American in Iberia talks

The shake-up in the European air industry continues with news that Swissair is close to agreeing on a deal with Sabena of Belgium and that American Airlines has been talking about investing in Iberia of Spain, writes Russell Hotten.

The Independent has learned that American is considering taking a stake in the loss-making Spanish airline as part of a rescue package being considered by the European Commission.

The Spanish government is seeking approval for £700m in state subsidies for Iberia, an issue that marks the first big challenge for the new EU transport commissioner, Neil Kinnock. British Airways, among others, has been a firm critic of airline state subsidies.

American has also been tipped as a likely investor in Air France, which itself is seeking to sell its 25 per cent stake in Sabena as part of the Swissair agreement.

A deal with Iberia would boost American's presence in Europe but may also further confuse the already complicated bilateral "open skies" talks between the US and UK air authorities. "Everyone wants leverage; everyone wants quid pro quo," one analyst said.

US airlines are seeking greater access to European markets, and have campaigned for more slots at London's Heathrow airport.

A Brussels source close to the Iberia rescue said that American was clearly interested in investing in the company. But he said: "It is always difficult to bring in private capital on a rescue before that rescue has actually taken place."

A spokeswoman for American said it was policy not to comment "on speculation about investments".

The Swissair/Sabena deal may be signed tomorrow, giving the Swiss carrier a much sought-after foothold in the European Union. Swissair is expected to take a 49 per cent stake through the purchase of Air France's 25 per cent and part of the Belgian government's holding.