BA hits back over rivals' link-up claims

British Airways and American Airlines yesterday launched a vigorous defence of their proposed alliance, hitting back at rival carriers' claims that it would create an unprecedented monopoly on some of the most lucrative transatlantic routes.

The two airlines were filing their joint application to the US Department of Transportation requesting formal approval for the alliance, which would give them some 60 per cent of flights between the UK and the US.

The link-up, which involves pooling revenues, timetables and facilities, depends on the successful outcome of "open skies" talks between the two governments aimed at liberalising access to Heathrow airport. Negotiations are due to restart in three weeks' time.

British Airways insisted it was confident it would get the alliance approved by UK competition authorities. The Office of Fair Trading has given the deal its provisional approval on condition that the partners give up 168 lucrative runway slots at Heathrow. However, rival airlines have attacked the conditions as far too lenient. They would still leave British Airways and American with some 3,000 slots at the airport.

The alliance partners also submitted their response yesterday to the OFT report, claiming the conditions recommended were excessive. But David Holmes, BA's director of regulatory affairs, told a news conference in Washington that the company was prepared to agree to give up some of its slots, but only on condition that it was compensated for the loss at a fair market value.

He said: "I won't disguise the fact that the regulatory process in the UK has taken longer than expected. However, there are no competition problems that cannot be solved by BA agreeing to undertakings."

Rivals have stepped up their campaign against the alliance in their own submissions to the OFT, claiming that British Airways' plan to sell the slots would give the company a huge "war chest" which it would use to put other carriers out of business.

Experts have estimated the 168 slots at Heathrow, equivalent to 12 round trips a day, would net pounds 180m.

The whole issue of slot trading has become more confused this week after news emerged that the European Commission has concluded that the practice is illegal under EC rules.

The admission by sources close to Neil Kinnock, the transport commissioner, threatens to undermine British Airways' negotiating position.

The EC is still investigating the alliance and has insisted that it needs European approval before it can operate.

Yesterday, a spokesman for American said the alliance would be the spur to a "dramatic" increase in competition in the UK-US airline market as new carriers gained access to Heathrow.

"We are flabbergasted by constant repetition of this nonsense about a monopoly," he said.

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