American concedes BA alliance may not get Brussels green light

American Airlines has conceded that its alliance with British Airways may not get approval from the European Commission. Michael Harrison reports on the increasing doubts surrounding the transatlantic link-up.
Bob Crandall, chairman of American Airlines, has given the clearest indication yet that it may be forced to walk away from its long-delayed alliance with BA because of the concessions demanded by the EC's Competition Commissioner Jarel Van Miert.

In a speech to senior airline executives on Thursday night, Mr Crandall attacked the "busy bureaucrats of Brussels" and said of the threat to block the alliance: "It would be a shame and there is no justification for it."

He also indicated that in the 15 months American and BA had been waiting for regulatory approval they had drawn up detailed continegency plans in the event of the alliance not being allowed to proceed as planned.

Mr Crandall said the two airlines had learnt a lot about one another since the alliance was first announced in June last year and that they would continue to cooperate in future if the link-up did not go-ahead.

His comments, at a dinner in the Dorchester Hotel in London, arte the closest a senior executive from either airline has come to admitting defeat. Mr Crandall angrily compared the way other alliances between Luthansa, KLM and Sabena and US carriers had been approved with the treatment given to BA and American by the EC competition authorities. "Their activism stands in sharp contrast to the quiescence with which they accepted alliances in Amsterdam, Frankfurt and Brussels," said Mr Crandall.

The dinner, held to coincide with a meeting of the American board in London, had been intended to celebrate the successful launch of the BA alliance.

But Mr Crandall said BA and American could not have anticipated the length of the examintaion launched by Brussels which has stopped the alliance in its tracks.

Earlier this week Don Carty, the American Airlines president, warned that it would pull out of the merger if Brussels stood by its demand that the two airlines give up 353 take-off and landing slots a week at Heathrow.

Mr Carty said that the price being demanded was not one it was prepared to pay. The Office of Fair Trading has said that BA and American should relinquish 168 slots - equivalent to 12 round trips a day. Mr Carty said this was as far as American would go and then only if it was allowed to sell or lease the slots.

Behind American's bellicose stance lies a degree of frustration. It is confident that US regulators will approve the alliance because that will pave the way for a wider open skies agreement allowing more US airlines access to Heathrow. But it is disappointed that BA has been unable to gain Brussels approval.

Senior BA executives were more upbeat however, saying that Britain's two EC Commissioners, Sir Leon Brittan and Neil Kinnock, the Transport Commissioner, supported the alliance. It was suggested that Mr Van Miert, a former socialist prime minister of Belgium, was making a political issue out of the BA-American alliance because he has his eyes set on the EU presidency when Jacques Santer retires.

Meanwhile, BA is facing the threat of being fined by Brussels for anti- competitive behaviour following complaints lodged by Virgin Atlantic that its sales techniques have breached the Treaty of Rome.

An EC spokeswoman in London denied, however, that it had already concluded that BA was in violation of article 86 of the treaty and said hearings would take place towards the end of October at which BA and Virgin could state their respective cases. "There is no truth in the suggestion that the Commission is about to impose fines. We still have to scrutinise replies and comments.''