American and British Airways Still Waiting for Feds Antitrust Immunity Decision

October was supposed to be it. By Halloween, the feds were supposed to have made their ruling on the long-delayed application by British Airways (LSE: BAY.L) and American (NYSE: AMR) for antitrust immunity, but we still haven’t heard a thing. The airlines are frustrated, the pilots are thrilled, and this whole thing is just a mess. I, for the life of me, can’t figure out how they keep holding this up.

As you probably know, there are three big alliances with major presences over the Atlantic. British Airways and American form the cornerstone of the oneworld alliance. United (NASDAQ: UAUA), Continental (NYSE: CAL), and Lufthansa are the backbone of Star Alliance. And Delta (NYSE: DAL) and Air France make up the main players in SkyTeam. United and Lufthansa long ago applied for antitrust immunity which would allow them to coordinate schedules and pricing over the Atlantic. Recently, the immunity was expanded to include Continental, Air Canada, and some European players as well. SkyTeam has built off the successful Northwest/KLM pioneering alliance to form a strong bond between Air France, Delta, KLM, and others. This just keeps getting stronger for them.

Yet oneworld partners British Airways and American have not been able to get antitrust immunity. They’ve been turned down once and now they’re waiting to hear back again. So what’s the problem? Politics, of course. And London/Heathrow is right in the middle of things.

Originally, the issue was centered around the highly restrictive nature of flights at London/Heathrow. Before the UK joined the EU-US open skies treaty, flights between the US and London were limited to four US/UK airlines. American and British Airways were two of those. The government didn’t like that kind of dominance in a single alliance, so they shot it down. For customers, this has been a pain. You can’t even earn miles on American if you fly BA over the Pond. It’s been an all-or-nothing kind of deal for the airlines.

When open skies went into effect between the US and UK, those carrier limits at Heathrow disappeared. While no other British airline has opted to fly between the US and Heathrow, there is nothing stopping them. On the US side, US Airways, Delta, and Continental all now find themselves at Heathrow. So how is this still an issue up for debate?

Now it comes down to slots. While Heathrow may not have carrier restrictions anymore, there are still slot restrictions in place. The speculation by many is that BA may have to relinquish some slots to make this deal go through. To date, they’ve refused to do that.

Let’s be honest, are slots really an issue here? Delta, Continental, and US Airways had no trouble getting a hold of slots for their flights. That’s what alliance partners are for. And Star Alliance partner bmi has a very significant number of slots at the airport that could easily be reallocated for Transatlantic flying if they so chose. Look at a place like Frankfurt - Lufthansa has a higher percentage of slots there than BA has at Heathrow, but they were still granted immunity with United and others. But this is London, and it’s a different story.

Unaligned Virgin Atlantic has been one of the most vocal opponents here for years. They say it’s bad for competition. Lately, however, the most noise has been coming from American’s own pilots. In fact, the pilots have issued a release declaring “unequivocal opposition” to the deal. Why? Well, they think they’re all going to lose their jobs. Yeah, it’s more of the “sky is falling” kind of rhetoric that apparently was so ineffective that the flight attendants responded by saying they support the deal.

So now, we continue to sit and wait while the DOT slowly tries to make a decision. Hopefully this painful process will end, immunity will be granted, and we can see true competition between the three alliances.