Stakes rise in airline slots battle

Date: 17/07/1997

By Tim Jones

EUROPEAN and British authorities are pressing for more than 300 weekly take-off and landing slots at London's Heathrow airport to be made available to new airlines in return for approving the controversial alliance between British Airways and American Airlines, say official and industry sources.

Regulators want slots made available to new entrants for at least 23 daily round trips along the lines recommended by the US Congress' general accounting office in the spring.

US airlines Continental, Delta, TWA and USAir all want to gain access to the world's largest airport outside the United States to be able to provide services from their regional hubs direct to London and onward into Europe and the Middle East.

The 322-plus slots would come not just from BA or AA, but also from the airport's limited pool.

The world's biggest aviation alliance cannot be cleared by the European Commission or the British government until September at the earliest because of the EU's long summer break, its cumbersome procedures and the need to complete negotiations on a UK-US 'open skies' deal.

However, the willingness of UK Industry Minister Margaret Beckett to countenance slot-shedding on such a scale by the country's erstwhile flag-carrier has improved the chances of regulatory clearance, say official sources.

Beckett has already surprised observers by her tough approach to merger-vetting. At the end of June, she took the unusual step of overturning a recommendation from independent monopoly advisers and blocking a giant brewing deal between Carlsberg and Bass.

Since taking office at the beginning of May, Beckett has accepted that the advice given by the Office of Fair Trading to her predecessor - that only 168 weekly slots should be made available to new entrants - does not go far enough. This would amount to 12 round trips: one less than AA is bringing to the deal.

Although BA chairman Bob Ayling is a friend of UK Prime Minister Tony Blair, the government is keen to show that it is not in the pocket of special interest groups. Moreover, Beckett is being lobbied intensively by Richard Branson, the boss of Virgin Atlantic, either to extract the maximum concessions from BA or veto the deal.

Unlike her Conservative predecessor, Beckett is conducting her inquiry into the link-up in conjunction with the Commission and intends to rule on it at the same time. Competition Commissioner Karel van Miert had planned to present his case to the EU's advisory committee on restrictive practices and dominant positions during July, but diplomats say this now looks unlikely.

The authorities are negotiating with the airlines over how many of the slots should be permanently shed, how many should be leased out and how to determine when the leased slots should revert to the alliance as new airlines win footholds at Heathrow.

The authorities are also waiting for the conclusion of an 'open skies' agreement between the British and Americans aimed at scrapping access and capacity restrictions at Heathrow and Gatwick airports, introducing a liberal pricing regime and creating an independent disputes-settlement system.

This would make clearance of the alliance easier.