British Airways near to deal with American

/ Source: The Associated Press

British Airways PLC, which is already in talks with Spain’s Iberia SA over a combination, said Monday it hopes to seal an alliance with its U.S. partner American Airlines within weeks.

BA spokesman Euan Fordyce said that the carrier expected final preparations for a deal to be completed within two weeks, and an application to U.S. regulators for antitrust immunity to be filed shortly afterward.

BA and AMR Corp.’s American, the world’s largest carrier, have failed in the past to win an exemption from U.S. competition laws to work more closely together because of their dominance at London’s Heathrow, where the pair have more than half the capacity to and from the United States.

However, they are expected to argue that the competitive situation has changed since the “open skies” agreement between the U.S. and the European Union came into force in March, allowing airlines to fly to and from any point in the U.S. and any point in the EU.

Fordyce said talks with American are running concurrently with BA’s discussions with Iberia over an all-share combination, a potential deal that could also form the basis of a three-way trans-Atlantic combination.

BA and Iberia, which are long-term partners in the oneworld alliance, have said agreeing on terms of a deal could take several months but have added they are confident of gaining European regulatory approval.

Strict airline ownership laws in the United States all but rule out a full merger between BA and American Airlines. However, an exemption from the anti-competition laws could allow the pair to run their trans-Atlantic operations as a single company, with cooperation on pricing and schedules — adding to the flight capacity and airline facilities they already share.

The round of talks is being held against the backdrop of soaring oil prices and falling passenger demand because of the global economic slowdown, conditions that BA Chief Executive Officer Willie Walsh last week said presented “the worst trading environment the industry has ever faced.”

The impact on BA was revealed by an 88 percent plunge in first-quarter pretax profit, prompting the carrier to cut its winter flight schedule and trim its full-year forecast for revenue growth to 3 percent, instead of 4 percent.

Some 25 airlines around the world have ceased flying this year, while the International Air Transport Association has forecast $2.3 billion in industry losses this year.

U.S. airlines have been scrambling to combine or form new alliances since Delta Air Lines Inc. announced plans to purchase Northwest Airlines Corp. earlier this month, and analysts believe that consolidation could spread to Europe.

Walsh has previously balked at proposals from regulators that they would provide antitrust immunity in return for the carrier surrendering some of the valuable takeoff and landing slots at Heathrow, Europe’s busiest airport.

Takeoff and landing slots at the airport are sold for as much as 30 million pounds ($60 million) a pair.