British Airways has signed a "tie-up" deal with American Airlines to share passengers and costs between the European Union and North America. Two non-EU nations, Switzerland and Norway, are also covered in the agreement.

BA says the deal will be worth $7 billion a year and will give passengers greater access to discounted fares. They'll also get better connections and access to the airlines' global network.

The deal, which has been in the works since 2008, only received regulatory approval this summer after rival carriers complained that it would create a near-monopoly. BA and Iberia merged last year. The current tie-in deal with AA is not a merger, but instead a close cooperation agreement to integrate ground operations and other aspects of the airlines. This will reduce costs by getting rid of overlapping services, and if these savings are passed on to the customers then there could indeed be a reduction in fares. With competition as fierce as ever, BA, Iberia, and AA will want to make this deal as marketable as possible.

The joint venture will being in October. Stay tuned to see how it turns out.


[Photo courtesy Fly For Fun via Gadling's flickr pool]

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