BA pursues link with US carrier

BRITISH AIRWAYS is in negotiations to take a stake in USAir, the loss-making American airline, although industry sources said it could be several more weeks before any deal is agreed, writes Michael Harrison.

A partnership between the two would fit in with BA's desire to link up with a large domestic US carrier and USAir's stated ambition to join forces with an established international airline.

However, the deal faces a number of stumbling blocks. One is the financial plight of USAir - it has debts of dollars 2bn and made losses of dollars 760m in the past two years.

Another is the US legislation restricting foreign ownership of its airlines. Overseas carriers can buy up to 49 per cent of a US airline but they are limited to 25 per cent of the voting rights.

Industry observers doubt whether the BA chairman, Lord King, would be interested in making a heavy investment in USAir without being in a position to tackle its losses. For these reasons BA is thought to be taking a cautious approach in the talks.

If the talks come to fruition then BA and USAir might buy some of the assets of TWA, the bankrupt airline owned by Carl Icahn.

USAir is America's sixth-largest domestic carrier and has a strong network in the eastern US. A link-up would give BA better access to this market.