British Airways is considering a three-way transatlantic alliance with existing partner American Airlines and its US rival Continental Airlines as carriers struggle to cope with record fuel prices and a deteriorating world economy.
The airline confirmed it is “exploring opportunities for cooperation” with the pair. BA and American are partners in the Oneworld alliance, but their cooperation so far has been limited to code-sharing flights after they were denied the anti-trust immunity that allows carriers to coordinate their networks.
Any deal would stop short of a merger because of US limits on the foreign ownership and control of US airlines.
BA chief executive Willie Walsh called for these limits to be swept aside in the next stage of open-skies deregulation between Europe and the US, on which talks are due to begin this month. However, there is substantial opposition to a relaxation in the US and any deal would not come into force until 2010.
Continental had been in merger talks with United Airlines, a member of the rival Star Alliance, but withdrew after United revealed quarterly losses of more than $500 million. Continental would have to quit its membership of the third airline alliance SkyTeam, which includes Air France-KLM, Delta Air Lines and Northwest Airlines, to join BA and American.
Delta and Northwest announced they would merge last month, pending regulatory approval. Unlike BA and its ally, the SkyTeam carriers have been granted anti-trust immunity.
US carriers are under severe pressure, not just from the record oil price, but from a downturn in demand that is leading some airlines to cut their domestic networks by up to 10%.
BA has also issued a profit warning this financial year and is expected to issue another.
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