AIRLINES SEE LESS COMPETITION IN U.S.-U.K. MARKET

Top executives from three major U.S. airlines have written to U.S. Transportation Secretary Norman Y. Mineta to warn against a collapse of competition on important transatlantic routes under a possible new "open skies" bilateral agreement between the United States and the United Kingdom.

Serious concerns are being raised by Continental Airlines, Delta Air Lines and Northwest Airlines as the United States prepares to resume "open skies" discussions with the U.K. later this month. The talks will occur as American Airlines and British Airways, the dominant airlines in the U.S.-U.K. market, are making plans to expand their alliance that will allow them to compete as a unit against smaller carriers.

In a rare joint letter to Secretary Mineta, the executives expressed extreme concern that the proposed American Airlines-British Airways combination would increase the already dominant position of American Airlines and British Airways in the U.S.-U.K. market.

None of the three airlines is currently authorized to serve London Heathrow airport. Despite the fact that a new open skies agreement would allow all airlines to serve Heathrow, the carriers are concerned that they will not be able to acquire the arrival and departure slots and facilities at Heathrow necessary to compete.

"The two most dominant airlines in the U.S.-U.K. market now seek to create the most powerful and anti-competitive alliance in international aviation history," the letter to Secretary Mineta states. "Unless the Department takes decisive steps to ensure significant access at London's Heathrow Airport, open skies between the U.S. and the U.K. will damage competition and harm U.S. consumers."

Together, American Airlines and British Airways have market shares exceeding 50 percent on seven U.S.-Heathrow routes that account for two-thirds of all U.S.-Heathrow traffic, and they operate monopoly service on at least nine U.S.-London and 16 U.S.-U.K. routes.

Against this backdrop, the airlines said Mineta should not sign an open skies agreement or approve the proposed American Airlines-British Airways mega-alliance unless the following pro-competitive guarantees are in place:

1. A sufficient number of Heathrow slots at competitive times must be made available for distribution to new entrant U.S. carriers. The U.K. Government must guarantee in writing that the slots will be made available as required by the U.S. Government.

2. Competitive airport facilities must be made available to U.S. carriers at Heathrow.

3. An ironclad mechanism to guarantee the availability of Heathrow slots in the future must be developed so that U.S. carriers can respond to the American-British Airways alliance.

4. U.S. carriers need to initiate competitive service from the inception of open skies before (1) American-British Airways are permitted to begin any joint activities authorized by DOT, and (2) U.K. carriers are allowed to begin new U.S.-Heathrow operations with their existing slot portfolios.

"While we strongly support the U.S. aviation open skies policy, U.S. carriers must obtain economically viable landing and takeoff slots at the two London airports (particularly Heathrow) to compete effectively and provide the consumer benefits associated with open skies," the letter to Secretary Mineta stated.

Executives signing the letter were Gordon Bethune, Chairman and CEO of Continental Airlines; Leo F. Mullin, Chairman and CEO of Delta Air Lines; and Richard H. Anderson, CEO of Northwest Airlines.