Deal breakdown represents a 'lost opportunity for all'

AS JOHN MAJOR arrived at a cold and damp Heathrow at 6am on Monday, following his talks with President Bush, the BA-USAir deal was already dead in the water, writes Michael Harrison.

The failure of his eleventh-hour plea left Lord King, the BA chairman, with only one question as he assembled his board 24 hours later. Should he announce the demise of what had been styled 'the world's largest airline alliance' or wait for Washington?

BA and USAir are not the only losers. The collapse is also a serious setback for hopes of an 'open skies' agreement across the Atlantic and the ambitions of America's three biggest carriers to gain increased access to the UK.

Although officially denied on both sides, from the moment the BA-USAir deal was announced it became inextricably tied to wider negotiations aimed at liberalising US-UK air services.

It also became the subject of one of the most intensive and costly lobbying campaigns ever mounted as United, American and Delta clubbed together to oppose the deal with the aid of one of Washington's most expensive firms of political lobbyists and full-page newspaper advertisements.

No stone was left unturned, no angle too small. At one stage the US attempted to put diplomatic pressure on Britain by suggesting that, unless concessions were granted, it had the power to put Cayman Airways, the flag-carrier of the Cayman Islands, a British dependency, out of business.

Put simply, the US saw the BA agreement as a priceless opportunity to squeeze fresh concessions for its airlines from the UK authorities.

But despite almost six months of talks as the two sets of negotiators shuttled endlessly across the Atlantic, they were no nearer to an agreement than when they began.

The glittering prize - more flights into BA's Heathrow hub, the world's busiest international airport, would not come until the US eased restrictions on foreign ownership of its airlines.

Yesterday's announcement may yet prove to be a pyrrhic victory for those US airlines which so assiduously opposed the deal. Bob Crandall, chairman of American Airlines, was content to reflect that when it came to a choice between BA walking away from the deal or permitting more competition at Heathrow it chose the former.

But Stephen Wolf, chairman of United, said that the outcome 'marks a lost opportunity for all concerned'. In the welter of yesterday's recriminations, that may turn out to be the most accurate assessment of all.