Commentary: Dividing the air into trading blocs

Click to follow
The demise, temporarily at least, of British Airways' link-up with USAir leaves two inter-related questions hanging in the ether. Whither BA's strategy for conquering the world? And what price the dawning of a new, liberalised era in transatlantic air travel?

First BA. Lord King has filled in part of the jigsaw through the purchase of a 25 per cent stake in Qantas. But if the BA chairman is to achieve his goal of turning the airline into a truly global player then it must have a presence in the US - the world's biggest air travel market.

The difficulty is that BA is fast running out of partners. The three biggest US carriers - American, United and Delta - are already spoken for or compete directly with BA across the Atlantic. As for the remaining contenders, Continental is paired up with Air Canada and Northwest with KLM.

That would appear to leave BA with little option but to resurrect some deal with USAir. But if control, or at least a large say in the running of USAir, is out of the question, then what is the purpose in BA investing anything, much less dollars 750m, in a loss-making carrier saddled with formidable debts?

The answer may be to prevent USAir being snapped up by another European flag-carrier. But who else is interested? Lufthansa has been touted as a partner but it has financial problems of its own.

If BA's failure to gain approval for the USAir partnership was a setback to the shareholders of both airlines, then it was a greater disappointment to advocates of 'open skies' across the Atlantic, the issue on which the BA alliance turned and ultimately foundered.

The present air services agreement between Britain and the US is one of the most repressive of its kind in the restrictions on which airlines can fly where. But it is difficult to see John MacGregor and his opposite number in the Clinton administration sitting down in the new year and unravelling it, given the entrenched positions of both sides.

Interestingly, what appears to have stuck most in the craw of the UK negotiators was the US insistence that, in return for approval of the USAir deal, their carriers be given unrestricted access not just to and through the UK but also beyond. With Britain anxious to be seen as a good EC citizen, providing the US with a bridgehead into the rest of the Community might not have sent the right signals.

Herein lies, perhaps, the greatest worry. From 1 January Europe will have a single market, of sorts, in aviation, open to any EC carrier but not, of course, to non-EC airlines.

As Europe's flag-carriers fight to consolidate their positions within a Community from which US airlines are excluded, and each looks askance at perceived protectionist tendencies in the other's home market, then the prospects of air travel becoming a commodity that is divided up by global trading blocs can only increase.

Whatever happens to BA, and whether or not USAir joins the ranks of airlines seeking Chapter 11 protection, that poses the greatest concern.