The US Department of Transportation has finally launched its review of the proposed American Airlines-British Airways alliance.But 15 months after the linkup was first mooted, the US regulators are in danger of getting left behind as the process migrates to the political level.

Still, the prospective partners are clearly relieved at the DOT's move and view this as something of a breakthrough. 'While we are disappointed that it took so long to get to this point, we are pleased that the formal review process will finally begin,' says American's vice president of international affairs, Arnold Grossman. The timeframe envisaged in the review process will now push approval for the alliance back to November at the earliest.

While BA also welcomes the move, there are concerns at the carrier about three unprecedented procedures envisaged, which one senior source at the UK carrier describes as 'worrying'. He points to the 'extent to which are competitors are going to get their hands on confidential data'; the 'very leisurely' timescale of a 30-business day response period for interested parties, followed by a 21-day period for reply and oral presentations; and a hearing chaired by Charles Hunnicutt, the DOT's assistant secretary for aviation and international affairs, which does not have to be held within any timeframe.

Such is the scrutiny of the case in the US that the process is 'driven by fear,' says the BA source. 'If Hunnicutt gets the process wrong it would be open to a judicial review,' he suggests.

Hunnicutt is keen not to get out of step with the regulatory review in Europe and can use the hearing device as 'a brake' on the process in Washington should this happen. Indeed, the UK government and Brussels still appear to be a long way apart on reaching an agreement on how many slots the alliance should relinquish in London. European competition commissioner Karelvan Miert is sticking to his 350 weekly slots, while London's position is much closer to the 168 slots recommended by the UK Office of Fair Trading.

While there will still be horsetrading between London and Brussels, it now appears that the process has moved firmly on to the political level. Margaret Beckett, the president of the UK Board of Trade, is due to meet van Miert again at the end of September. The UK deputy prime minister, John Prescott, who also holds the transport portfolio, is due to meet van Miert prior to Beckett's meeting in Brussels. 'The problem we have had so far is that people have tried to deal with what is a political issue as an economic and regulatory one,' says the BA source. 'If you look at how the Lufthansa-United and KLM-Northwest alliances were done, these were at an international trade level.' And there is no doubt van Miert's motives are politically driven as he tries to secure external competence for the Commission in aviation.

In mid-September the US State Department increased the political stakes when undersecretary Stuart Eizenstat, a former US Ambassador to the European Union, intervened with van Miert. He told him that Washington did not want to see the BA-AA alliance scuppered by Brussels' excessive demands, because it would ruin the US chances of reaching an open skies deal with the UK. A partial retraction soon followed from the State Department, but not before the damage had been done. Eizenstat's intervention left the alliance's opponents angry and the DOT with its nose out of joint.

Mark Odell/Jane Levere

Source: Airline Business