LACK OF LEVERAGE ON the part of US negotiators has led to the current impasse in bilateral aviation talks with the UK, according to the US General Accounting Office (GAO). As the GAO issued its report, British Airways chairman Sir Colin Marshall, visiting Washington, was warning the US Government to cut the political rhetoric and offer the UK more concessions if it wanted an agreement.

The investigative arm of the US Congress concluded that the Clinton Administration's lack of success in liberalising the current accord with the UK has come about because the USA lacks adequate bargaining chips.

It says that BA has already obtained extensive access to the US market through its code-sharing alliance with USAir. The agency says that BA's share of the UK-US market rose to 58% in 1995. It adds that Virgin Atlantic, has a larger share, than any of the six US carriers in the market, except American Airlines.

The GAO says that US negotiators are hamstrung because they must negotiate with the UK knowing that any action it takes - such as renouncing the current pact - will set a precedent which could affect the US-Japan air-services negotiations now under way.

The GAO suggests, however, that the USA could use anti-trust immunity to win concessions from the UK. "We conclude, that anti-trust immunity could be a powerful tool, in the Department of Transport's efforts to obtain 'open skies' agreements, and the cumulative success of several alliances with immunity, could place significant pressure on the UK, as traffic that once traveled to Europe via London, shifts to other gateways served by the immunised alliances," says the GAO. It notes, however, that such immunity might backfire, leading to reduced competition and higher air fares.

"BA operates in all sorts of differently regulated markets...What we do not like are markets which are highly politicised; and markets in which the playing field is not level," Marshall says.

He says that negotiations, which broke off last October, are at an impasse because US airlines want greater access to London Heathrow, but the USA refuses to make concessions such as allowing increased foreign ownership of US carriers.

"For taking the line that liberalisation should not only encompass the US version of open skies...we are denounced as protectionists. US negotiators are told that we have to be brought to heel; to be threatened. I presume this makes for good domestic politics, but it seems a peculiar way of seeking productive results," says Marshall.

Building blocks identified by Marshall as capable of laying the foundation for a new pact include anti-trust immunity and "...tolerance of joint ventures - on a gateway-by-gateway basis, if need be". He also suggests that phased implementation might help.

Source: Flight International