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EU to rule on BA-AMR pact
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July 6, 1998: 11:48 a.m. ET
European regulators expected to ask American, BA to cut 270 airport slots
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NEW YORK (CNNfn) - At a meeting set for Wednesday, European regulators are expected to call on AMR Corp.'s American Airlines and British Airways to surrender as many as 270 of their 630 weekly take-off and landing slots to get the backing the carriers need to activate an alliance announced in 1996.
The move is seen as the first regulatory hurdle the carriers must surmount en route to formalizing their alliance. Ultimately, the agreement will require approval by governmental authorities in both Britain and the United States.
Rival airlines have complained -- often vociferously -- that the proposed alliance would put them at a competitive disadvantage in the coveted transatlantic market. The alliance would command 60 percent of air traffic between the U.S. and the United Kingdom. It envisages revenue and flight-code sharing between the carriers.
However, the United States is making its approval of the alliance conditional on the conclusion of an "open skies" agreement with Britain.
Under an agreement between the United States and Britain, American Airlines and United Airlines are the only U.S. carriers permitted to fly into London's Heathrow, one of the world's busiest and most sought-after hub airports.
At its weekly meeting Wednesday, the European Commission is expected to adopt preliminary rulings on the alliance that would require BA and American to reduce the number of flights on some transatlantic routes by as much as 55 percent, according to published reports.
The restrictions also would call for the would-be allies to shed anywhere from 260 to 270 of their 630 weekly landing and take-off slots, primarily at Heathrow airport. Apart from hub-to-hub routings, the slots will include carrier links between London and such major American metropolitan markets as Boston, New York, Los Angeles, Seattle and Philadelphia.
Over the weekend, the London Sunday Times reported British Airways is unhappy with the reported EU recommendations and is interested in trying to broker a better deal with government help.
The newspaper quoted an unnamed BA executive commenting on the terms apparently being offered by the EU's Competition Commissioner, Karel Van Miert.
"If that's the deal Van Miert is offering, then our board will reject it," the executive told the newspaper. "What Europe says is influential but it does not mean that the fat lady has sung. It is not the final decision.. The Department of Trade and Industry still has a role to play, as do the American authorities."
British Airways officials could not immediately be reached for comment Monday morning.
The paper also said BA would ask British government regulators for help in cutting the number of mandated slot reductions to about 220, and in allowing the carriers to phase in the cuts.
Despite the tit-for-tat, investors appeared to remain confident Monday that the deal would go through.
American depositary receipts of British Airways PLC (BAB) were up 2-1/8 at 113 in early trading Monday on the New York Stock Exchange; AMR Corp. (AMR) shares climbed 1-1/8 to 85-1/2.
AMR spokesman Chris Chiames echoed that optimism, saying that the waiting process, while frustrating at times, seemed to be nearing a conclusion. Chiames also sought to play down the threat from rival carriers.
"They are trying to block this (alliance) for their own competitive interests, and have done a fairly good job in distracting people," Chiames said. 
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