Air France in talks with American

US airline reopens negotiations with continental counterpart in case BA deal is blocked

Air France has restarted negotiations with American Airlines about a marketing and code-sharing alliance. Talks, which had reached an advanced stage, were called off three months ago when American chose to pursue its controversial alliance with British Airways.

But an Air France spokesman confirmed that the two airlines were talking again. "We are in discussions with a number of US carriers about an alliance, including American," she said.

The talks are thought at this stage to be tentative, given American's commitment to its alliance with BA. However, they confirm the seriousness of the US carrier's threat to seek a continental partner if the BA deal is blocked. "If the alliance with BA is stopped on either side of the Atlantic, then we will go across the Channel immediately and our first port of call will be Air France," an American spokesman said.

American's negotiations with Air France earlier this year were described by one insider as "having gone right down to the wire". The talks were halted just two weeks before American announced its partnership plans with BA.

The talks centred on a number of initiatives, including code sharing, joint marketing and consolidation of frequent flyer programmes.

The negotiations were not terminated because of any difficulties between the two sides but because American regarded BA as a better fit for its alliance ambitions.

If the BA deal collapses, however, American is determined to secure a partnership with a continental airline as part of its long-term strategic development.

Air France has been encouraged to revive discussions because of the opposition to the American/BA alliance on both sides of the Atlantic. The deal has been criticised by both British and US carriers, and it is also being scrutinised by competition authorities in both countries.

The Office of Fair Trading will shortly pass its recommendation on the proposed deal to Ian Lang, the President of the Board of Trade. He must then decide whether or not to refer it to the Monopolies and Mergers Commission.

BA has argued that the deal should be cleared and has pointed out that the alliance is important if the airline is to continue to fight off the mounting competition, particularly from Europe. Although American and BA would account for 60 per cent of UK-US flights, BA has argued that it is more important to view the alliance in a European context.

It will point to Air France's interest in working with American as confirmation of its argument that if its planned alliance is blocked it will hand an opportunity to its continental competitors.

Yesterday BA had no comment to make on the Air France/American talks, other than to say they were a matter for the two airlines involved.

Further doubt was cast on the American/BA alliance last week, when it emerged that the British Government was taking a firm line with its US counterpart over a new open skies air agreement. The Government has indicated that it is not prepared to accept an agreement similar to the one the US negotiated with Germany earlier this year.

The US has insisted on a new agreement before it will approve American's deal with BA.

Opposition to the deal from USAir, in which BA has a 24 per cent stake, also intensified last week. It applied to fly in direct competition on four transatlantic routes currently served by BA under the code-share agreement between the two airlines.

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