American Airlines is hoping for a breakthrough in 1998 in its continued battle to win approval for an alliance with British Airways. But concessions will have to be made, particularly at Heathrow.

Some 20 months after the proposal first surfaced, the level of frustration in Texas is nearing boiling point, admits a Washington D.C. aide who is helping American in its bid to get the deal done. But American's managing director international affairs, David Schwarte, insists the airline's resolve has not been undermined. 'There have been a lot of disappointments and frustrations but we are not running around screaming,' he says. 'Our view still is that the US and the UK governments should want open skies and this deal, so eventually they will recognise the posture of our competitors is just an attempt to thwart us.'

Schwarte admits that the hurdle negotiators on all sides are finding most difficult to cross is '. . . slots, slots and slots.' BA's and AA's official line has always been that they are heavily reluctant to give away slots. However, insiders reveal a turnaround in both carriers' attitudes - the airlines are now prepared to offer concessions in order to let the larger issue of approval move forward. Sources say that giving up a number of daily slots, perhaps as many as seven or eight, might be acceptable without much need for negotiation. The number could even be pushed up to the 'early teens' if the terms were right.

Schwarte says that the 24 slot number that the US General Accounting Office recommended be relinquished is, in their view, 'far too high'. Since that recommendation was made public earlier in 1997, at least four slots have become available at Heathrow, points out Schwarte.

Schwarte says American is encouraged by the European Commission and UK authorities' moves towards a common approach to the proposal in recent weeks. 'That is good news because if they don't agree then the ability to move forward can be cast in doubt,' says Schwarte.

Schwarte was anticipating more meetings between the UK and European authorities in December 1997 before an announcement in February. Originally, the airlines had been hoping for a decision on 17 December.

In the US, meanwhile, American is still debating whether to hand over confidential documents to the US Department of Transportation. The DOT asked for additional documents in July, but American baulked at the idea of making such information accessible to its competitors. The airline has asked for a guarantee that, if supplied, the documents would be seen only by DOT officials. Schwarte expects an oral hearing in late February or early March.

The Department of Justice, meanwhile, is working closely with the DOT. The DOJ holds fewer concerns about the slots issue than the DOT, which regarded the GAO's recommendation of 24 slots as too lenient. 'We believe that we can work through all of the concerns with both of them,' says Schwarte.

American has been surprised by how successful its competitors have been at stalling the approval process. Continental chairman Gordon Bethune took another swipe at the proposal in December while in London, reiterating his belief that it would be a monopoly of giants. 'There's no way to dress this pig up to make it into a ballerina,' he said.

Meanwhile, American has completed its agreement to take a 10 per cent stake in Aerolineas Argentinas.

Karen Walker

Source: Airline Business