Image via Wikipedia American Airlines, British Airways, Iberia ready to work closely together
12:00 AM CDT on Sunday, August 29, 2010

By TERRY MAXON / The Dallas Morning News tmaxon@dallasnews.com

For more than a decade, American Airlines Inc. and British Airways PLC have been talking about what they'd do if regulators would just let them work closely together.

In a few months, consumers may finally find out what's in it for them.

American, British Airways and Iberia, whose joint business agreement was approved by U.S. and European regulators last month, will start the integration process this fall with their frequent-flier programs.

"Today, our frequent-flier programs across the Atlantic aren't reciprocal, aren't coordinated," said American Airlines president Tom Horton. "Starting in October, they will be."

Although the carriers are all members of the Oneworld alliance, they didn't have antitrust law immunity, which would have let them coordinate their offerings, including their frequent-flier programs. Now they do.

At present, if you earn your miles on American, you can't use them on British Airways. Earn them on Iberia, you can't get a trip on American. That will change, Horton said.

"You can earn and burn on American or BA [and Iberia] and be indifferent what airplane you fly on," Horton said.

Of course, the programs are not identical, forcing the partners to devise tweaks to make them comparable.

"There's still a lot of work that's being done in the back side," said José Maria Alvarado, Iberia's general manager for the U.S. and Canada.

"For example, in my case with Iberia Plus, you earn points," he said. "But with American AAdvantage, you earn miles. There are a lot of technical issues that have to be worked out, and we have a group that is precisely looking at those issues."

Bigger changes
Fliers will have to wait a while longer for the airlines to make other changes, such as coordinating their pricing and schedules to attract more travelers.

Approval of the joint business agreement by the U.S. Department of Transportation and the European Commission in July came too late for the three carriers to make substantive changes in their winter 2010 schedules, which begin Oct. 31.

But schedulers at all three airlines are conferring to see how they can make the timetables work better for them and customers beginning in 2011.

Simon Talling-Smith, BA's executive vice president for the Americas, said the airlines will be able to implement some of the changes in the summer 2011 schedule, which goes into effect in late March.

The bigger changes won't be seen until the Oneworld partners release their winter 2011 schedule in October 2011, he said.

But when the scheduling coordination is done, the Oneworld offerings will be much more convenient for travelers, the carriers said.

Horton cited the schedules out of New York's Kennedy International Airport for Heathrow as an example of where American and British Airways overlap.

In the morning, an American and BA flight depart within 10 minutes of each other. In early evening, they have flights departing within five minutes of each other. Later, they have another pair of flights departing only 10 minutes apart.

"In the future, after we have sat together and talked about coordinating our schedule, we can create a pattern of service so that in the evenings, we've got a flight every half an hour," Horton said.

"That's pretty powerful if you're a New York-based business traveler and you want to just hop on the next kind of shuttle service to London," he said.

Horton said American has plans – which it's not ready to announce – to add flights across the Atlantic now that it has approval to work with BA and Iberia. The alliance should make American more profitable, allowing it to grow somewhat, he said.

Along the same lines, American's new partnership with Air Berlin should allow American to add flights into Germany. Air Berlin is expected to join Oneworld in 2012.

"In the past, we've flown Berlin. We've flown Düsseldorf. We were financially unsuccessful and wound up pulling out," Horton said.

"Well, in the future, if we have a partner with a hub in Düsseldorf and Berlin, I would bet we could make a go of that and make that financially successful," Horton said.

The partners are also working on being able to price their tickets together, including offering "combinability" – the ability to take one airline one direction and another airline coming back.

At present, that usually requires a pair of expensive one-way tickets. As planned, customers would be able to get round-trip fares, regardless of which carrier is offering the flight.
"The aim of the alliance is to make it seamless in moving from one airline to another so they might easily fly across the Atlantic on one carrier and back on the other carrier," Talling-Smith said.

Corporate travel
The airlines also hope to make themselves more attractive to corporate travelers. For several years, American has complained that it and its Oneworld cohorts were being penalized because they couldn't jointly sell their services to corporate customers, while airlines in rivals Star Alliance and SkyTeam could.

Kurt Stache, American's vice president of international, said that in recent years, "most of the corporations that have a contract with us are large corporations that want the global network.
"It's not just about D/FW or Dallas. It's absolutely critical to be able to offer Dallas to the rest of the world."

More corporations are asking for bids from alliances, not just from individual airlines.
"The other alliances have really stepped up to that. Our plan is to catch up very quickly," Stache said.

As Wall Street has muttered about parent AMR Corp.'s continuing losses, American executives have said they expect their alliances to add more than $500 million annually to AMR's bottom line.

That includes the impact of the joint business agreement with Iberia and British Airways, plus a similar partnership proposed across the Pacific with Japan Airlines, also a Oneworld member.
Opponents of the trans-Atlantic partnership, most loudly Virgin Atlantic Airways Ltd., argued vigorously that the deal would hurt consumers and competitors, and urged regulators to reject the application or impose heavy restrictions.

Horton said the partnership will be good for the airlines and should also be good for fliers.

"Obviously from the airline companies' perspective, it allows us to do a lot of things to compete with the other two alliances. We can coordinate our schedules. We can coordinate our pricing. We can coordinate our product offerings. We can go jointly sell to corporations," he said.

"All of those things are important to the company. But when you flip it around, for most every one of those, there's also a benefit to the customer," he said.

"And if we make it work for the customer, we make it work for the company," Horton said. "If we don't make it work for the customer, then it's not going to work out well for the company." Iberia, British Airways and American Airlines, whose joint business agreement has been approved, will start integrating their frequent-flier programs this fall. Travelers will have to wait a bit longer for the airlines to make other changes, such as coordinating their pricing and schedules."