Report: Air Alliance Hits Bump

British Airways is scaling back plans for an alliance with American Airlines because the tradeoff demanded by regulators is too much, according to a published report.

A spokeswoman for British Airways said the story by The Financial Times, attributed to unnamed observers close to British Airways, is false and denied any such plans.

The newspaper reported Friday that British Airways is now seeking to integrate with American in phases because it is perturbed by regulators' demands that it give up hundreds of its takeoff and landing slots at London's Heathrow Airport in exchange for approval of the alliance.

The alliance, which would be the largest in the world, would allow the two airlines to coordinate fares and flight schedules. Favored by the British government, it is being reviewed for approval by the U.S. government.

Washington has insisted the deal be linked to a so-called "open skies" agreement, a new aviation treaty between the two countries that would give American air carriers more access to Heathrow by allowing any airline in either country to fly across the Atlantic and land at any airport it chooses in the United States or Britain.

Under the current aviation treaty, known as Bermuda II, only two U.S. carriers, American and United Airlines, are allowed to fly into Heathrow, which offers the most connections to international points.

U.S. officials have said there would be no approval of the proposed alliance until Britain signs off on the open skies proposal.

Britain has said an open skies deal depends on the U.S. government approving the alliance.

U.S. negotiators want an agreement that once Heathrow is opened to all carriers under the open skies agreement, other U.S. airlines will be guaranteed runway slots free of charge and rights allowing U.S. carriers to fly between Britain and other countries.

The Financial Times said British Airways is pressing its government to reach an aviation agreement with Washington that will open access to Heathrow gradually, instead of immediately as proposed.

The United States has similar phased-access agreements with Japan and France.

Under British Airways' plan for a scaled-back alliance, the Times said, British Airways and American Airlines would start with a code-sharing agreement that would allow them to sell seats on each other's flights but not set fares jointly.

The newspaper said the two airlines would then hope to receive antitrust immunity when the transition to open skies was completed, and meanwhile the airline could hand over slots to other U.S. airlines gradually.

Insisting that her company has no plans to scale back the alliance with American, Yolanda Foster, a spokeswoman for British Airways, said the company has no quarrel with the prospect of an open skies agreement, which it has always known was linked to the alliance.

The company continues, however, to b in discussion with regulators over the details of the deal, such as how many slots it would have to give up, she said.