If its boss has his way, the ’world’s favourite airline’ is about
to balloon to twice its size. Within months, the two biggest airlines in
the world, British Airways and American Airlines, aim to have a
’strategic alliance’ in place, creating a giant network straddling the
world and serving 36,000 city pairs - doubling their current reach.
There are however a few small local difficulties to negotiate first.
Although the proposed deal was announced six months ago, it was European
competition commissioner, Karel van Miert’s angry outburst in
mid-January which pushed the issue into the public arena.
Van Miert was reacting to Trade Secretary Ian Lang’s preliminary
decision, that, provided BA made certain concessions, he would not refer
the matter to the Monopolies and Mergers Commission. Van Miert had other
ideas, claiming that BA takes advantage of EC law on some issues (in
1995 Van Miert put pressure on Air France to relinquish its stranglehold
on internal flights and BA purchased the slack), but objects when the EC
tries to curb BA’s might.
In particular, Van Miert claims that competition will be eliminated
overnight on 13 UK to US routes and the BA/AA alliance would take
between 78 per cent and 83 per cent of traffic on routes such as London
The OFT recommended that BA should sell 168 take-off and landing slots
at Heathrow worth around pounds 180 million on the ’grey market’. But
Van Miert is against creating a market in slots and demands that BA
hands over ’considerably more’ than that without payment. He also claims
that some routes should be given up completely in the interests of
’We aren’t trying to mount a PR campaign for BA’s rivals,’ says EC
spokesman Angel Carro. ’But it’s important the British Government has
all the facts.’
Some insiders claim BA was taken aback by the ferocity of the European
Commissioner’s objections. BA’s director of corporate communications,
Kevin Murray, guffaws at the suggestion. After all, Van Miert’s outburst
was prompted by BA’s point-by-point 144-page rebuttal of Brussels’
concerns, which hardly amounts to overlooking the commission’s
viewpoint, he says.
Van Miert’s insistence that Brussels should dictate some of the
conditions of the alliance has inflamed Eurosceptics like Bill Cash and
Sir Teddy Taylor. ’The British people are sick to death of interference
by unelected commissioners,’ says Cash. It is nothing but ’meddling’
according to Taylor.
Their widely-reported hostility may be convenient to BA, but does not
appear to have been exploited, possibly because of the proximity of the
General Election and the political minefield it could land them in. BA’s
stand at both party conferences contained scant information about the
proposed alliance and according to one MP with a special interest in
aviation, ’staff were poorly informed and unwilling to talk about the
proposal. It was as if they were embarrassed’.
While BA’s opponents - Virgin, Delta, United and Continental, plus
assorted consumer groups - have used the media to put their message
across, Murray dismisses that tactic as ’far too crude’. Instead, his
in-house teams, covering government, international relations and
communications, have each concentrated on lobbying and targeting only
their key audiences.
These were broken down into: regulators on both sides of the Atlantic;
employees of both companies; key customers and governments - all briefed
prior to the announcement last June.
As far as British and EC power brokers are concerned, much has rested on
the political skills of chief executive Bob Ayling, a former specialist
in European law at the Department of Trade and legal undersecretary at
the department working on the privatisation of British Airways in
His fellow former senior civil servant, David Holmes, director of
corporate resources at BA, also has high-powered contacts.
’It comes down to three or four key alliances in Government,’ says one
insider. ’It helps being the former national carrier but it helps even
more when Lang and Heseltine are your chums, very sympathetic to BA and
While Ayling, Holmes and their teams have been pressing the flesh in
Brussels and at the OFT, Board of Trade, and Department of Transport,
BA’s American team has been doing the same in Washington, backing up
American Airlines’ massive onslaught.
Hitting the right lobbying note
In Britain, at each stage of the campaign, a key audience has been
targeted and research via phone and direct mail has been carried out.
For example, several hundred key customers were called on the phone and
asked what they saw as the benefits of the proposed alliance, whether
they thought BA would be given the go-ahead and how their view differed
from that in the headlines. This was backed up by a direct mailshot
spelling out the facts and how BA customers would benefit.
Keeping all lobbying in-house, except for using external legal advisers
in Brussels and Washington, has allowed BA to run a very tight ship. It
is in the process of re-pitching for a lobby company and the current
incumbent, Adele Biss, says she has ’not been working on this in any
depth’. Since BA’s own staff has largely managed without the services of
a lobby firm so far, it’s unlikely the new firm will have much
involvement in the issue.
But how much work BA staff have on their hands in the next few months
will depend largely on how big a stink Van Miert and other opponents to
the deal kick up. They’re a disparate lot. There are consumer groups and
then there are business rivals. The consumers’ representatives claim a
monopoly and higher prices will be the ultimate result of the BA/AA
deal, and have used press reports and lobbied regulators to get the
There’s no chance of business rivals banding together on a lobbying
level, ’we’re fighting for the same territory,’ says one. But their
demands are broadly similar. One is demanding at least twice the number
of slots which the OFT suggested. Another, three times the number. And
they don’t seem to be able to agree on whether slots should be traded on
an open market. One aviation regulatory body is telling ministers this
would be a bad idea, encouraging smaller airlines to cease running
planes and become nothing but slot brokers. All say they responded to
the OFTs proposals before the 10 January deadline.
BA responded to accusations with a 14-page document entitled ’Myths,
Reality and Facts’ which was distributed to journalists and ’interested
parties’ and countered each argument point by point. Its main argument
was that the deal could only go ahead subject to being granted
anti-trust immunity and an open skies agreement in the States. Open
skies, it claims, will clear the way for free entry into the American
market, boosting traffic by 20 per cent. As for slots being in short
supply, BA claims that too is a myth: 45 new airlines have bought slots
at Heathrow in the last five years, it says. And since BA has invested
millions in buying them, it should not be asked to give them to
Should the deal go ahead, there could be dramatic implications for many
staff, particularly those covering North Atlantic traffic. Murray claims
there will be no redundancies, although role switching is likely. ’There
will be some synergy in how we undertake PR’ he claims. What that means
exactly isn’t clear. It may not even be clear to his colleagues at AA
since, according to Lizann Peppard, AA’s regional PR manager, nothing
has been guaranteed as far as job security goes, although like Murray,
she is confident of her own post. ’Well I would say that wouldn’t I?’
she says. ’But the individual brands will remain distinct - customer
research has proved that’s what people want - that in itself will
justify separate PR offices.’
What Murray calls ’operational leverage’ will be shared between the two
public affairs offices, so AA will benefit from BA’s privileged access
and understanding of British media, and vice versa.
But according to one well-placed observer, behind BA’s seemingly slick
campaign is a surprisingly seat-of-the-pants operation: ’They’ve been
left behind by the global partnerships already set up by Lufthansa et al
and as usual BA has wrapped itself in the British flag, not done a
brilliant job of explaining its arguments to its customers but talked
confidently to the men in suits ... It’ll probably work.’
VIRGIN ATLANTIC: PLAYING THE MONOPOLY GAME
Other than BA, Virgin Atlantic is the only transatlantic domestic
carrier. Despite being a minnow compared to BA, Virgin argues the
proposal is anti-competitive. It began a vociferous opposition campaign
in a bid to ensure the proposal was the subject of a full parliamentary
’We spent a lot of time looking at how they would tie up 60 per cent of
the Britain to US market, even 100 per cent on some, such as the Dallas,
routes,’ says corporate affairs director Will Whitehorn. Written
submissions were made to the transport committee’s investigation, Office
of Fair Trading, Monopolies and Mergers Commission and US carriers. The
latter, says Whitehorn, had already assumed the alliance was inevitable.
Virgin’s campaign has focused on three main issues:
- The availability of take-off and landing slots at Heathrow. ’BA would
have to give up a huge number to allow reasonable competition, around
three times what the OFT now claims it should concede (a total of 500),’
- BA and AA are the world’s biggest carriers. They could swamp travel
agents with loyalty discounts and on some routes the travelling public
would have no choice of airline and face higher prices.
- Combined frequent flyer programmes - which give business customers
huge discounts if they stay loyal - could prove unassailable.
As well as targeting regulators, Virgin used lobbying firm Politics
International to talk to opinion formers and provide contacts and ideas.
PI was hired at the start of the campaign in June and used the Virgin
executive, headed by Branson, in all briefings. Whitehorn claims:
’opinion formers are our target rather than the public’, nevertheless,
Virgin has spent thousands on press ads. Even last week’s (Jan 20)
full-page Freddie Laker ad in the Times, was paid for in part by Virgin.
And since last June, tail fins on Virgin jets have sported the slogan
’BA/AA No Way’.
Surprisingly, Whitehorn claims ’Europe is a red herring. Reference to
the Monopolies and Mergers Commission is the real crux.’ The time for
lobbying and tactics is over, Whitehorn claims. ’This is the end of the