Anniversary blues for BA

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The Independent Online
Like some of its customers, British Airways knows all about delays. In 1993 and 1994 it took nine months to push a watered-down version of its alliance with USAir Group through the regulatory thickets.

Chief executive Robert Ayling and chairman Sir Colin Marshall are now finding that it gets worse. This week they passed the one-year mark since they proposed their transatlantic alliance with American Airlines.

Once optimistic of starting the alliance to share revenue and unite fares across the Atlantic by April 1997, they now admit it will be at least November before they get approval - a full year later than they had initially hoped. It would be summer 1998 before the carriers could begin the pact in earnest.

Mr Ayling warned this week that he would have to consider other options if regulatory approval is still not forthcoming. "There's got to be a limit to how long they can wait," said Michael Stoddart, an analyst with Charterhouse Tilney Securities.

That doesn't mean BA would abandon American entirely. Some analysts maintain that if the carriers get too frustrated, they could link their frequent- flyer programs and seek to sell flights on some routes under joint flight codes as a first step.

While it wouldn't approach the cost savings of a full joint venture with American, which analysts put at about pounds 150m, "it would at least give them something," said Peter Bergius, an analyst with ABN Amro Hoare Govett.

BA and American still say forcefully that they expect approval in November, and the European Commission has said it would finish its review by then. "This is going to happen. It's taken too long to get there, but it's going to get there," said Hans Mirka, the vice president of American's international operations.

But even if the EU's review is finished by November, it's only a first ruling. Wrangling over how to share out take-off and landing slots at Heathrow Airport, which the carriers would undoubtedly be forced to shed, could take far longer.

And it's still unclear how new Trade Secretary Margaret Beckett views the alliance.

If she surprised the City by referring the takeover of two rail franchises by bus operator National Express to the Monop-olies and Mergers Commission, it wouldn't be a shock if she had problems with a partnership that would carry almost two in every three passengers between the US and Britain.