Europe set to make rules for linking American Airlines, British Airways Carriers trying to unite flights, fares

July 08, 1998|By BLOOMBERG NEWS

BRUSSELS, Belgium -- British Airways Plc and American Airlines will be told today what concessions European regulators require before allowing the airlines to implement a proposed partnership that would unite their flights and fares across the Atlantic.

AMR Corp.'s American, the largest U.S. airline by revenues, and BA, Europe's biggest airline, have been struggling for two years to win clearance for a merger of marketing, frequent-flier plans and a host of other activities that would make the two carriers appear as one to passengers.

The ruling by the European Union's executive agency is only one hurdle, with additional steps to come before final clearance can be won.

According to people familiar with the decision, the commission is expected to ask the airlines to give up 270 landing and takeoff slots at London's Heathrow International and Gatwick airports, and to cut their share of flights from London to three U.S. hubs to 45 percent for six months after the alliance begins operating.

Those rules would be unacceptable to the carriers, sources close to the companies said.

Many analysts are bullish about the benefits to be derived from the alliance.

"We expect the alliance to boost earnings by at least 15 percent from 2000 onwards," said Andrew Light, Salomon Smith Barney's London-based airline analyst, in a note to investors. Light raised BA's rating to "outperform" from "neutral" based on hopes for the proposed alliance.

The commission will also rule on the alliance between Deutsche Lufthansa AG and U.S.-based UAL Corp.'s United Airlines, which has been in effect since 1996.

EU Competition Commissioner Karel Van Miert has said the airlines will be asked to give up about 115 slots in Frankfurt, Germany, and Copenhagen, Denmark.

Pub Date: 7/08/98

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