British Airways is considering selling its 24.6 per cent stake in USAir and negotiating a strategic alliance with another American carrier.
United Airlines and American Airlines, both in the early stages of takeover talks with USAir, are expected to be joined by Delta and Continental. A bid battle could send the value of BA's investment soaring. The company paid $400m for the stake in 1993, but wrote down almost half earlier this year as financial and labour relations problems mounted at USAir.
"USAir is not the only American carrier we can link with," said a senior BA source. "If the price is right, we may sell." The USAir alliance is a vital link in BA's plan to become a global airline, but the British company is looking at other small US operators it could join with.
BA, whose shares rose 20p to 472p, would only say yesterday that it was considering its options. But one airline industry executive believed BA was in a no-lose situation. "There are a number of potential options for BA here: developing an alliance with one of the bidders or doing something with someone altogether different."
However, analysts did not rule out the possibility of BA being squeezed out of its operational alliance with USAir, either by a purchaser or by the US aviation regulators.
"I find it very hard to envisage some sort of tri-party cooperation between either American or United and USAir and British Airways," said Guy Kekwick at Lehman Brothers.
If either American or United could work with BA, it could give the US carriers a network of connections from Europe to the rest of the world. BA could tap into American's or United's huge networks covering North and South America, in addition to the existing USAir routes concentrated on the east coast. "If you are feeding passengers onto United or American you are feeding the whole of the United States; you are feeding Central America, the Caribbean and South America," said an analyst.
American is still looking for a strong European partner, having lost out to United over alliance with Lufthansa last year. United said yesterday: "We are committed to our growing alliance with Lufthansa and it would be pointless for us to speculate about other matters before we decide whether to move ahead on USAir."
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