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Friday, October 23, 1998 Published at 11:47 GMT 12:47 UK

Business: The Company File

US turbulence for BA-AA deal

British Airways says it still hopes for regulatory approval by next year

The alliance of British Airways (BA) and American Airlines has run into trouble, as US regulators are reported to have delayed their hearings on the deal.

According to the London-based Financial Times newspaper, the US Government now believes that BA "has scaled back its plans and is no longer interested in a full alliance with American."

However, a spokeswoman for BA said "we have absolutely no plans to put our alliance on hold."

The deal may fall through nonetheless, because of a transatlantic spat over a so-called 'open skies' agreement.

This dispute could be the real reason for the delay of the hearings, which were planned to begin next week.

A full-blown alliance, where both airlines co-ordinate fares and flight schedules, requires approval of anti-trust regulators in both Europe and the United States.

[ image: BA flies new colours, but the American Airways logo is missing]
BA flies new colours, but the American Airways logo is missing
In July the European Commission gave the alliance the go-ahead on the condition that both airlines surrendered a large number of landing and take-off slots for transatlantic flights.

At the time, BA's chief executive Robert Ayling said both airlines might attempt a less ambitious alliance if the regulators' conditions were too tough.

A BA-AA link-up would create the world's largest airline partnership, dominating air travel between the United States and the UK.

Open skies

Washington has made approval of the deal dependent on an 'open skies' agreement between the United States and the United Kingdom. The US has such accords with 31 other countries.

Airtravel between Britain and the US, however, is governed by the so-called Bermuda II agreement, which regulates which airlines can fly how many planes how often on the transatlantic route between the two countries.

The many competitors of British Airways and American Airlines have said that traffic on the transatlantic route should be liberalised.

On Thursday the chairman of US Air, Stephen Wolf, wrote a letter to President Bill Clinton, calling on him to renounce the existing aviation treaty with the UK to force London to accept the "principles of free competition."

Two weeks ago a US delegation walked out of open skies negotiations after failing for two-and-a-half days to reach agreement with their British counterparts.

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