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European row threatens BA alliance

A row in the European Commission over the legality of selling take-off and landing slots at airports yesterday threatened to undermine the British Airways-American Airlines alliance, despite clearance last week by the British government.

Ian Lang, president of the Board of Trade, agreed on Friday to the alliance on the condition that the airlines surrender 168 of their slots, and the department said over the weekend that the airlines would also be allowed to auction the slots. These are thought to be worth pounds 1m to pounds 10m each.

Sources close to Karel Van Miert, the Competition Commissioner, yesterday cast doubts on this, saying selling slots was illegal, and increased the chances of the Commission finding the proposed alliance anti-competitive.

But Neil Kinnock, the Transport Commissioner, is understood to reject Mr Van Miert's analysis, and he is hoping to announce formal recognition of the policy of selling slots early next year.

A turf war over the issue appears to be under way within the Commission, with Mr Kinnock in charge of airline policy but Mr Van Miert the commissioner responsible for vetting mergers - and therefore in a powerful position to influence BA's deal with American.

A spokesman for Mr Kinnock confirmed that he wanted to clarify the rules in a way that would legitimise the widespread practice in the airline industry of selling slots.

He said: "Slot selling is an economic reality and it is done all the time. So are we going to try to fight against reality or are we going to try to give a framework to this practice in order to avoid monopolies and guarantee fair competition?"

Transport specialists in the commission describe the rules on slots as a "grey area" and they acknowledged that Mr Van Miert took a different view.

One source pointed out that at the end of the day Mr Van Miert had to take the issue to his peers, and the final decision would be taken by the Commission as a whole. Mr Kinnock will then be able to make his case.

In London, the Department of Trade and Industry said it believed slot selling was perfectly legal.

A spokeswoman added "We have checked with them [the Commission] the legislation as regards slot trading. They have come back to us and have not said the regulations prohibit slot trading. If they were to, we would obviously look very carefully at it."

The Brussels regulation stated "slots may be freely exchanged between airline carriers or transferred by an airline carrier".

BA said "we are advised by our experts that it is certainly not illegal".

Commission sources said there were still serious doubts about the transatlantic deal because of the threat to competition, though the British government and BA privately dispute the commission's jurisdiction over the deal.