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British Airways Urges American Airlines Tie-Up

Reuters
Thursday, 18 Oct 2007 | 7:05 AM ET

British Airways has urged its US partner American Airlines to get closer still as it seeks to fend off a transatlantic joint venture between Delta and Air France.

"American Airlines is a key partner for us and in the long term we would like a closer relationship with them," said a BA spokesman. "But we're not going to go into what those two words might mean."

BA's invitation came after Air France and Delta announced an $8 billion-a-year tie-up -- the biggest shake-up in years of the transatlantic market, which has long been dominated by BA and Richard Branson's Virgin Atlantic.

BA and American are already partners in the oneworld alliance, but two previous attempts to further combine their operations have been struck down by competition regulators.

The Air France and Delta venture is the biggest deal yet to follow a transatlantic Open Skies pact reached by the United States and the European Union and set to take effect next March.

"This joint venture would set regulatory precedent and open the door to further similar combinations elsewhere," said analyst Andrew Fitchie at Collins Stewart.

"BA has made no secret of the fact that it would still like to combine with American on the transatlantic," he added. "If precedents are set, this deal could come back on the radar, post Open Skies."

The Times newspaper said on Thursday that BA was in talks with Michael Bishop, the controlling shareholder of bmi, about also buying the British carrier, which would bring with it more valuable slots at Heathrow.

But both bmi and BA denied that, and industry sources said Bishop had held no talks with BA.

"Either way, consolidation should improve industry returns and BA with its 42 percent share of the world's No.1 premium hub is in pole position to participate," said Fitchie.

Shares in BA rose 1.3 percent to 429.25 pence.

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