Despite its bilateral successes elsewhere, when the US sits down to renegotiate its air services agreement with the UK, it will be the first example of the US Department of Transportation stepping away from its vow two years ago not to negotiate incremental deals.

By mid-March, no firm date had been set to discuss a proposal from the UK, which would open up London/ Heathrow to a daily United service from Chicago. In exchange, UK officials wanted a bundle of new awards that would include formal recognition of the Virgin-Delta Air Lines codesharing alliance (already tentatively approved), extension of the British Airways-USAir codesharing alliance, and double-daily service for BA to Philadelphia.

USAir gave its tacit approval to the proposal, while United's support was assured. The carrier has been shut out of the lucrative Chicago-Heathrow market, which American and BA jealously guard.

But when US officials presented their negotiating plan to airlines at the start of March, the DOT was hit with a wave of negative reactions, including criticism from several members of Congress who decried a proposal that would primarily benefit one carrier. And even a US demand for unlimited codesharing beyond Heathrow - something American has wanted for years - did not satisfy the Dallas-based carrier. 'Over the last two years, there are fewer and fewer people to codeshare with at Heathrow,' explains Ed Faberman, American's government affairs vice president.

Unsatisfied with the deal, American CEO Robert Crandall made a lobbying trip to Washington that one observer says 'was highly effective.' That same day, it became apparent that the US proposal to the UK was dead.

After the mid-March massacre of the US negotiating stance, DOT officials were busy crafting a new approach. Sources say it will be the same as before but with a request for an additional Heathrow service that would be allocated after a formal carrier selection procedure at the DOT. However, it is doubtful that would placate American, which according to Faberman wants assurances that it can move its daily Gatwick services from Dallas, Raleigh-Durham and Nashville to Heathrow.

The UK is unlikely to accept, or if it does may request access to the US 'Fly America' programme. This determines which airlines are permitted to fly US government employees - a right already awarded to KLM because its codesharing alliance with Northwest Airlines meets the criteria.

The problem for the US is not new: it has little negotiating leverage against the UK. The UK, which is assured that the US will not hold back the BA-USAir authority while USAir is in a weak financial condition, wants little more than it has. Under these circumstances, the US felt it was in its own best interest to take up the UK's invitation for United to begin serving Chicago-Heathrow. In doing this, transportation secretary Federico Peña's two-year campaign to liberalise the US-UK market went out of the window.

The situation highlights a distinct weakness in the US's international aviation strategy, and stands in sharp contrast to the aeropolitical success it is having with Canada as well as its nine-country open skies initiative in Europe. Even smaller deals such as the offer to let United into Heathrow from Chicago are fraught with difficulty for the US. With these advantages, says a source, 'the UK will never go for liberalisation. Why should they?'

Source: Airline Business