Brussels urged to relax stance on BA alliance

A rift was threatening to develop last night between Washington and Brussels over the British Airways-American Airlines alliance after a senior US government official warned the European Commission not to impose too strict conditions on the deal.

The US Under Secretary of State for Commerce, Stuart Eizenstat, delivered the message during a short meeting with Karel Van Miert, the EC Competition Commissioner. Mr Eizenstat said he was concerned about Mr Van Miert's insistence that the alliance should only be allowed to proceed if BA and American gave up 353 take-off and landing slots at Heathrow.

Mr Eizenstat said that if the alliance did not proceed then nor would there be an open skies agreement between Britain and the the US: "We expressed the hope that the merger would be approved and that no conditions would be attached that would stand in the way."

There were fears last night that the issue could blow up into a repeat of the stand-off between Europe and the US over approval for the Boeing- McDonnell Douglas merger. That ended with Boeing agreeing some modest concessions with Mr Van Miert.

However, Commission officials cautioned against reading too much into Mr Eizenstat's comments. The Department of Commerce has no direct involvement in vetting the deal. The two arms of the US government with responsibility for that are the Department of Transportation, which finally began its formal review of the alliance this week, and the Department of Justice, which has to give BA and American anti-trust immunity.

There was further confusion over Mr Eizenstat's remarks since the US General Accounting Office, the investigative arm of Congress, has recommended similar conditions to those put forward by Mr Van Miert. The General Accounting Office said earlier this summer that the two airlines should be required to relinquish 322 slots a week - the equivalent of 23 round trips a day. The Commission's proposals would involve surrendering 25 round trips a day.

Earlier this week Bob Crandall, chairman of American, said the two carriers could only afford to surrender about half the slots the Commission wanted. This is in line with the recommendations of Britain's Office of Fair Trading, which said 168 slots should be relinquished.

In a further twist, however, Delta Air Lines of the US, the airline most vigorously opposed to the alliance, has said that none of the conditions demanded by the regulatory authorities goes far enough. It wants BA and American to be forced to give away 700 to 800 slots.

The alliance needs to receive clearance from London, Washington and Brussels by November otherwise BA and American may not be able to launch joint services in time for next summer's timetable.