Virgin and BA close to deadlock

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The prospects of a settlement giving Virgin Atlantic compensation from British Airways over the dirty tricks affair were balanced on a knife edge last night as senior executives from both airlines continued talks.

Although negotiations are expected to continue over the weekend and possibly into early next week, hopes of a deal appear to be fading. 'I have an inkling that we might be about to enter a new phase in the affair rather than reach an agreement,' a source close to the talks said. 'The lines are beginning to be drawn now. The chances of a settlement are 50:50 rather than 70:30.'

Richard Branson, the Virgin chairman, is seeking financial compensation from BA for the 'serious commercial damage' done by the dirty tricks campaign, the transfer of some BA slots at Heathrow to Virgin Atlantic, and a written undertaking not to repeat the behaviour.

He flew back from the United States on Thursday after holding consultations with US lawyers about the prospects of Virgin succeeding in an anti-trust case against BA. Mr Branson had set a deadline of last night for a conclusion to the negotiations.

Last night talks were still going on between Stan Abbott, Virgin's head of finance, and Robert Ayling, BA's newly appointed group managing director.

The two sides appear to have made precious little headway since the talks began nearly three weeks ago, despite a suggestion from BA's new chairman, Sir Colin Marshall, this week that 'most things are on the table'.

Meanwhile, the European Commission is set to clear BA's takeover of Dan Air after an inquiry demanded by Belgium under the EC's merger control regulation. The EC competition commissioner, Karel van Miert, has concluded that BA would not gain a stranglehold on routes between London and Brussels and has informed his colleagues in the 17-member Commission of his intention to clear the deal.