BA presses USAir to drop lawsuit

British Airways will ask USAir, where it has a 24.6 per cent stake, to drop last week's lawsuit or face a fundamental re-evaluation of their four-year relationship. It is also prepared to launch a counter suit of its own.

BA, which has three representatives on the USAir board, was stunned by last week's legal action in New York alleging that BA's planned alliance with American Airlines was anti-competitive. To add to the theatre USAir has asked for the case to be heard by the same judge who is presiding over an existing anti-trust action brought against BA by Virgin Atlantic.

The BA board met on Friday to discuss the USAir action. BA executives are angry that USAir gave no hint that it was about to resort to the courts. It has kept USAir fully informed of its discussions with American and had been seeking ways to fully involve USAir in the new alliance.

Senior BA sources are still hopeful that USAir can be persuaded to reconsider its action. However, they point out that a partnership is based on mutual trust and that USAir's action could put the relationship under great strain. BA remains mystified as to USAir's motivations, since the action will jeopardise a partnership which has brought benefit to both sides.

USAir argues that it made sacrifices as part of its original alliance with BA and gave up routes to London. However, BA points out that that was a requirement imposed by the US Justice Department as a condition of the deal going through.

The USAir action is the most damaging of the many attempts to scupper the BA deal with American. The Office of Fair Trading is under pressure to refer the proposed alliance to the Monopolies and Mergers Commission. The US Justice Department is also considering the anti-trust implications.

Last week six US airlines wrote to President Clinton urging hims to suspend bi-lateral negotiations with the British government over a new open skies air agreement until the Justice Department has concluded its investigations. The talks broke up on Friday without agreement.