Plan to enlarge foreign stakes in US airlines

BRITISH AIRWAYS and other carriers would be allowed to own voting stakes of up to 49 per cent in US airlines under a plan proposed yesterday by the Clinton administration, freeing BA almost to double its holding in USAir, its transatlantic partner.

BA originally planned to buy a dollars 750m stake in USAir, but it had to reduce its investment to dollars 400m a year ago because of objections to the influence it would wield. BA's stake would rise to about 44 per cent from 24.6 per cent if it were to proceed with its original deal.

BA said yesterday it had long argued for a relaxation of the 25 per cent cap on voting shares.

However, increased foreign ownership, which the US Transportation Secretary Federico Pena proposes as part of a wider plan to revitalise the struggling US airline industry, must first pass the US Congress. Executives of the leading US carriers, who lobbied successfully against BA's original investment, say passage of the plan depends largely on negotiation of a new bilateral airline agreement with Britain.

Those talks, which were to have resumed on 19 January, have been postponed indefinitely by the Americans, who complain of British intransigence over opening up Heathrow.

Mr Pena's proposals would not change laws that insist American carriers be controlled by US citizens. But objections to BA's original investment in USAir centred on the number of directors it would name to the carrier's board, and US regulators or courts could still veto a higher stake on those grounds.

However, the US Transportation Department has been given considerable discretion in defining foreign control, recently approving Air Canada's stake in Continental Airlines after gaining safeguards for the independence of the carrier.