BA claims tie-up will benefit rivals by $1bn

Bob Ayling, chief executive of British Airways, yesterday stepped up his defence of the group's planned alliance with American Airlines, claiming rival carriers would see benefits in revenue growth worth $1bn (pounds 613m) as a result.

At a speech to mark the tenth anniversary of BA's flotation, Mr Ayling claimed services between Heathrow and the USA would grow by a fifth if the alliance partners had to give up some of their lucrative runway slots at the airport under proposals from the Office of Fair Trading.

The OFT says the tie-up could escape a referral to the Monopolies and Mergers Commission if the partners had to divest 168 slots, equivalent to 12 daily round-trip flights.

Mr Ayling said the new services would come when the UK and US concluded an "open skies" agreement to liberalise access to Heathrow Airport. Rounding on critics of the strategy, which has linked approval for the alliance to the successful outcome of the talks, he said: "It may not please our competitors, nor the purists among the competition authorities, but in the real world it offers the only chance of real progress."

The alliance involves BA and American going beyond simple "code-sharing" arrangements to a deal where the two airlines pool revenues and facilities. Rival carriers in the US have launched an unprecedented attack on the link-up, which would give BA and American 60 per cent of UK-US flight capacity.

Mr Ayling's remarks were seen by other airlines last night as an attempt to back up his insistence that British Airways should give up Heathrow slots only if it gets financial compensation. Experts have estimated that the proposed168 slots, which amount to almost all the slots currently allocated to American Airlines, could net BA pounds 180m.

The debate over slot trading has become crucial to the successful conclusion of the alliance after European Commissioners said the practice of selling the slots was illegal under Commission rules.

But rival carriers doubted BA's claim that services would grow by 20 per cent from the slot divestiture plans. A spokesman for United Airlines said: "We frankly doubt whether BA and American are doing this in order to cut their own share of the market. From their point of view that doesn't make sense."

Other US airlines have pointed out that BA and American would still be left with more than 3,000 slots at Heathrow. They have also claimed that other facilities, including security checks, baggage handling and departure gates, are in such short supply that the open skies deal would in practice lead to little growth in flight capacity.