BA-AA venture held up by open-skies talks

Date: 25/11/1999

By Renée Cordes

British Airways and AMR Corp's American Airlines were forced to abandon plans to form a fully-fledged alliance last year.

The European Commission demanded that the airlines surrender more than 250 slots at London's busy Heathrow airport and reduce the number of flights on several routes where they enjoyed a dominant position.

They were dealt another blow this summer when US regulators dismissed the airlines' petition for anti-trust immunity, which would have allowed the carriers to share revenue and operate a code-sharing arrangement.

Seeking to overcome these hurdles, the airlines announced a more limited partnership earlier this month which would involve operating some flights jointly.

Under the latest plan, set to take effect in March 2000, the BA code would be added to flights operated by American Airlines, American Eagle and Business Express, while the AA prefix would be added to British Airways' flights to nine UK regional destinations and 20 European cities.

"In July we made a commitment to continue developing our alliance with British Airways in ways that would not require anti-trust immunity," said AA's chairman and chief executive officer Don Carty when he announced the new, scaled-back scheme. BA chief executive Bob Ayling said the arrangement would offer customers greater choice and invigorate competition.

But some industry experts warn that the carriers should not start popping the champagne corks just yet, given that the US is still pressing for a new open-skies deal with the UK which would lift restrictions on fares, routes and schedules.

Washington is expected to try to delay any deal involving BA for as long as possible to put maximum pressure on the British authorities to strike an accord.

"The US authorities will block American and BA from signing a full alliance with anti-trust immunity until the UK agrees on open skies," says Tim Coombs, an analyst at UK-based consulting company Aviation Economics. "They are playing hardball."