The announcement that BA is to take a minority stake in a new carrier forged with Dan-Air is certain to set the scene for a fresh row over UK aviation policy.
But BA's bid to acquire a foothold in the US airline market, through a 44 per cent stake in USAir is proving equally controversial and, ultimately, is more crucial to BA's future strategy.
The delay in sealing the tie-up with USAir follows the failure of British and American negotiators to reach agreement on a liberalisation of air services between the UK and US during three days of talks this week.
Andrew Card, the US Transportation Secretary, left London yesterday after discussions with his British counterpart, John MacGregor, ended inconclusively. The next round of talks will not now take place until 9 November, by which time the US could have a new Democratic president and administration.
The deadlock in the negotiations hinges around Britain's refusal to grant US airlines increased access to Heathrow airport in return for US approval for BA to take a 44 per cent stake in USAir.
US negotiators put forward proposals for an open skies agreement phased over two years but with their carriers being granted an immediate increase in services to Heathrow. Initially, US airlines would have been allowed to fly to Heathrow from six more 'gateway' airports in the US.
This, for instance, would have enabled United Airlines, American and Delta to fly to Heathrow from the US hubs of Chicago, Dallas Fort Worth and Atlanta.
US sources suggested last night that any new Democratic administration would take an equally tough line.
Fears remain, however, that USAir, which reported third- quarter losses down from dollars 81m to dollars 55m, could be forced into Chapter 11 bankruptcy protection if the deal was blocked.Reuse content