Boost for USAir

March 17, 1993

The Clinton administration neatly split the issues in the quasi-merger of USAir and British Airways. In approving the initial British investment of $300 million in USAir, Transportation Secretary Federico Pena did what was legally required under the aviation treaty between the two nations. By making the next $450 million British Airways investment conditional on a renegotiated treaty, he placed the issue in the political arena, where it belongs. And he retained a valuable bargaining chip for his dealings with the British.

This agreement between the two airlines is significantly different from the one the Bush administration balked at in December. That one raised serious questions whether British Airways would gain effective control of USAir through the power to veto major business decisions. That issue has now been put off. British Airways would eventually like to own 44 per cent of USAir's stock. Mr. Pena made it clear, though, that the administration will not go along with British control -- prohibited by current law -- without political concessions.

The three strongest U.S. airlines -- American, United and Delta -- have raised all sorts of arguments about the dangers of foreign control of U.S. airlines. This in spite of evidence that international barriers are falling in the airline industry. In fact, the three airlines disliked having a strengthened competitor, and, most important, they wanted greater access to London's Heathrow airport.

Until now the British have strongly resisted giving the other U.S. airlines more landing rights at Heathrow and the ability to pick up passengers there for other European cities. Behind the heretofore solid opposition in London has been British Airways' sometimes ruthless restraint of competition at Heathrow, from local as well as trans-Atlantic competition. The aviation pact with Britain is the most restrictive Washington has. It is increasingly an anachronism, as other governments gradually relax the restraints on competition that long protected their national carriers.

Here in Maryland the Clinton administration's decision is most welcome. USAir is the mainstay of Baltimore-Washington International Airport, whose health is critical to the state's economy. The infusion of British capital will strengthen a faltering carrier that has been forced to cut back service here. It now will be better able to compete with the stronger domestic carriers.

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