Andrew Chuter/LONDON

American Airlines and British Airways have finalised the first stage of their global expansion plans with an alliance that pulls the two carriers together with Cathay Pacific, Qantas and Canadian Airlines International.

The group, which has been put together under the working title of "World Alliance", is expected to be announced officially in London on 21 September, even though the controversial American/BA link-up awaits final regulatory approval on both sides of the Atlantic.

The "World Alliance" is the long awaited response of American and BA to the rival Star Alliance, which is led by United Airlines/Lufthansa.

Talks on a wider alliance have been under way for months as American and BA sought to add Cathay Pacific and Japan Airlines (JAL) into a group which already linked Canadian and Qantas with the two leading players through marketing and shareholder ties.

The Japanese carrier has balked at joining the alliance at this stage, although it continues to put the final touches to a new code-share agreement with American.

JAL is seeking a "major European" airline with a comprehensive network to give it access to the region. It now relies on simple code-shares with KLM and Air France. The airline already co-operates with BA partner Qantas. The Japanese carrier would provide the alliance with a counter to All Nippon Airways, which is poised to join Star

With the presently declared members, the two groups will be running neck and neck in terms of group sales, with the Star Alliance having a $1 billion edge with sales of $46 billion last year.

On passenger numbers the United/Lufthansa team pulls ahead, having carried 188 million people against 159 million by the "World Alliance".

The next phase of the BA/AA link is likely to see the incorporation of a second tier of carriers in which the two have links of various kinds, including Aerolineas Argentinas, Iberia, Finnair, LOTPolish Airlines.

A tie-up with Aerolineas would provide a South American link to oppose Star's Varig Brazil. The connection with Cathay Pacific could have important spin-offs into China, where its 20% holding in Hong Kong-based Dragonair could pay dividends.

China National Aviation is the major shareholder in the regional carrier and the Beijing-based company has long harboured ambitions of drawing together its interests in Air Macau, Zhejiang Airlines and China Southwest into a cohesive alliance - possibly eventually linking into a wider grouping such as the "World Alliance".

Although it is too early to look beyond a marketing alliance it is expected that in time the American/BA led group will follow the Star Alliance members into joint ventures in sectors such as spares provision and cargo.

Source: Flight International