it needs to link up with American because SkyTeam and Star are dominant at their hubs. But the fact is that BA on its own is already bigger between Heathrow and the US, the thickest airway out of Europe, than Star is from Frankfurt or SkyTeamis from Paris – and that’s before it gets together with American Airlines.

Heathrow accounts for nearly a quarter of all passengers travelling between Europe and the US, and in stark contrast to other European hubs where competitive entry is possible, it is effectively full.

This makes it physically and financially impossible for any carrier to offer any meaningful level of new competitive service at Heathrow, let alone attempt to replicate the network that BA/AA would have.
 
If BA/AA were to receive clearance, the travel trade and large corporate accounts would suffer. A bigger airline, with less competition, would force up prices because it wouldn’t face as much pricing pressure.

Travellers would pay higher fares in return for less choice. Remember what BA was like when there was no choice across the Atlantic?

The current economic malaise is no justification for regulators to let the application for anti-trust immunity go through. There is no reason to allow special protection from the immediate challenges of the economic cycle.

Anti-trust laws should not be ignored during an economic downturn for good reason because when the economy recovers, competition and consumers would be faced with a giant carrier which had permanently changed the market for the worse.

It’s why regulators should be saying no way to BA/AA as well. If BA gets to play monopoly with American Airlines, then we’ll all be losers.