BA chief renews attack on EU airline subsidies

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Sir Colin Marshall, chairman of British Airways, launched a bitter attack on airline subsidies yesterday, as the company continued to resist pressure to write down its £260m stake in USAir, writes Russell Hotten.

State aid to Air France, Alitalia and Iberia was a waste of millions of pounds of taxpayers' money while undermining the profitability of BA, he told a conference in Australia.

The lack of market discipline distorted competition for private airlines which had survived without government handouts. State owned airlines had wasted "colossal sums of their taxpayers' money'', Sir Colin said.

The remarks came as BA repeated that it would not write down the value of its holding in troubled USAir.

On Monday Warren Buffett, the American investor, wrote down his $268m investment in the company and said he would resign from the board. BA said it would only write down the value of its investment if it believed there had been a permanent diminution in the book value. "This is not currently the position although it is of course regularly reviewed," the company said.

Sir Colin said he was heartened that USAir was still negotiating for a cost-cutting deal with its employees and said the company had embarked on a rationalisation of its fleet and route network.

But Mr Buffett's action has dented confidence in USAir. "Everybody's investment in this company has been diminished. If they don't get a deal with the labour force, the value will diminish even further," said Thomas Longman of Lehman Brothers.

Meanwhile, the resumption of talks aimed at liberalising airline links between Britain and the United States, which were expected to start in London yesterday, was postponed until next week at the earliest.

Division amongst US airlines on what proposals US officials should bring to the negotiating table was blamed for the delay.

The US team was expected to bring proposals for a new deal to break the deadlock after nearly four years of trying to get a totally free "open skies'' market for air travel between the two countries.

The US side may offer to drop its "Fly the Flag'' policy banning American civil servants from using foreign airlines for transatlantic travel.

US airlines are determined that any new agreement must allow them to fly extra routes out of London Heathrow, rather than the capital's other two airports at Gatwick and Stansted, which offer fewer onward connections.