Like it or lump it, Brussels tells BA alliance

Karel Van Miert, the European Competition Commissioner, yesterday said US regulators backed his demands that British Airways and American Airlines surrender 350 slots a week at Heathrow. He was speaking ahead of a meeting today with Margaret Beckett to discuss the P&O/Stena ferry merger. Michael Harrison reports.

Mr Van Miert insisted there would be no horsetrading with BA and AA, indicating that Brussels had already softened its stance on the concessions being demanded. He said that if it had applied the same rules to their alliance as other tie-ups between US and European carriers then the two carriers would have had to give up 500 slots.

The Competition Commissioner also said it was his understanding that the US Department of Transportation, the main regulatory body on the other side of the Atlantic, was looking for a similar level of slot concessions.

Mr Van Miert said he was not saying to BA and AA "take it or leave it" but that the Commission stood by its demands. "We have no reason to back- track from that. As things stand the companies will have to come up with proposals."

BA and AA would not be allowed to sell the slots because the legislation did not allow for that and they would have to surrender them from the first day their alliance became operational.

Mr Van Miert's tough stance helps explain why there are real worries in some quarters that the alliance will never get off the ground. Bob Crandall, the chairman of American Airlines, last week gave a downbeat assessment of the prospects of gaining approval from Brussels. But he said the two airlines still planned to co-operate even if they were not allowed to proceed with a full-blown merger of their transatlantic operations.

The concessions that Brussels is demanding are equivalent to 25 round trips from Heathrow a day. The Office of Fair Trading has recommended the two airlines give up half that number of flights but rival US carriers have argued that the concessions should be double the level demanded by Brussels.

Bob Ayling, BA's chief executive, spoke briefly to Mr Van Miert yesterday at an SBC Warburg transport conference the two men were attending in London and shook hands.

Later BA put out a conciliatory statement which contrasted with its initial criticisms of the Commission's "flawed" approach to vetting the alliance when it submitted its formal response on 5 September.

BA said it had met the Commission last Friday and agreed that a detailed series of meetings would take place over the next few months to discuss issues raised by the Commission's competition directorate and respond to its request for substantial further information.

"We are confident that at the end of this process an equitable solution will be reached with the three competition authorities of the UK, US and EC."

Earlier Mr Van Miert had indicated that unless progress was made the Commission would move to formalise its position. He said Brussels could not prevent the alliance from proceeding but if it went ahead on the proposed basis "there will be trouble for sure".

Separately, he criticised the open skies agreements that a number of EU member states have been signing with the US and which London and Washington will sign if the BA-AA alliance goes ahead.

These, he said "flew in the face of the principles of the single market" because they discriminated in favour of certain airlines. The Commission has filed a complaint with the European Court of Justice but has agreed to freeze the action pending talks with member states about Brussels being given the power to negotiate Europe-wide agreements with the US.

Whitehall sources described the meeting between Mrs Beckett and Mr Van Miert over the P&O-Stena merger as significant, indicating that London and Brussels are close to a decision on the deal. The Commission wants to impose concessions to protect ferry passengers.

Outlook, page 25