USAir Files for Divorce from Partner British Airways

USAir Inc. filed suit Tuesday to break up its 3-year-old alliance with British Airways, claiming it had been betrayed by its partner’s recent plans to join forces with American Airlines.

The proposed linkage of American and British Airways--which would be the biggest in a series of recent global airline alliances--would cripple Arlington, Va.-based USAir by effectively barring it from the lucrative U.S.-London market, USAir contended in the suit filed in federal court in New York.

British Airways, which became USAir’s largest shareholder in 1993 by buying a 24% stake for $400 million, has repeatedly frustrated the U.S. carrier’s efforts to expand service to Britain and other European destinations, the suit alleges. Because of its investment, the British carrier has a strong voice on USAir’s board and a strong say in internal marketing decisions.

On June 11, British Airways and American parent AMR Corp. announced plans to combine operations by sharing passengers; coordinating fares, schedules and ticketing; and pooling profits on some routes. With that, USAir, the nation’s fifth-largest carrier, suddenly found its partner in a rival’s arms.

USAir asked the court to order the resignation of the three British Airways representatives on the USAir board and the “orderly sale” of British Airways’ investment in the U.S. carrier.

The suit also seeks unspecified damages, which could be tripled if the court finds the American-British Airways agreement violates U.S. antitrust laws, as USAir contends. The agreement is under review by the Justice Department.

“In agreeing to form a mega-alliance with American Airlines, British Airways is violating the requirements of its contract with USAir,” said Lawrence Nagin, USAir’s general counsel. “We would be put in a weaker position, we would be competitively handcuffed” if the alliance goes through without changes between British Airways and USAir.

Additionally, USAir wants the rights to fly to London from its hubs at Philadelphia; Pittsburgh; Charlotte, N.C.; and Boston. It was required by the federal government to give up its routes to London from Baltimore, Charlotte and Pittsburgh when its 1993 British Airways deal was approved.

In a statement, British Airways said it has offered to include USAir in its proposed alliance with American. “Discussions between the airlines on this are now underway,” the statement said.

Some Wall Street analysts speculated that USAir’s suit is a bargaining ploy to extract better terms in such a three-way arrangement. USAir would not comment, referring instead to the demands in its lawsuit.

American said it was “astonished and mystified” by the suit. The airline noted that its alliance with British Airways cannot proceed unless the Clinton administration and the British government agree on a new “open skies” pact deregulating air travel between their countries--a step that would create new opportunities for USAir and other carriers, it said.

Negotiations between the two governments on a new air travel agreement resumed Tuesday.

USAir’s stock gained 37.5 cents to $17.75, American depositary receipts of British Airways rose 37.5 cents at $80.875, but AMR’s stock fell 25 cents to $76.875. All trade on the New York Stock Exchange.