Making the Skies Friendlier

November 11, 1992

Preaching international business harmony as the United States and the European Community threaten a trade war may seem ill-timed. But there is a trans-Atlantic issue festering that directly affects the Maryland economy. British Air's proposal to invest $750 million in USAir, the struggling airline that is by far the major carrier serving Baltimore-Washington International Airport, has aroused strong opposition from other U.S. airlines.

It is also entangled in negotiations between the U.S. and Britain over U.S. landing rights in the U.K. During the campaign, President-elect Bill Clinton too hastily criticized the agreement. Fortunately, the decision is in the hands of the Bush administration, which must make it by Christmas.

There are two sets of issues involved, and we believe both support approval of the investment. The infusion of $750 million into USAir would bolster an airline whose financial health is critical to BWI and thus to the state's economy. One person who realizes that is Gov. William Donald Schaefer, whose lobbying of the Bush administration for approval of the deal should fall on friendly ears following his maverick endorsement of the president. The airlines opposing the deal are USAir's more profitable competitors, who seek to retain their dominance of trans-Atlantic service. They profess to see heightened competition for service within the U.S. by British Air. In fact, they will be faced with stronger competition from USAir.

Despite the immediate threat of a war over agricultural trade, over the long haul economic barriers are coming down. The quasi-merger of British Air and USAir is only one of several international airline deals pending. A similar one has just been concluded between bankrupt Continental Airlines and struggling Air Canada, which would strengthen both of them. British Air is a major purchaser of U.S.-built Boeing aircraft, to the dismay of the European Airbus consortium. It is buying the new Boeing 777 with U.S.-made General Electric engines rather than British-built Rolls Royce engines. The three U.S. airlines fighting the British Air investment all fly the Airbus (USAir does not). Economic jingoism doesn't dictate major business decisions as it used to. Economic common sense does, and those arguments support the freer flow of international trade and investment.

There remains some tough bargaining on both sides. USAir's competitors want more landing rights in Britain, and the right to pick up passengers there for other European points, in return for approval of the British Air investment. That involves renegotiation of the U.S.-British landing rights agreement, one of the most restrictive pacts in the industry. It may not be possible to complete the talks in two months. The best hope for greater access for everyone is starting the process right now -- with prompt approval of the British Air-USAir agreement.

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