THE European Commission has warned Britain against approving the planned alliance between British Airways and American Airlines as it stands, saying it would restrict competition.

The Competition Commissioner, Mr Karel Van Miert, in a letter to the Department of Trade and Industry, said he disagreed with Britain's announced intention to clear the deal.

He warned that the Commission would defend its view in the European Court of Justice if necessary.

Mr Van Mieit's letter was reacting to a draft decision by Britain's Office of Fair Trading in December to allow the deal to go ahead [provided the companies gave up 168 weekly takeoff and landing slots at London's Heathrow airport. BA has said it is willing to do this provided it gets financial compeasation. But in the letter to British Trade Secretary Ian Lang, Van Mieit said clearly that the selling of slots was not allowed under an EU civil aviation regulations.

In past airline alliances vetted by the EU's competition watchdog, such as the takeover of Belgium's Sahena by Swissair, the Commission demanded that slot rights be made available free to rival companies.

The Commission has already detailed its concerns about the deal to the companies. A final EU ruling is not expected until the end of March, the EU sources said.