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UK Regulator To Investigate IAG's Trans-Atlantic Alliance

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The UK's Competition and Markets Authority or CMA said Thursday that it will investigate International Consolidated Airlines Group's (IAG.L,BAIRY.PK,BAY.L) revenue-sharing partnership on trans-Atlantic routes. IAG is the parent company of British Airways.

The CMA is investigating the Atlantic Joint Business Agreement between American Airlines Group Inc. (AAL), Finnair and members of International Airlines Group - British Airways and Iberia.

The Atlantic Joint Business Agreement is a revenue-sharing joint venture that covers routes between Europe and North America. It allows the partners to co-operate on pricing, capacity and scheduling.

The CMA said it decided to study the trans-Atlantic alliance as commitments made by the airlines to the European Union will expire in 2020. The UK will no longer be part of the EU by that time.

However, the CMA added that the investigation is at an early stage and no assumption should be made that the Atlantic Joint Business Agreement infringes competition law.

After an investigation under EU competition law, the European Commission accepted ten-year commitments from the airlines in 2010 in relation to six routes to address potential competition concerns.

The six routes are London-Dallas, London-Boston, London-Miami, London-Chicago, London-New York and Madrid-Miami.

These included a commitment by the airlines to make landing and take-off slots available to competitors at either London Heathrow airport or London Gatwick airport. These commitments are binding until 2020.

The CMA noted that on expiry of the airlines' commitments in 2020, the European Commission may re-assess the agreement, but there is no requirement for it to do so.

"As 5 of the 6 routes subject to commitments are from the UK, and to prepare for the time when the European Commission may no longer have responsibility for competition in the UK, the CMA has decided to review afresh the competitive impact of the agreement in anticipation of the expiry of the commitments," the CMA said.

In response to the CMA's announcement, IAG said it will respond to the review.

IAG noted that since 2010, British Airways and Iberia's transatlantic joint business with American Airlines and Finnair has brought significant benefits to millions of travelers, providing them with improved access to cheaper fares and easier journeys to more destinations.

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