Rip up treaty, urges US Air

American airline heads move to step up pressure on UK over concessions on transatlantic flights
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US AIR, one of America's top airlines, is spearheading a campaign by US carriers to press the Clinton administration to cancel the treaty that governs air traffic between the UK and the US.

The move follows the collapse last month of negotiations between the two countries that were designed to open up each other's air travel markets.

"The UK Government has shown that its only real interest is to deter competition and perpetuate its dominance of the US-UK market," Stephen Wolf, chairman of US Air, wrote in a letter to President Bill Clinton on 22 October.

"The UK simply is not prepared to permit the transatlantic marketplace to be governed by free competition. Under these conditions, only one option remains: renounce Bermuda 2."

Bermuda 2 is the agreement that has been in force between the two nations since 1977. US government officials and airline executives believe it has given UK carriers, especially BA, advantages in the transatlantic market. Their chief grievance is what they see as a stranglehold on air slots in and out of Heathrow. British carriers control more than half of the transatlantic air traffic.

Mr Wolf is lobbying chief executives of the other five big US airlines to endorse his call for treaty renunciation. "If the five other carriers support re-nunciation, this would strongly influence the US position," said Patrick Murphy, at the US Department of Transportation.

Leo Mullin, president of Delta Airlines, has already voiced support for Mr Wolf. However, he has said he was not yet ready to support re-nunciation.

On 3 November, United Airlines, a main partner in the global Star Alliance, a powerful competitor to BA's Oneworld alliance, weighed in with a sharp rebuke of the UK and BA for the talks' collapse.

"In the face of a slowing UK economy, BA has rediscovered the concept of a Fortress Heathrow," said Cyril Murphy, United's vice-president. The US has made an open-skies agreement a precondition for regulatory approval of the now-troubled alliance between BA and American Airlines.

Unilateral renunciation of Bermuda 2, would allow the US to impose tough route and landing restrictions on BA, which would in turn be likely to force the British government to negotiate a new treaty.

"US Air is taking a fairly confrontational approach," said Austin Reid, managing director at British Midland.

Given the poisoned atmosphere, US regulators seem determined not to allow BA any benefits until a new bilateral treaty is negotiated.That could mean that the regulators refuse to approve even the most modest marketing agreements between BA and AA, who have decided to phase in a proposed alliance over five years after EU regulators demanded 267 slots be ceded at Heathrow.

US officials also accuse the UK of reneging on past commitments to renegotiate Ber-muda 2. "We think the US- British aviation agreement is a disgrace," said Mr Murphy. "We hate it."

US and UK negotiators met on 5 October for the first time since 1997. The meeting ended with the US delegation walking out because it felt the UK had brought nothing new to the talks.

"BA would like an immunised monopoly," said one insider. "But a regulated oligopoly is still pretty good."

In 1976, the UK renounced the existing treaty and threatened to close the UK market to American aviation unless a new treaty was negotiated to help the survival of the then-unprofitable BA.