Aer Lingus's plans for its future development will suffer a serious blow if - as expected by tomorrow - the US department of transportation dismisses the application by British Airways and American Airlines to set up a global aviation alliance.

The move will bring to an end the three-year struggle by the two airlines to merge their organisations and will be bad news for Aer Lingus, which is negotiating to join the alliance.

The BA/AA partnership was to have formed the basis of the world's most powerful airline grouping. The Government cleared the way for Aer Lingus to participate in it just last week as part of a strategy which envisages the airline's flotation towards the end of next year.

The US decision to reject BA and AA's alliance application follows the failure of the US and UK governments to agree an aviation accord. The US had made the conclusion of such an accord a precondition for approving the alliance.

The expected announcement will throw into doubt the future of Oneworld, the international airline grouping set up by BA and American Airlines last year.

Oneworld, which also includes Qantas of Australia, Canadian Airlines, Cathay Pacific, Iberia of Spain and Finnair, was set up to challenge the increasing power of groups such as the Star Alliance, led by Lufthansa of Germany and United Airlines of the US.

BA said yesterday it still wanted to pursue the alliance with American Airlines and was still in talks with Britain's Office of Fair Trading about regulatory conditions.

Swissair recently announced an alliance with American, raising the possibility that the US carrier might be searching for an alternative European partner to BA. Swissair has a stake in Sabena of Belgium, and could provide American with greater access to Brussels airport.

BA and American first announced their alliance in 1996. They planned to co-ordinate pricing and schedules and to share revenues on transatlantic flights. But they have been unable to win approval from regulatory authorities in the US, Brussels or the UK. The regulators demanded that BA and American relinquish hundreds of take-off or landing slots at London's Heathrow airport. But the two carriers decided the price demanded was too high.

Last year Mr Robert Ayling, chief executive of BA, decided to scale back the alliance. The airlines said they would proceed with their alliance more gradually in return for a slower opening of Heathrow to competition.

However, the breakdown earlier this year of negotiations on a new US-UK air accord prevented this from happening.

The most recent breakdown in UK-US talks resulted in BA being unable to reach agreement with the UK Office of Fair Trading over how quickly Heathrow should be opened to competition.

To revive the aviation negotiations, Mr David Marchick, the chief US air negotiator, recently suggested that the two governments leave the BA-AA alliance to one side and attempt to reach a new accord. But industry observers believe the UK government would be unlikely to attempt to reach a new agreement without the support of the largest British airline.