BA fares 'may soar' after deal with American Airlines, watchdog warns

BA insisted the landmark agreement - which also involves its Spanish airline partner Iberia - would mean cheaper transatlantic fares and better service for passengers.

But the watchdog Which? said it would formally oppose the deal unless it receives assurances that fares will not rise.

British Airways said today it had signed a joint business agreement with American Airlines and Spanish carrier Iberia on transatlantic flights

Sir Richard Branson, whose Virgin Atlantic carrier competes with BA on many transatlantic routes, attacked the partnership as a 'monster monopoly'.

He said the agreement would be 'bad for passengers, bad for competition, and bad for the aviation industry'.

Economists at Which? are examining the deal to determine the real implications for passengers.

A spokesman for the consumer body said: 'The authorities need to look at the deal very closely to make sure that it doesn't damage competition and doesn't see consumers losing out through higher prices, less choice or poorer service.'

Kate Hanni, of the Coalition for an Airline Passengers' Bill of Rights in America, said: 'This is all about bringing down capacity and raising fares.

'The airlines will have an effective monopoly.'

But BA boss Willie Walsh said there is now far more competition on transatlantic routes thanks to the so-called open skies agreement - which allows any EU airline and any U.S. airline to fly between the EU and the U.S. - which came into effect in March this year.

Branson has already written to U.S. democratic presidential candidate Barack Obama seeking his support in blocking the deal.

Mr Walsh - who warned recently that he was to axe one in 20 flights and put up fares by four per cent - countered by describing Virgin's criticisms as 'listening to a broken record'.

He denied that the agreement is a way for BA to introduce cutbacks.

The deal involves a combined route network serving 443 destinations in 106 countries with 6,200 daily departures.

In commercial terms, it means BA, AA and Iberia will continue to operate as separate entities, but will share revenue and marketing on routes between the U.S., Canada and Mexico and the EU, Switzerland and Norway.

BA said this would help the three carriers reduce costs, attract new customers and combat high fuel prices.

But Sir Richard said: 'Make no mistake - if this monster monopoly is approved it will be third time unlucky for consumers.

'It will still be bad for passengers, bad for competition, and bad for the UK and U.S. aviation industry.

'BA/AA and Iberia would still be unacceptably dominant, with nearly half of all of the slots at Heathrow, leaving competitors powerless to take them on.'

The airlines will now apply to U.S. authorities for immunity from competition regulations. European authorities will also have to give the agreement the green light.

BA hopes to receive regulatory approval by the end of this year with the deal coming into practice by the middle of 2009.