Boost for British Airways as tie-up step closer

BA, AA and their oneworld alliance partners Iberia, Finnair and Royal Jordanian Airlines will only have to give up four pairs of prized take-off and landing slots at Heathrow under a draft ruling from the Department of Transportation (DoT).

The airline has been dogged by industrial disputes, winter weather and hugely difficult conditions for the aviation sector as a whole in recent months, but markets welcomed the good news yesterday.

The strengthening of the alliance will see the airlines jointly market routes, co-ordinate schedules as well as cut down on costs and connection times. The tie-up still requires final approval from the DoT as well as clearance from the European Commission.

The airlines will work together on routes between USA, Canada and Mexico and the EU, Switzerland and Norway while continuing to operate as separate entities.

The move enraged BA's bitter transatlantic rival Virgin, which called on European regulators to act to block the deal and called the weekend decision "a real kick in the teeth for consumers".

While the alliance partners must make four pairs of Heathrow slots – each worth around 20m – available to competition, it represents a fraction of the 130 transatlantic slots currently controlled by BA and AA.

This is the third time that BA has applied for anti-trust immunity for an alliance with AA after previous tie-up attempts in 1997 and 2001 foundered.

Panmure Gordon analyst Gert Zonneveld said: "This is clearly very significant for BA. It's a major market for them and the ability (of the alliance) to effectively operate as one player is a major advantage."

The DoT said the proposed alliance would enhance competition by giving a new rival to the existing Star Alliance and the SkyTeam tie-up, which have already been granted immunity.