British Airways Says It Hopes to Seal an Alliance with American Airlines

British Airways, which is already in talks with Spain's Iberia SA over a combination, said it hopes to seal an alliance with U.S. partner American Airlines within weeks. A BA spokesman said the carrier expected final preparations for a deal to be completed soon, and an application to U.S. regulators for antitrust immunity to be filed shortly afterward. BA and AMR's American, the world's largest carrier, 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 U.S. However, they are expected to argue the competitive situation's 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. He said talks with American are running concurrently with BA talks with Iberia over an all-share combination, a potential deal that can also form the basis of a 3-way trans-Atlantic combination. BA and Iberia, which are long-term partners in the oneworld alliance, have said agreeing on terms of a deal can take several months but have added they're confident of gaining European regulatory approval. Strict airline ownership laws in the U.S. 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. BA’s CEO recently said this is the worst trading environment the industry's ever faced. The impact on BA was revealed by an 88% plunge in 1st-Q pretax profit, prompting the carrier to cut its winter flight schedule and trim its full-year forecast for revenue growth to 3%, instead of 4%. Some 25 airlines around the world ceased flying this year, while the International Air Transport Assn. has forecast $2.3B in industry losses this year. U.S. airlines have been scrambling to combine or form new alliances since Delta Air Lines announced plans to purchase Northwest Airlines earlier this month, and analysts believe that consolidation can spread to Europe.