BA Iberia American Launch Venture Add Routes

American Airlines, British Airways PLC and Spain's Iberia Airlines launched a trans-Atlantic joint venture Wednesday to compete with rival alliances and defend their leading market share on lucrative U.S.-U.K. routes.

The U.S. Department of Transportation also gave tentative antitrust approval Wednesday to proposed trans-Pacific joint ventures that would team AMR Corp.'s American with Japan Airlines Corp. and United Continental Holdings Inc. with All Nippon Airways Co.

International joint ventures are multiplying as many countries keep foreign ownership limits on airlines and three major global alliances—Star Alliance, SkyTeam and Oneworld— battle for the upper hand on cross-continental routes.

In contrast to more modest code-sharing pacts, joint ventures allow carriers to coordinate routes, schedules and prices.

American Airlines on Wednesday also said it is recalling 800 furloughed employees, or about 1% of its workforce. The carrier hopes its joint ventures will help it narrow the gap with United Continental and Delta Air Lines Inc., two U.S. rivals that recently leapfrogged it in size through domestic mergers.

The latest trans-Atlantic joint venture was hatched by Oneworld and coincides with the planned merger of British Airways and Iberia Lineas Aereas de Espana SA, which recently won antitrust approval from the European Union. Oneworld is playing catch-up after SkyTeam and Star already inked trans-Atlantic joint ventures in recent years. SkyTeam comprises Delta, Air France-KLM SA and CAI Alitalia SpA. S

Star's competing joint venture combines United Continental and Deutsche Lufthansa AG.

SkyTeam has the largest number of flights between North America and Europe, through its hubs in Paris, Amsterdam and Rome. Star is No. 2, through its dominant position in Frankfurt.

Oneworld has a big edge on routes between the U.S. and London's Heathrow Airport, a key destination for business travelers. British Airways controls 40% of seats and American another 18%, according to OAG, a data provider. Other carriers are vying to expand at Heathrow as business travel between the financial centers of New York and London bounce back after the recession. Delta plans to have 49 weekly departures from the U.S. to Heathrow by January 2011, up from 33 at the start of 2010. Nearly half those flights originate at New York's John F. Kennedy International Airport.

American and British Airways currently have 14 daily departures from New York's JFK and Newark Liberty International Airport in New Jersey to Heathrow—often at the same time. Under the joint venture, the two airlines will spread the flights out so that they can offer more departure times.

"It will look more like a shuttle," Tom Horton, American's president, said in an interview. American and British Airways made several failed attempts to secure antitrust approval on trans-Atlantic routes dating back to the late 1990s, before finally securing approval from U.S. and European regulators in July.

Oneworld's joint venture partners estimated that they capture $7 billion to $8 billion in annual combined revenue on trans-Atlantic routes. The carriers also said Wednesday they will expand code-share arrangements on more than 2,700 flights and increase the number of flights between Europe and the U.S. through Iberia's hub in Madrid, which is less crowded than Heathrow.

American is launching two new routes next spring, New York-Budapest and Chicago-Helsinki, while increasing the number of flights from JFK and Miami to Barcelona and Madrid, respectively. British Airways is launching a London-San Diego route and Iberia will start a Madrid-Los Angeles route.

Mr. Horton, American's president, estimated the trans-Atlantic joint venture and proposed trans-Pacific joint venture will net the U.S. carrier an additional $500 million in annual revenue. American hopes to have its venture with Japan Airlines up and running by early next year, he added.

Final approval for the proposed trans-Pacific joint ventures hinge on the U.S. and Japan ratifying a tentative "open skies" accord that the U.S. and Japan inked last December. SkyTeam doesn't have a major Japanese partner, but Delta secured a Tokyo hub after acquiring U.S. rival Northwest Airlines in 2008.

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