Britain opposes EU over airline deal

A ROW between the European Commission and the British government was looming yesterday after the Department of Trade and Industry said in London it was for the UK alone to decide whether the proposed alliance between British Airways and American Airlines could proceed.

On Monday, in a letter sent to Mr Ian Lang, the British trade and industry secretary, the European Union competition commissioner, Mr Karel Van Miert, threatened to take Britain to the European Court if it approved the alliance. He argued that conclusion of an agreement would constitute abuse of a dominant position and the alliance would restrict competition on all routes between the UK and the US.

However, DTI officials said that, while the Commission had the right under article 89 of the Treaty of Rome to look at the deal, a decision to exempt it from European competition rules could only be taken by Mr Lang.

"They can only propose remedies. They can't override Mr Lang's decision or revoke it," the DTI said.

However, in Brussels yesterday Mr Van Miert said article 89 gave the Commission the possibility to act where it had concerns about a decision taken by a national authority.

"We don't contest that they (member states) can have their own procedures but it means any solution has to be in line with European competition rules," he said.

The commissioner added that the Commission would like a legal instrument with which to tackle such transatlantic alliances, but had not yet been granted one by the Council of Ministers. This had prompted it to fall back on article 89.

Under normal circumstances the power to vet anti-competitive agreements and grant exemptions from the competition rules is reserved to the Commission under regulation 17.

However, shortly after regulation 17 was adopted in 1962 a decision was taken to exempt the transport sector, reviving the powers of the member states under article 88 of the treaty to vet agreements in that area.

In the intervening years regulation 17 powers have been slow re-applied to the transport sector, including in 1987 to internal EU air transport. But it still does not apply to international air transport between the EU and third countries, such as the US. As a result it fell to the British authorities to vet the proposed BA/AA alliance.

Lawyers in Brussels suggested yesterday that Mr Van Miert's posit ion probably had more to do with not wanting the deal to set a precedent for the sale or leasing of take-off and landing slots at European airports.

The British Office of Fair Trading has approved the deal on condition that the companies sell or lease 168 weekly slots at London's Heathrow airport.

Mr Neil Kinnock, the EU transport commissioner, is keen to propose rules to govern the trade in slots but this has been strongly opposed by Mr Van Miert, who believes the sale of slots is anti-competitive and plays into the hands of the big air carriers.

The competition commissioner believes carriers should be forced to give up unused capacity to encourage new entrants into the market.