>> good morning. welcome to the national press club for our speaker breakfast at my name is donna. i'm a reporter with u.s.a. today and president of the national press club. we are the world's leading professional organization for journalists and are committed to a future of journalism by providing informative programming and a journalism education and fostering a free press worldwide. for more information about the national press club, please visit our website. on behalf of our 3500 members worldwide, i would like to welcome our speaker and our guest in the audience today. i would also like to welcome those of you who are watching us on c-span or we are looking forward to today's speech, and afterwards i will ask as many questions from the audience as time permits. please hold your applause during the speech so that we have time for as many questions as possible. for our broadcast audience, i

would like to explain that if you do hear applause, it may be from the guests and members of the general public who attend our events, and not necessarily from the working press. i would now like to introduce our head table guests and ask them to stand briefly when their names are called. from your right, mark, senior associate editor of clippinger and editor of the washington airline society. melissa, of news for comedian and vice chair of the speakers committee. nigel milton, vice president of government affairs for version atlantic and a guest of our speaker. maryland, national public radio senior business editor overseeing transportation coverage. anita, partner of holland and knight and cochair of the firm's local aviation team and a guest of our speaker. skipping over the podium, angela keen, bloomberg news and chair of the speakers committee.

skipping our speaker for just a moment your john bullard president of the group and a member of the national press club board of governors. he is also the speakers committee member who organized this event. thank you very much, john. paul charles the director of communications for virgin atlantic and a guest of our speaker. joe of aviation week. casper, senior press officer for the european union's delegation. and finally my rent, former ap bureau chief in london and the secretary of the national press club. ask anyone in this room who served richard branson is and he will be defined many different ways. a flamboyant rish on to partner with a seemingly insatiable appetite for starting new businesses. a magnet for controversy such as his region stant as a glasco

train cleaning worker in a tv ad for his virgin train or $8 billion philanthropist attempting to save mother earth. no matter, he has a gift for making people pause and take notice. his high profile adventures include developing personal spaceflight, and in 1986 crossing the atlantic in his virgin atlantic to offshore racing boat in record time. a year later he set another record crossing the atlantic in his virgin atlantic flyer. not only the first hot air balloon to cross the atlantic, but also the largest ever at 2.3 million cubic feet. clearly, this is a man who likes challenge, whether it's in business or in sport. and while many would be satisfied after being knighted by the queen of england for services to entrepreneurship, he has not. sir richard branson, founder of a pint sized record business in

1970 now rules an empire that rivals the gross domestic product of many small countries. whether it is virgin cola, investing in alternative green technologies, space tourism, or running one of the hippest airlines in the sky, he has been. and although the european press has skewered him for having lost and i worked water and 1.5 billion pounds in the last year or 171,000 british pounds an hour, he continues to be optimistic. who in this room would promise all of his or her airline profit, if you actually own an airline, to the breakthrough discovery of an alternative fuel for the airline industry. only one person. when recently asked why, he responded quote i actually believed it's a good financial investment and i hope that anybody who gets spare cash will put their money into the sector because our beautiful world needs to be protected. ladies and gentlemen, and members of the national press club, i introduce to you

entrepreneur, balloonists, daredevil, philanthropist, environment list and personal spaceflight advocate sir richard branson. [applause] >> thank you very much. good morning and thank you very much for inviting me to speak at the well famous, highly influential national press club. i'm honored to be addressing you here today. at the 25 year, i wish it was one of five year old, anyway, 25 year veteran of the transatlantic aviation market. its 25 years this year since virgin atlantic and nodule flight took off to newark in june 19 84. we started with just 1747 and now have 38 widebodied aircraft

flying to 30 destinations around the world from london's airports. but i will never forget those first few hours of operating. and engine was hit by bird strike on test flight. the bank was trying to close us down. most of the food wasn't loaded on board the inaugural. unfortunately there was plenty of his. just another typical day in our industry, of course. so it's taking us 25 years to grow as a private company without any government subsidy or bailouts to get to the position where you are today. where we are still red-hot. the airline that is. we have grown by listening to customers, innovating where other carriers can't or won't and by providing a strong product against our competition. we don't have the giant marketing budgets of our rivals, yet travelers choose us because we offer real quality at good value. and we provide red-hot

competition. yet, we are celebrating our birthday amid the most testing economic times ever. the airline industry itself has never faced such a crisis. commercial aircraft were barely in their infancy at the time of the last significant collapse, the wall street crash in 1929. now airlines around the world are reacting swiftly. hunkering down, cutting capacity and sadly jobs in order to protect their cash and the operations. in all my expert i have never seen anything like it. i'm sure you all agree it's a sobering time, one which unfortunately will last many, many months yet. when we started virgin atlantic i knew we were in for a hard time. i knew we would face numerous challenges and dirty tricks from the incumbent carriers. i knew the odds were stacked

against us. but i didn't think that 25 years later, after flying around over 70 million trimesters, entrepreneurs, ministers, students, families, business people, elder statesmen and women, entertainers and that some airlines would still be adopting, polling tactics and trying to bend the rules to kill off the competition. i'm here to warn you that consumers and users of transatlantic services that if the proposed merger and/or all semantics because the merger is what they will effectively be, of the two largest airlines in the world, british airways and american airlines, is allowed to go ahead, then the result for passengers, for employees, for communities and for fair and healthy competition will be absolutely disastrous. it will be the end of red-hot

competition. given the state of turmoil and swift changes that the airline industry finds itself in, it is questionable how any competition authority can reach a relevant, robust and meaningful conclusion regarding the plan of the british airways and american airlines. it is impossible to predict with any degree of certainty what the future competitive landscape would look like, when there is so much change taking place. in fact, the one certainty we can predict is that it be a and a. are allowed to proceed unchecked, there will be higher prices and competitors will be squeezed out there it doesn't make sense to actually encourage even less competition by allowing the two largest dominant carriers to increase their stranglehold by setting prices together and agreeing schedules. before virgin atlantic started, air travel was any the form of transport. now it's more affordable and an

everyday part of our lives. aviation links are businesses and families. without it, economic growth, cultural exchange and development assistance would be significantly hampered. i have no doubt that aviation will be the way in helping economies to recover from the current economic crisis, but it can only do so if industry remains viable and competitive. i understand that it is tempting to regulations say, we have given this to one alliance, we should do likewise for others. as they have done previously. but they must resist that temptation. each antitrust establishment must be considered on its own specific merits or and considered on its merits it is good at the application for the merger between british airways and american airlines must be rejected. outlined in the sand must be drawn. i'm not saying that all consolidation within the airline industry is a bad thing.

while consumers may stand to benefit, it's coffin every network by carriers that are not common in a particular market place are being pulled, they suffer it if networks overlap. because of the tendency towards monopolies. i believe the fact of ba and american airlines demonstrated that this would be the prime example of bad consolidation. the only witness would be the shareholders of those two airlines. certainly not the employees of british airways and american airlines or their customers. we had been accused by the heads of these airlines of wheeling out the same arguments they accuse us in 1996 and 2001 as well, when the two last applied to create a merger. the facts are the same, if not worse, than why should we change our status that our arguments are as strong today as they were

then. their dominance has gone even further between then and now. and let me spell out why you should still be worried. last time we said, heathrow is so congested that it is virtually closed. the same applies today. heathrow is unique to this antitrust application because it is full. the hubs are not full. and if we wanted to start a new airline in pairs or frank for today, we could do so. british airways and american airlines is the only alliance were the most important gateway hub is virtually closed to competitive entry. heathrow u.s. has a far greater share of the eu u.s. market than any other eu hub. it is vital that regulators understand that this isn't just another alliance. it's an attempt to stitch up the most important loan routes from europe's most important airport. ba and aa together and are protected partners in one world

would hold half of the total takeoff and landing slots in heathrow. in comparison, virgin atlantic is capped in just over 3%. a striking distance which shows that no one can replicate their scale. last time, we said ba and aa would hold the dominant share of heathrow. nothing has changed. these peak hour slots are essential for the competitiveness of transatlantic services. ba was gifted, many of them, but it was privatized. no other carrier could get anywhere close to competing. last time, we said that ba and aa would have an insurmountable lock on key heathrow u.s. airport pairs. nothing has changed. in fact, their market share has increased further since 2001. at the moment, they compete against each other on six key was from heathrow. getting it in unity will change all this for consumers. according to the official

airline guide at the end of march 2009, ba, aa controlled 100% of dallas-fort worth capacity, 80% of heathrow boston college 73% of heathrow, miami. 64% of heathrow chicago. 64% of the heathrow to new york and 47% of heathrow the los angeles capacity. given the constraints to heathrow there will be no chance for any carrier to try to mount a meaningful, competitive response to these captive heathrow u.s. city markets. is a right that one group should have a 60, 70, 80 or even 100% share of a route so they can milk consumers? so times haven't changed. as heathrow's owner beasley said in a recent submission to the department of transportation, heathrow is as full and access to it is as limited as it

historically has ever been. of course, the eu, u.s. phase one agreement does not guarantee heathrow's thoughts, gays or other facilities. in fact, public financial filings indicate continental airlines paid $209 million. i.e. over 50 million per slot there to support a single heathrow round-trip flight. free access to heathrow, hardly. what european carriers provide a handful of slots to facilitate the few heathrow flights last summer that supply of slots is not limitless as ba aa content. in fact, that very small pool of thoughts is now exhausted. also, with jfk recently joining the heathrow club as a closer airport with virtually no competitive entry, red flags should be flying high on both sides of the atlantic. ba-aa argued that even if he too

is full, competitors can operate from gatwick. it would not have occurred if financial returns were in any way comparable. heathrow has a clear premium as an airport. after all, why put its owner want to keep it, yet agreed to sell off gatwick and other london airports. ba argues that it needs to link up with america because skycam are dominant at their health. the fact is that even ba on its own is already bigger between heathrow and the u.s., the busiest from star is too bright for or skycam is to pairs and that's even before it gets together with america. heathrow california one quarter of all passengers traveling between europe and the u.s. they argue that the competitive environment is changing. our own look at recent data suggest that whatever changes are taking place are simply

reinforcing heathrow's dominance of routes between the u.s. and the eu. and back, and 2008, it looks like eight out of the top 10 u.s. route to europe were heathrow routes. that makes heathrow very special indeed to u.s. consumers. and they are going to be feeling shortchanged when suddenly there's a lot less competition and higher prices on the routes to get there. i'm in washington today to put the finishing touches to virgin atlantic's final submission to the department of transport. will prove that the benefits ba-aa alleged will result from their merger are a luxury. even robert crandall, former chairman and ceo of american airlines who led the first attempt to merge ba and aa has now seen the light. he said in the london daily telegraph newspaper, article recently, and listen to these words because we thought this man for years when he was trying

to get this merger through last time. he said any objective observer would have to look very hard to find a way in which alliances have benefited consumers. what a change of stance for the days when he was actually the chairman of american airlines in 1996 when he said the ba-aa allies will benefit travelers on both sides of the atlantic. bob crandall knows in reality that ba-aa is a step too far. his former airline has long agreed that the alliances are a pure blessing. particularly when the air france linkup cut off ba link up at paris. get american airlines is now tried to argue that alliances is great for consumers. that's the sort of flip-flop which would give the most popular politician a bad name. what may look like a lifesaver for an airline will be a

millstone around the neck of consumers. if ba-aa were to receive clearance, fares would rise because there would be less competition. why else would ba and aa want to join forces at an airport effectively closed to newcomers. in addition for the travel trade, and large corporate accounts, ba-aa would be very damaging indeed. travel agent with such large parts of their fares being dried from ba-aa would also be completely beholden to them. with well over 75% of their income coming from just one source. they would end up being forced for their very survival to recommend ba-aa to passengers. a bigger airline with less competition would force up prices because they wouldn't face so much pricing pressure. travelers will pay higher fares in return for a poor product. the application does not incentivize the question of these options are in fact it

strongly penalizes the introduction. these are all good reasons to prevent ba-aa from going ahead. the support of this alliance have to resort to other arguments to prevent the regulars with a normally would prevent. the current economic melee is no reason for antitrust immunity through. ba and american had helped to see the avocation approved by the end of last year and yet this would have represented a dereliction of duty by the regulators to rigorously asked back the long term impact of a ba-aa tie up. not to provide special protection from the immediate challenges of economic cycle. what would the ba-aa monster monopoly be like when the economy recovers? antitrust laws should not be ignored during an economic downturn for good reason. because when the economy recovers competition and consumers would be faced with a permanently changed the market.

that would be unsustainable, and consumers, the intended beneficiaries of competition laws would be the biggest losers. of course, there's an element of self-interest in virgin atlantic's opposition to ba-aa. the proposed alliance would impact on our ability to compete fairly on some of our most important routes. but there is a much wider consequence. at heathrow, competitors cannot challenge ba's dominance. whether there's no meaningful competition, ba and aa would be able to increase fares on the most important air carriers in the world. in fact, if granted, immunity would ensure that the two largest transatlantic players will remain in lockstep and will result in abuse of market power. consequently the regulators need to show more than ever that they are guarding consumers interest. protecting monopolies is not acceptable to consumers who end up paying higher prices. and it shouldn't be acceptable to regulators.

nothing has changed since 2001 when the regulators last look at these plans and demanded ba give up hundreds of slots at heathrow. how can they require anything less, if nothing has changed? the european commission is rightly opened a full investigation into ba plans because of federal observers are rightly asking how is it that two giants dominant airlines can be allowed to merge when already have such a tight grip on industry and consumers. ba and aa emerging is the equivalent of allowing coke and pepsi to merge. with the regulators allow that to happen in the soft drink industry? i don't believe they would. consumers certainly would not stand for it, and i'm pleased that the doj here in washington also takes its role as the guardian of the consumer interest very seriously. allies must not be viewed by independent experts in the context and impact on the consumer. the crisis we face in aviation

doesn't mean we should relinquish our focus on making our industry more sustainable. efficiency gains, though considerable, are not enough. our industry's success, the rapid growth of aviation means it will continue to grow for many years to come. this just doesn't make sense considering the dire warnings from clive at change unless we can be part of a global framework which limits and then drives down overall greenhouse gas emissions. in the summer this year government and environmental leaders from all around the world gather in copenhagen together with our colleagues in aviation global deal group, virgin atlantic is pushing hard for aviation to be included in the global carbon dioxide reduction targets. we know it can be tricky, especially in the industry like ours, but some of our major developers but it needs to be done. and we think development the

group offers a way for government to balance about environmental effectiveness, economic efficiency and the different responsibilities both climate change between industrialized and industrializing countries. they will deliver much-needed revenues for carbon abatement, lower carbon technologies and avoid deforestation. over the past few months we have been sharing this proposal with policymakers, industry and environmental groups. and look forward to making a positive contribution to negotiations in the run up to copenhagen. the global scheme will replace regional carbon trading, carbon regimes for aviation, such as the european emissions trading scheme which aviation will be a part of from january 2012. we know that eu, eds has received mixed reviews and it may well be subject to legal challenges from third country carriers. i can't help feeling that the carbon cap and trade scheme

ideally a global carbon cap and trade scheme is practical to put taxation. we've got firsthand experience in the uk where the passenger duty paid by each passenger was initially introduced as an environmental tax allowing aviation to cover its extra costs. since then, it has morphed into a revenue raising mechanism for government and the passenger got the passenger contradictions have doubled or tripled in the face of a couple of years, with none of the proceeds for environmental projects. cap and trade schemes are at least link to the environment performance of the carrier and incentivize low carbon behavior. aviation is a carbon of the industry that currently relies totally on fossil fuel derived kerosene to get our planes off the ground. just 18 months ago people did not think that there were any alternatives to using fossil fuel derived kerosene to get

planes off the ground. it was only with virgin atlantic's announcement we're going to be the first airline with our partner, boeing, to use biofuel kerosene blended to fly a commercial jet aircraft which at the time greeted by enormous skepticism. but we did. and in february 2008 and since then sustainable biofuels are at the forefront of the whole industry's efforts to put aviation on a lower carbon flightpath. it was as a drop-in replacement, if i believe only a couple of years away, major efforts are underway for groups such as the sustainable aviation fuel group to make sure that these supply chains are developed in a sustainable way right from the very beginning. we are also a major investor in a company called tivo, a new comp me which turned biomass such as sugarcane into iso- butanol which also i believe could be answer for aircraft and

formula one cars alike. we have been watching with keen interest in the obama administration's focus on green economic recovery, but we need governments over the world to support for the next generation of biofuels as part of the economic regeneration efforts. i have been a big believer in innovation throughout my life, and some of the work that is going on right now as a renewable fuel feedstock and converting biomass waste into fuels that need to restrict wire meant is already impressive. government support for these efforts is a sensual and will help to make sure that airlines can play their crucial role in maintaining this is an cultural links between countries, simulating economic development, and flying our way out of this recession. sustainable aviation is the only way forward over the next 25 years. that means on environmental issues as well as competitive issues, the industry can only thrive with airlines competing freely and free markets are they

already dominate markets on an unbelievable scale. virgin atlantic has made its way through to aviation prizes in 1991 and 2001, and fully intend to get through this latest crisis. allowing british airways and american airlines wouldn't just be tilting the playing field. it would be armor plating want to charge its way through the opposition and score a touchdown after touchdown. what is before the regulars today is the future of competitive international aviation industry. the latest british airways, and american airlines fabrication isn't about what the industry wants. it's about what the consumer needs. it should not be decided on demotion or past legends of support. it should be decided on true facts. when this recession is over, we need an industry we can be proud of. an industry that promotes competition, creates jobs and brings real benefits to consumers.

please join me in saying no way, ba-aa. thank you for listening. and thank you. [applause] >> you mentioned that after the recession lives that they ba and american merger would be anti-competitive and would be something that the world would regret. and consumers would regret. but british airways and american say they cannot survive this particular economy without a merger. what's your response? >> well, as they are the two largest carriers flying between, across the transatlantic, and they certainly should be able to survive. british airways was given all their flight at heathrow by the