US regulators put transatlantic airline alliance on hold

Regulators in the US have put on hold scrutiny of the proposed British Airways-American Airlines alliance, raising doubts whether the plan to create the world's most powerful airline partnership can survive in its original form.

The decision follows the breakdown earlier this month of US-British negotiations over an "open skies" agreement, which Washington has made a precondition for approving the BA American link-up. The move could have implications for Aer Lingus, as the alliance centred on BA and American was tipped as one with which it could form links as part of its strategic alliance plan. The US government is understood to have concluded BA has scaled back its plans and is no longer interested in a full alliance with American. Such an alliance would require antitrust immunity from the US authorities, allowing the airlines to co-ordinate fares and flight schedules. Washington now expects BA and American to attempt a less ambitious alliance, involving code-sharing. This allows airlines to sell seats on each other's flights but does not involve setting joint fares. However, Washington is thought to be unwilling to approve a code-sharing arrangement without an open skies agreement.