BA will give up hundreds of U.S. flights to forge American Airlines pact

The slots are worth tens of millions of pounds, but BA chief executive Willie Walsh sees it as a price worth paying to secure a three-way tie-up with AA and Spain's Iberia.

The alliance would give the joint venture huge dominance in transatlantic flights.

BA Chief Executive Willie Walsh thinks giving up the slots is a price worth paying for a three-way merger

It would have 46 per cent of all the slots and handle 62 per cent of all transatlantic passengers.

On one route - Heathrow to Houston - the combined group would control 100 per cent of all scheduled flights.

BA will meet US Department of Justice officials early this week and offer to give up the flights.

In return, the airline hopes to win immunity from prosecution under US anti-monopoly laws, allowing it to press ahead with its link-up without-the risk of a lengthy legal battle.

When BA last tried a deal with AA in 2002, it was told it would have to surrender 16 flights a day to win anti-trust immunity.

That figure was deemed too high at the time, but this time round BA hopes to convince US authorities a much lower figure will satisfy their concerns.

BA is planning a full merger with Iberia and wants a deal to share costs and revenues with AA.

Walsh believes such a three-way venture is the only way airlines will be able to survive at a time of soaring fuel costs and falling demand.

He is shuttling between London and Washington to lay the groundwork for a successful application. This will be the third attempt by BA to link up with AA.

BA will run into tough opposition from rival Virgin Atlantic, which has pledged a full-blown campaign of opposition.

Virgin Atlantic chief executive Steve Ridgway said: 'This alliance would give them a stranglehold on Heathrow-US flights. BA and AA will not face enough competition on their huge network to stop them raising prices.'

The open skies agreement signed last year between Britain and the US means the domination of the transatlantic route by BA, American, Virgin and United has gone.

A further six US airlines have since been allowed to land at Heathrow.

Even more significant from BA's point of view is the fact that its rivals - Northwest Airlines, Delta Air Lines, Air France, KLM and Alitalia - have all won anti-trust immunity.

Faced by such a huge challenge Virgin is looking to merge with another airline. Its first choice would be to buy BMI, which has 11 per cent of all the slots at Heathrow.

 • Three former BA executives and Andrew Crawley, its current director of sales, were told last week that they could be jailed for up to five years after being charged with criminal cartel offences in connection with the alleged fixing of the price of fuel surcharges.