For British Airways and American Airlines, the new year is about to begin. They have awaited regulatory approvals and antitrust immunity for their proposed alliance for more than five years, and entered 2002 expecting a final decision within the year's first few weeks.

UK and US transportation authorities agreed on crucial late-January meetings as they moved toward concluding an open skies pact that would clear the way for a grant of antitrust immunity.

The two airlines were heartened by the US Department of Transportation's (DoT) final approval of antitrust immunity for the SkyTeam members Air France, Delta Air Lines, Alitalia and CSA Czech Airlines. Made final in early January, this appeared to be a clear suggestion that the US authorities are eager to encourage inter-alliance competition.

"The pro-consumer and pro-competitive effects of this alliance should be particularly evident in the so-called behind- and beyond-gateway markets," the DoT says. American and BA argue that their proposal is similar enough in size and scope to the SkyTeam plan.

But London Heathrow remains the central issue, in particular access to its valuable slots. It is not known how many slots the two carriers would have to give up to satisfy regulators. BA's share of Heathrow slots would go from 37% to 39% if combined with American's, a relatively small increment but still the single largest holding. A divestiture of 126 weekly slots has been mentioned, but BA has told analysts that this is "far from ideal" and points to the dominance of other European carriers at their hubs.

The US and the UK sides are eager to conclude a deal before they are in effect pre-empted by a European Court decision, for which a preliminary ruling is imminent. This is likely to make such bilateral agreements between member states and the USA illegal. A final decision is expected in May but if the two sides do not complete their deal before the preliminary ruling, "they will be in danger of negotiating an illegal treaty," warns Damian Horth, analyst at ABN Amro. n

Source: Airline Business