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US airlines want curb on foreign investment

PRESSURE is mounting on the Clinton administration to take a much more protectionist line over foreign investment in the US airline industry.

The big three US carriers, led by American Airlines, are warning that unless foreign investment is curbed, the difficulties of the industry will deepen, following the total dollars 8bn ( pounds 5.7bn) loss run up by US airlines in the past three years.

This will be one of the key planks of their evidence to the national commission into the future of the aviation industry announced this week by the Transportation Secretary, Federico Pena. The 15-member commission has 90 days to report back to President Bill Clinton and the US Congress with recommendations.

President Clinton is being urged to use British Airways' dollars 300m investment in USAir as an opportunity for a comprehensive review of US aviation trade policy. A savage price-cutting war on domestic routes, exacerbated by airlines operating under Chapter 11 bankruptcy protection, has already weakened American, United Airlines and Delta.

They now fear that airlines such as BA will snatch more profitable international business by siphoning domestic passengers into their own transatlantic route networks.

The most vociferous opponent of the BA tie-up, Bob Crandall, chairman of American, said that the US should not allow any foreign airlines to serve its market unless US carriers had equal access and rights in their countries.

Mr Crandall said that the BA- USAir deal should be allowed to proceed only if there was a complete 'open skies' agreement across the Atlantic.

In a recent address to Wall Street analysts, Mr Crandall said: 'As part of its review, the US government should come to grips with the many pernicious and anti- competitive practices US carriers encounter abroad.' These included lack of access to overseas hubs and slots at congested airports such as Heathrow.

Although BA has watered down its investment in USAir so that it does not emerge with a controlling stake, Mr Clinton is being urged to veto the code-sharing element of the agreement that will enable domestic USAir routes to be classed as BA services.

American claims this will divert tens of thousands of passengers from other US airlines, putting huge numbers of jobs at risk. Mr Crandall said: 'The British government and BA have made it clear they have no interest in flying to the US if the price is opening BA's markets to US airlines. If that is the attitude it is quite hopeless. We will insist on an open- skies regime.'