Airlines on a Collision Course

March 14, 1994

The United States and Britain, together with some of their major airlines, may be headed for a midair collision this week. Negotiations over a new agreement on trans-Atlantic service have broken down after a year of virtually no progress. The temporary authority given to USAir and British Airways to merge their trans-Atlantic operations expires Thursday. Transportation Secretary Federico F. Pena is under pressure not to extend it, or even to renounce the U.S.-British airlines treaty. Either move could have serious consequences.

Although they have no role in the dispute, Marylanders have a great stake in its outcome. USAir is the dominant carrier at Baltimore-Washington International Airport, one of the state's most important economic engines. Still struggling to regain profitability after years of staggering losses, USAir is hard-pressed by new competition from fare-cutting, no-frills operators like Southwest Airlines. USAir has tried to copy some of the competition's cost-saving techniques, but it is turning around very slowly. If it does not become more efficient, it could be in deep trouble a year from now.

British Airways, which appeared last year to be USAir's savior with a $400 million investment and promise of more to come, is now making disenchanted noises. Its threat to withhold a further cash infusion may be no more than a form of pressure on USAir's management to speed up restructuring, or on USAir's unions for concessions, or on Mr. Pena not to tamper with the quasi-merger. U.S. officials are similarly practicing some brinkmanship by openly considering the cancellation either of the agreement between the two airlines or the two governments' 17-year-old treaty.

The pressure for revocation comes from the three major U.S. airlines, American, United and Delta, which seek greater access to London's Heathrow airport. If British Airways is to have wholesale access to dozens of U.S. cities through its joint operations with USAir, they argue, U.S. carriers should have greater landing rights at Heathrow. It is the most desirable international hub, which also makes it highly congested. British Airways jealously protects its dominant position at Heathrow against competitors, foreign and domestic.

Increasing competition in the skies benefits the passenger. That requires a financially secure USAir at home, lest the Big Three carriers control the full-service market. It also means greater access for U.S. airlines to foreign destinations while welcoming greater foreign investments in the domestic carriers. Posturing and bluffing, if that is what is going on in both capitals, delays attainment of those goals. A major confrontation could destroy these objectives for years to come.

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