Virgin boss appeals to McCain, Obama on BA deal

Virgin Atlantic Airways president Richard Branson has written to both U.S. presidential candidates to warn that a proposed alliance between British Airways and American Airlines would severely damage competition on trans-Atlantic routes.

Richard Branson has written to oth Barack Obama and John McCain about BA's proposed deal.

Branson said Monday that a closer relationship between the two carriers would result in higher prices for customers and job losses on both sides of the Atlantic, adding it was "very dangerous" to believe that consolidation was the best response to the current difficult economic conditions.
"Just because life is tough out there, you shouldn't rid yourself of competition," Branson told BBC radio after releasing details of the letter to Senators Barack Obama and John McCain.
BA, which is already in talks with Spain's Iberia SA over a merger, said last week that it expected final preparations for a deal with AMR Corp.'s American, the world's largest carrier, to be completed within weeks. An application to U.S. regulators for antitrust immunity would be filed shortly afterward, it added.
It declined to comment further on its progress on Monday.
BA and American have failed in the past to win an exemption from U.S. competition laws to work more closely together because of their dominance at London's Heathrow, where the pair have more than half the capacity to and from the United States.
However, they are expected to argue that the competitive situation has changed since the "open skies" agreement between the U.S. and the European Union came into force in March, allowing airlines to fly to and from any point in the U.S. and any point in the EU.
Strict airline ownership laws in the United States all but rule out a full merger between BA and American Airlines. However, an exemption from the anti-competition laws could allow the pair to run their trans-Atlantic operations as a single company, with cooperation on pricing and schedules -- adding to the flight capacity and airline facilities they already share.
In his letter to Obama and McCain, Branson said that using open skies to justify a deal "is a complete red herring," arguing that the agreement has not significantly increased competition on Britain-U.S. routes or reduced ticket prices. He also noted that the agreement could be unwound in 2010.
"Neither is the current economic slowdown a justification for waiving through any application," Branson added in the letter. "The job of the regulators is to assess the long-term impact of the alliance on competition, not to provide special protection from the immediate challenges of the economic cycle, with which every other airline has to deal with."
BA's round of three-way talks with Iberia and American is being held against the backdrop of soaring oil prices and falling passenger demand because of the global economic slowdown.
BA Chief Executive Officer Willie Walsh last week said current conditions presented "the worst trading environment the industry has ever faced."
Branson said on Monday that Virgin, which has not provided an earnings report for almost a year, was still profitable despite conditions he said were worse than the aftermath of the Sept. 11, 2001, terrorist attacks in the United States. The company is privately held between Virgin Group and Singapore Airlines.
Branson added that Virgin had no plans to cut back its winter flight schedule, unlike several other carriers including BA.
"I think it's important to keep at least a daily flight on all the major routes," he told the BBC. "So I think as far as Virgin Atlantic is concerned, we feel that we can get the load factors that we need to keep the airline profitable."