Airlines step up fight against Dan-Air deal

THE CAMPAIGN by rival airlines to block British Airways' takeover of Dan-Air will intensify tomorrow when British Midland and Virgin spell out their opposition to the deal to the Office of Fair Trading.

Both airlines will argue that it would undermine competition at Heathrow and Gatwick, reduce consumer choice and lead to less job creation in the long-term.

BA believes that Sir Bryan Carsberg, the Director General of Fair Trading, will not refer the Dan-Air acquisition to the Monopolies and Mergers Commission.

But OFT sources stressed that he had not pre-judged the issue and that consideration would have to be given to complaints from rival airlines.

The Civil Aviation Authority, meanwhile, is likely to point to the reduction in competition that a merger of BA and Dan-Air would lead to.

But the real stumbling block could come in Brussels, where the European Commission's competition authorities are said to be taking considerable interest in the proposed deal and listening sympathetically to the objections raised by rival airlines.

Sir Michael Bishop, chairman of British Midland, said he thought it likely that Brussels would subject the agreement between BA and Dan-Air to a three- month investigation.

A lengthy examination in Brussels resulting in BA being forced to surrender routes and slots at Heathrow as the price for taking over Dan-Air could deter it from going through with the deal.

British Midland has already made two presentations to officials at the EC's competition directorate, DG4, and is certain to be called to give further evidence should a full-scale inquiry be launched.

BA is supporting its case by arguing that the takeover will save jobs and prevent Dan-Air from being forced into receivership.

Sir Colin Marshall, chief executive, denied it would give BA a stranglehold at Gatwick, saying BA and Dan-Air together accounted for only 21 per cent of the slots at the airport.

Richard Branson, chairman of Virgin Atlantic, disputes this and has called for a full review of competition at both Gatwick and Heathrow by the Civil Aviation Authority.

Virgin says that if it was allowed more access to the two airports it would launch long-haul services to three additional destinations - Johannesburg, San Francisco and Washington - and set up Virgin European Airways with scheduled services to five cities including Paris and Brussels.

The total number of jobs created would be up to 1,500 compared with the 400 that BA will retain from Dan-Air's full-time staff of 2,000.

British Midland will argue that the regulators should strip BA of routes at Heathrow to preserve competition. It has licences to fly to a further seven European cities but is prevented from doing so by the lack of slots.