ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Saturday, January 11, 1997 TAG: 9701130102
SECTION: BUSINESS PAGE: A-5 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
British Airways and American Airlines applied Friday for U.S. permission to create the world's largest airline alliance, arguing the deal is a necessary step in opening trans-Atlantic competition.
A U.S. official said the government wouldn't approve unless Britain agreed to an open-skies pact with the United States to ease restrictions on rival carriers, which could be crippled by such a transportation titan.
``We have made it clear to the British that an open-skies agreement ensuring free competition would be a prerequisite for consideration of antitrust immunity for such an alliance,'' said Bill Schulz, a spokesman for the Transportation Department. ``The U.S. believes it is critical that our airlines have competitive access.''
The airlines agreed with that idea, saying the proposed alliance envisioned just such open competition along with lower ticket prices.
``An American-British Airways alliance will provide consumers with important new price, service and quality options in the global marketplace, and we're eager to move ahead,'' said Robert Crandall, American chairman and chief executive officer.
The United States has open-skies agreements with a dozen countries, including Germany, and ``liberalized'' air transportation pacts with nearly 30 others, Schulz said. The next round of open-skies talks between the United States and Britain is set for Feb.4 in Washington.
British Airways and American Airlines, which announced the proposed alliance in June, applied Friday with the Transportation Department for antitrust immunity to permit them to coordinate their passenger and cargo activities between the United States and Europe.
Normally, that would be illegal under U.S. laws that prohibit price fixing. But the airlines - which together control 60 percent of the British-U.S. market - say they are not merging and will maintain separate corporate identities in a partnership.
The two carriers said the partnership is necessary to let them compete in a business where alliances - such as United Airlines and German Lufthansa, or Northwest Airlines and KLM Royal Dutch Airlines - are increasingly common.
But rival airlines complained that the American-British Airways alliance is a bigger threat to competition than previous deals because the routes involved are major U.S. gateways to England and the rest of Europe.
USAir said that before approving such an alliance, the U.S. and British governments must set the open-skies deal to allow more airlines to operate between U.S. hubs and London's Heathrow Airport. Britain restricts Heathrow, the No. 1 destination of high-paying international business travelers, to just two U.S. carriers, American and United.
``If this giant alliance gets any head start on its competition, it will create a monopoly that will be unshakable,'' said Stephen Wolf, USAir chairman and chief executive officer.
USAir, the only major U.S. carrier not serving Britain, has applied to fly between Heathrow and Philadelphia, Pittsburgh, Charlotte, N.C., and Boston, but has been turned down.
In London, rival carriers also complained to British regulators about the proposed alliance, saying a monopoly and higher fares could result.
Britain's Office of Fair Trading agrees the deal is effectively a merger and has proposed the two carriers give up enough takeoff and landing slots to let U.S. competitors add 12 new daily flights to London's Heathrow Airport.
United Airlines, Continental Airlines and USAir said that's not enough.
The British proposal is ``simply a disgrace,'' designed to keep British Airways profitable at the expense of the traveling public, said Barry Simon, Continental's senior vice president for international operations.
``It must be the result of political pressure,'' Simon said, adding that ``This transaction is like Coca-Cola and Pepsi merging.''
United wants American and British Airways to give up enough slots to add 15 daily flights by competitors from New York and Chicago.
The U.S. airlines also complained that Britain has said American and British Airways could sell the slots - for an estimated $2.5 million each - even though they were handed out free in the beginning.
Last summer, the Justice Department opened an antitrust investigation into the proposed British Airways-American alliance.
LENGTH: Medium: 87 lines ILLUSTRATION: PHOTO: AP. 1. USAir said it will oppose the Americanby CNBAirlines-British Airways alliance unless Britain lets USAir use
London's Heathrow Airport as a destination for passengers from
airports like Dulles International in Chantilly, Va. (above). 2.
David Holmes (left) of British Airways and Wil Ris of American
Airlines tell reporters Friday in Washington of their airlines'
request to form an alliance. color.