British Airways and Iberia Airlines are closing in on a merger agreement due to be signed this quarter. The union of airlines will become even more significant now that the two airlines, plus American Airlines, Finnair, and Royal Jordanian – all members of the oneworld® alliance – have received the go-ahead from the U.S. Department of Transportation (DOT) to strengthen ties. According to a Virgin Atlantic Airways boss, however, it's now up to Europe to stop it.

U.S. regulators have granted the oneworld member airlines anti-trust immunity that will allow the participating airlines the ability to coordinate schedules and prices and to operate as a single marketing entity. According to oneworld member American Airlines, "with antitrust immunity, American, British Airways and Iberia will be able to align their networks for North America-Europe travel by coordinating schedules, fares and operations, while sharing revenues and jointly marketing our frequent flyer programs, lounges and other services, offering customers seamless travel and enhanced rewards." However, such immunity still must clear EU regulators, and the very vocal opposition by the executives at Virgin Atlantic are now pinning their hopes on the EU to stop what it previously has called "a monster monopoly."

The enhanced benefits of alliances are of interest to flyers but concerns among regulators have focused on the dominance of carriers at airports such as London's Heathrow Airport, a BA stronghold. According to the Reuters news agency, the oneworld carriers have been told to make four pairs of London Heathrow takeoff and landing slots available for up to 10 years to transatlantic competitors, as a concession to anti-trust worries. BA, Iberia and American Airlines have also offered to modify their plans to share more of their lucrative transatlantic routes in an effort to settle a competition dispute with the European Union, according to the report. The DOT previously granted immunity to oneworld's rivals Star Alliance and the SkyTeam alliance.

The DOT's ruling was influenced by a concern over more competition but not in the traditional airline vs. airline sense. As we've written before, the new dynamic in the airline industry is the emerging competition among alliances, and this was the key reason for the granting of anti-trust immunity to BA, AA and Iberia, in particular. Nothing is completely certain, however. The EU continues to review the anti-trust application of the oneworld partners as it conducts a broader sweep of alliance tie-ups in general. Though a few labour groups and U.S. lawmakers have expressed opposition to the granting of anti-trust immunity, rival airlines have remained largely silent on the issue since many of them already enjoy anti-trust immunity for their respective alliances. Not too many airlines want to rock this particular boat, apparently. If one deal winds up unraveling, it could have universal consequences for all alliances.

The benefits of alliances are highly touted by their participants – more choices, better routes, greater chances of earning and redeeming travel awards. But the greatest number of flyers benefits when there is competition over price and services. If alliances continue to grow, and competitive rules that were not meant to be broken are allowed to be, are you concerned that competition between individual airlines may be shifting to competition between alliances? Do you think the results will be better or worse?