Branson and BA in new clash

Randeep Ramesh

Transport Correspondent

The battle for the skies above the Atlantic reached a new pitch yesterday as the bosses of Virgin Atlantic and British Airways clashed over BA's plan to link up with American Airlines.

Richard Branson, chairman of Virgin Atlantic and one of the deal's most vociferous critics, told US Congressmen that the proposed alliance between BA and American was "one of the most outrageous developments in the history of air transportation". He said the two airlines were far too big to get together and a link would just put prices up.

Mr Branson was appearing in London before the influential US House of Representatives Committee on Transportation and Infrastructure, which was also meeting BA yesterday.

He also accused BA of having several secret agreements with other state carriers that would only come to light after the deal with American had gained government approval. "We believe that they have secret agreements with JAL [Japan Air Lines], Iberia [Spain's flag carrier] and KLM," said Mr Branson.

However Bob Ayling, the chief executive of BA, went on the attack by claiming that Virgin Atlantic was "afraid of new competition".

Mr Ayling said his deal would allow UK airports to be opened to all US airlines. "Virgin wants to maintain its cosy position at Heathrow with access denied to airlines such as Continental, US Airways, Delta, TWA and Northwest ... Virgin is afraid of increased competition."

The deal between BA and American, the world's largest airline in terms of sales, is already way behind schedule and has floundered in the face of regulatory pressures.

Karel Van Miert, the European Commissioner in charge of competition policy, has made it clear he will not endorse the deal in its current form. The price demanded by Mr Van Miert, which involves BA having to give up 350 take-off and landing slots at Heathrow, is too high for either airline.

For Mr Branson, who meets Mr Van Miert later today, slots are not the only issue. " I would also like to see a review of frequent flier programmes and airport capacity considered," he said. "Small carriers wishing to start transatlantic flights would find it impossible without access to the new mega-airlines' frequent flier programme."

Mr Branson also proposed a new mechanism to help ease the slot constraint at Heathrow. He believes that slots should be offered on a franchise basis, with government regulators letting them out to airlines who propose the most customer-friendly flights.

"It needs government intervention to bring about proper competition," said Mr Branson.

If the new Labour government - with which Mr Ayling has links - refuses to challenge Brussels, many analysts believe BA will revert to a marketing alliance with American and bide its time for a full partnership.

BA would calculate that eventually, the pressure to open the skies over Europe would become so great that it could win clearance without having to bow to Mr Van Miert.

The US Congressional committee's deliberations are part of the overall American investigation into the alliance, although the key ruling will come from the European Commission.