The controversial alliance between British Airways and American Airlines is back on the agenda as the British and US governments hold talks in London today aimed at liberalising air services.
A joint venture between BA and American would be the most powerful force on the North Atlantic and would dominate services between the US and Europe.
BA is also seen as the front runner amongst the operators which might buy a stake in Aer Lingus, which the Government is now expected to sell in order to facilitate a rescue of the airline.
BA and KLM, the Dutch flag carrier, said yesterday they were discussing ways to co-operate to cut costs and increase revenues, both with each other and with other European airlines.
Carriers are under pressure to find savings following the terrorist attacks on the US last month, which have led to a sharp fall in demand for air travel.
The European Commission, the European Union's executive, last week indicated it would relax competition rules to allow airlines to co-operate on cutting capacity, where this would help maintain minimum levels of frequency and protect otherwise marginal routes.
Co-operation could come in the form of increased codesharing - selling seats on each other's flights under their own flight codes. "We are talking to KLM and we are talking to other carriers to see if there are ways we can work together more closely," said Rod Eddington, BA chief executive.
Several attempts to negotiate a UK-US "open skies" accord have failed, but pressure to conclude a deal is intensifying.
BA and American are being overtaken by deals made by their European and US rivals.
Also, the British government faces the strong prospect of having to cede the mandate for negotiating bilateral air services deals to the European Commission next year.
France and the US agreed last Friday to liberalise air services, opening the way for Air France, the majority state-owned carrier, to intensify its alliance with Delta Air Lines.
BA and American - as well as Delta and Air France - say they remain fully committed to their plans for transatlantic joint ventures, despite the impact of the terrorist attacks.
Mr Eddington appealed to the UK and US governments to conclude an "open skies" deal before the end of the year.
Such a treaty, particularly allowing more carriers to fly between the US and London's Heathrow airport, is a prerequisite for Washington to grant antitrust immunity for the planned BA-American alliance.
Mr Eddington said yesterday: "We want to work much more closely with American Airlines, but we need antitrust immunity. I hope the government can deliver this by the end of the year."
