The decision on code-sharing averts what could have been a nasty escalation in the dispute between the UK and the US over transatlantic air travel.
The US Transportation Department, frustrated in its attempts to win greater access to Heathrow for US airlines, had threatened to renounce the arrangement - the principal benefit BA derives from its dollars 400m holding in USAir. Washington will not, however, consider any applications from the two airlines to extend code-sharing from 38 destinations to an additional 70.
Airline officials also feared that the US, under pressure from some American carriers, might abandon the entire Bermuda 2 bilateral agreement that governs commercial air service between the two countries.
Federico Pena, the US Transportation Secretary, warned yesterday that continuation of code-sharing 'is provided notwithstanding actions the US government may take with regard to the existing US-UK bilateral aviation agreement'.
The US, he said, would 'assess all its options'. Through a full year of negotiations on a new treaty, the British government 'has demonstrated no real interest in pursuing a new and more liberal aviation agreement,' Mr Pena said.
But the Government was yesterday urged by the cross-party Commons Transport Select Committee to break the impasse over transatlantic air services by allowing US airlines unconditional and immediate access to UK regional airports.
A report from the select committee also recommended that Heathrow airport be opened up to more US airlines.
In return, US ownership rules would have to be relaxed to allow British Airways to raise its stake in USAir from 24.6 to 44 per cent, the MPs said.
The select committee also recommended that United Airlines be allowed to start flying from Chicago to Heathrow and that Richard Branson's Virgin Atlantic be permitted to switch its Boston service from Gatwick to Heathrow and operate alongside BA on more transatlantic services.
But the MPs ruled out the idea put forward by some US carriers that Heathrow's crucial take-off and landing slots should be auctioned to the highest bidder.
The code-share arrangement allows BA to operate transatlantic flights to USAir's domestic network as if they were its own services.
In return for an extended code- share arrangement, US airlines have demanded much greater access to the UK market, specifically Heathrow.
At present only American Airlines and United Airlines are permitted to fly to Heathrow but if the committee's recommendations were implemented the airport would be opened up to other US carriers such as Delta.
A BA spokesman said it recognised the need to make more use of regional airports, but added: 'We don't see any case in offering US airlines a deal that gives nothing in return for UK airlines.'
Virgin said it supported greater liberalisation at Heathrow but was concerned at the prospect of being swamped by US competitors when it could not get sufficient slots for its own needs.