BA set for AA tie-up 'with strings'

By ROBERT LEA
Updated:

 

OFFICIALS in America are close to waving through an alliance between British Airways and American Airlines. However, approval would carry tough conditions that could bump-start next week's so-called Open Skies talks aimed at getting more competition on North Atlantic air routes.

Reports in Washington suggest the Bush Administration is set to give the alliance between America's and Europe's largest carriers anti-trust immunity, allowing them a profit-sharing deal in which they can co-ordinate prices and schedules - effectively ending competition between them.

But in return the US Department of Transportation is set to lay down what the Wall Street Journal called a whole host of conditions to ensure the freeing up of take-off and landing slots at Heathrow. This would benefit other airlines such as Continental, Delta and bmi British Midland, which have been lobbying for access to the lucrative routes between London and the US. It is assumed, however, that the conditions will be less onerous than those required by the Clinton Administration in 1998 and which led to BA and AA walking away from the proposed alliance.

A report from the US Justice Department last month indicated the deal could go through if BA and AA agreed to divest themselves of 126 weekly slots, effectively giving up nine return flights a day. The 336 divestments demanded four years ago would have resulted in the two airlines losing 24 round-trip flights a day.

A spokesman for BA said the airline could not comment on whether the alliance would go ahead until it had seen the remedies demanded by the US government. There needed to be some indication of what the terms of the BA-AA alliance would look like ahead of the Open Skies talks between Whitehall and Washington scheduled to begin on Monday, he added.

The bilateral negotiations are aimed at allowing US airlines greater access to Heathrow and beyond in return for British airlines being allowed to operate in the closed US domestic market.

The failure to come to agreement on Open Skies has been a political irritant between the two nations' governments for several years. Some argue the closeness of Prime Minister Tony Blair to President George Bush during the attacks on Afghanistan should facilitate a deal.

Elsewhere in the aviation industry, critics of a BA-AA deal, including Virgin Atlantic's Sir Richard Branson, fear the two carriers will use the 11 September terrorist attacks and subsequent collapse in North Atlantic air travel to cajole regulators into agreeing special terms for the alliance.

Most watched Money videos