Brussels gets tough on BA/American merger

BRITISH AIRWAYS will be forced to accept tough conditions on airport runway slots and route dominance in exchange for EU clearance for its planned merger with American Airlines, the EU's Competition Commissioner, Karel Van Miert, said in an interview with The Independent.

Mr Van Miert is expected to recommend approval of the deal to forge the world's most powerful airline alliance on 8 July. But he will attach the condition that BA relinquish, for free, more than 250 slots at Heathrow airport to ensure fair access for smaller rivals such as British Midland and Virgin.

Slot surrender on its own will not be enough, however: the alliance will also have to agree to reduce the number of flights it operates on the most lucrative routes, said Mr Van Miert.

The Commission's opening bid was that BA give up 350 slots at Heathrow , but an agreed formula is likely to reduce this to between 260 and 270. Mr Van Miert told The Independent that the total number of slots to be given up will be determined by the strict application of the formula. "The number of slots will be the outcome of the implementation of a method. So it's not up for negotiation," he said.

The outstanding bone of contention is the Commission's demand that BA and American reduce the number of flights the partnership operates on the busiest routes, including London-New York, at least during the first six months. Mr Van Miert has set the threshold for routes which would come under this restriction at 120,000 passengers a year.

He said the focus of discussions was now between the Commission and Margaret Beckett, the President of the Board of Trade. The DTI has been asked to supply the latest passenger figures for a number of disputed routes which fall in or near the threshold.

"What is still being checked is which routes fall above or below the threshold, and so which will form part of the investigation. If it's a route where there are few passengers, obviously that is one thing, but if the number of passengers flying that destination is above the limit then it will be in the investigation... We need the most recent figures," he said.

American Airlines chiefs were reported yesterday to have offered to postpone the alliance until competitor airlines had enough Heathrow slots to operate 14 return transatlantic flights. But this would not meet the Commission's demand on slot numbers.

Mr Van Miert said selling slots off to rivals was "absolutely out of the question". British Airways had procured slots at Heathrow for free, he said, adding: "This is about meeting competition concerns and making sure there is access for other competitors. On several routes there will be no competition any more or the alliance will have a dominant position ... if you allowed them to sell the slots, then above and beyond the considerable competition problems which are already there, you would be creating additional problems."

Mr Van Miert has allowed input into the evaluation from Neil Kinnock, the EU Transport Commissioner, who has wanted to see a more lenient approach than a "purist" regulatory attitude. But Mr Van Miert said the conditions had to be able to stand up to legal challenge.

Mr Van Miert said BA management had been "naive" and "misguided" to think they could simply push the merger through with no strings being attached by Brussels.

Mr Van Miert is also expected to rule on a planned alliance between Lufthansa of Germany and United Airlines of the US on 8 July.