Government backs BA-American deal

The Government has given its broad support to the proposed alliance between British Airways and American Airlines despite intense opposition from rival US carriers, the Transport Secretary indicated to MPs last night.

Sir George Young told a Commons Transport Select Committee hearing that the tie-up, which would give BA/AA around 60 per cent of flights between the UK and US, "could provide the basis for a liberalising of arrangements with the US".

The deal, which is being investigated by the Office of Fair Trading, also requires anti-trust immunity in the US. This depends on the completion of an open-skies agreement between the two governments.

The Transport Secretary said the conclusion of an open-skies deal would need the establishment of an independent tribunal with the power to stop anti-competitive activities such as predatory pricing.

Sir George's remarks disappointed rival US airlines who gave evidence to the committee on Monday. "I think his emphasis is on BA rather than on the consumer," explained Michael Whitaker, director of international affairs at United Airlines. Earlier, TWA's president, Jeffery Erikson, told MPs the combination of BA and American would have monopoly power and make monopoly profits but that TWA would accept the deal with an open skies agreement if BA/AA divested itself of some lucrative slots at Heathrow.

Intensive negotiations between the Department of Transport and US Departments of Justice and Transportation are expected to last several weeks.

Two previous attempts to negotiate an open-skies regime, in 1993 and last year, collapsed when the US broke off talks.

It also emerged yesterday that several US airlines were briefed by BAA on the current availability of landing and departure slots at Heathrow. The meeting was also attended by US civil servants and a representative from the Office of Fair Trading.

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