Britain May Probe Airlines’ Proposed Pact

British antitrust authorities said they may investigate a proposed alliance between British Airways and American Airlines Inc. because they consider it a merger under British law.

News of Britain’s interest came as British and U.S. negotiators said they plan on Monday to reopen informal talks about the alliance as they try again to work out a new “open skies” treaty between the two nations.

A treaty is a precondition for the alliance, which would be the biggest in a series of links among U.S. and European carriers. British Airways and American said last week that they plan to link their transatlantic flights and coordinate their global route networks in an alliance that would begin in April 1997.

British Airways and American dominate the transatlantic market, with 62% of traffic between the U.S. and Britain.

In its unexpected announcement, Britain’s Office of Fair Trading also said it is in talks with British Airways. Analysts said those discussions are undoubtedly linked to the U.S.-Britain talks on Monday and are probably aimed at forcing the carriers to scale back their demands.

“Maybe they’re asking BA and American to make certain basic concessions before going any further,” said Nick Cunningham, an aviation analyst with Barclays de Zoete Wedd in London.

The concessions would probably include giving up some takeoff and landing slots to rivals or ceding routes where they would dominate, he said. American might have to divest the London-Chicago route, for example, because the two carriers would control more than 90% of its traffic.

The alliance agreement is already being vetted by the European Commission, the EU’s executive agency, and the U.S. Justice Department.

The prospect of an antitrust inquiry in Britain came as a surprise to aviation analysts, who had thought that Britain had no authority for an investigation. The British authorities’ rationale is a direct rebuke of the carriers’ claims that the pact is simply another of the “code-sharing” agreements that have become commonplace in the aviation industry.

“We think it’s a quasi-merger,” said Graeme Myles, a spokesman for Britain’s Office of Fair Trading.