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EU Sets Airline Alliance Conditions

July 8, 1998

BRUSSELS, Belgium (AP) _ European Union regulators set conditions Wednesday for a controversial alliance between American Airlines and British Airways, including a demand that they to fly fewer trans-Atlantic flights to maintain competition.

But the EU angered a rival group by saying it should also fly under restraints.

Competition officials told American and BA they must make room for competitors at London’s crowded Heathrow and Gatwick airports if they want their often-delayed partnership to take off.

The European Commission also slapped conditions on United Airlines’ coalition with Lufthansa German Airlines and Scandinavian Airlines System, prompting a furious reaction.

American and BA said the EU decision was a step toward finally getting the alliance up and running, but the conditions were too harsh.

``We object to some elements of the tentative decision, which we believe would penalize the alliance unfairly,″ American Airlines chairman and chief executive Don Carty said in a statement.

EU competition commissioner Karel Van Miert said BA and American would have to cut the frequency of their flights between London and the U.S. hub cities of Dallas, Miami and Chicago, in exchange for EU reglatory approval.

They also have to surrender up to 267 weekly takeoff and landing slots at London’s Heathrow and Gatwick airports for other trans-Atlantic routes, if requested by competitors. That would offer rivals the chance to operate 19 new daily flights from London to the United States.

The European Commission said such demands were needed to stop ``an abuse of the parties’ dominant position.″ The airlines pledged to lobby for easier terms before the pact comes up for final approval from EU, British and American regulators.

``Every lost slot means lost flights, lost business, lost service for customers. Every lost slot means 30 jobs we cannot create,″ said British Airways CEO Bob Ayling.

Competitors moaned the conditions were too soft and repeated demands for the alliance to be curtailed.

``The Commission’s preliminary position will allow BA-AA to dwarf their competition at Heathrow,″ said Scott Yohe, senior vice president for government affairs at Delta Air Lines.

Meanwhile, United and Lufthansa were furious with the EU’s demand that their alliance reduce frequencies on flights from Frankfurt to Washington and Chicago and give up slots on other routes at Frankfurt and Copenhagen airports.

``This European Commission action would turn back the clock to an era in which government regulators, not the market, determined the nature of international air services,″ said United chairman and CEO Gerald Greenwald.

United said it was filing a complaint with the U.S. Department of Transportation against the Commission.

The Commission is expected to make a final ruling on both alliances in the fall. Until then, the companies concerned and their competitors are expected to battle to secure changes in the conditions.

U.S. airlines wanting to get into London’s Heathrow Airport will demand far more slots than American and British Airways are thus far being asked to give up.

Delta and Continental said they each needed enough slots to offer 10 daily flights into Heathrow _ more than the total that the Commission has asked for even before demands from other carriers are taken into account.

British and U.S. regulators must also rule on the BA-American alliance. Britain’s trade secretary Margaret Beckett said she intends to approve the deal if measures are taken to safeguard fair competition on trans-Atlantic routes into London. She said Britain’s stance would be compatible with the EU decision.

The U.S. authorities have made their approval of the deal contingent on Britain agreeing to an ``open skies″ deal with the United States that would free up routes between the two nations to greater competition among airlines.

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