AMR-British Airways Alliance in Jeopardy

The Justice Department urged transportation officials Thursday to reject a proposed alliance between AMR Corp.’s American Airlines and British Airways unless the United States and Britain eliminate government-imposed restrictions on flights and prices between the two countries.

It also said that other airlines should be given enough takeoff and landing slots to operate 24 additional daily round trips between London’s Heathrow Airport and cities in the U.S.

“The combination of American and British Airways would result in air travelers paying significantly higher fares for travel between the United States and Great Britain,” said Assistant Atty. Gen. Joel I. Klein, who heads the department’s antitrust division.

“Placing additional slots in the hands of other airlines would not only help restore competition in many of the markets where American Airlines and British Airways currently compete head to head, but would also allow for new and expanded service from U.S. cities where nonstop service to London is not currently available,” Klein said.

The comments were filed with the Transportation Department, which is to decide whether to approve an arrangement allowing American and British Airways to coordinate their passenger and cargo activities between the United States and Europe. The proposed alliance would give the airlines control over 65% of the daily round-trip flights between the U.S. and Heathrow.

American Airlines said in a statement that it also supports the elimination of restrictions on flights between the two countries--a policy known as “open skies”--as a condition for government approval of the alliance.

AMR shares fell 63 cents to close at $146.69; British Airways rose $1.31 to close at $106.25. Both trade on the New York Stock Exchange.

American and British Airways have argued that they need to pool resources to compete.