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British Airways, USAir Get OK to Extend Pact : Airlines: Secretary of transportation extends the deal a year but says he is unhappy with access given to U.S. carriers.


WASHINGTON — Transportation Secretary Federico Pena on Thursday approved a one-year extension of a controversial aviation pact between British Airways and USAir, despite dissatisfaction with the pace of government talks to give U.S. airlines greater access to British airports.

"I have been very disappointed with the lack of progress in the negotiations," Pena said. "Over the last year, the British government has demonstrated no real interest in pursuing a new and more liberal aviation regime that would give U.S. airlines comparable competitive opportunities to those of U.K. carriers."

A year ago, the U.S. Department of Transportation granted USAir and British Airways authority to share airline reservation codes to a number of U.S. cities to facilitate the coordination of British Airways' international routes with USAir's domestic lines. That agreement was set to expire Thursday.

The code-sharing agreement--which allows travelers to make reservations to destinations of both carriers--was made after British Airways announced it would invest up to $750 million in USAir over five years.

At the time, the Department of Transportation made approval of the deal contingent on the British government allowing greater access by U.S. carriers to British airports.

Critics argue that existing treaties do not give U.S. carriers enough access to British airports, including London's Heathrow, a major European transportation hub.

The department also told the carriers not to complete the final phase of the deal until it could review the nature of the ownership interest that British Airways would acquire in USAir as a result of its investment.

If Pena had decided not to extend the agreement, it could have thrown the two nations' talks on opening aviation markets into turmoil.

Notwithstanding Pena's comments Thursday, British Airways officials cheered his decision.

"We are pleased that the traveling public will continue to be able to benefit from our code-sharing with USAir," company spokesman John Lampl said. "We remain committed to our partnership with USAir and our program of cooperation.

"We also remain committed to the goal of a progressive liberalization of the bilateral relationship between the U.S.A. and the U.K., which is fair to the airlines of both countries," Lampl said.

United Airlines, which supported the agreement and has been seeking a similar arrangement with Lufthansa German Airlines, said in a statement that it is very pleased with the extension.

But American Airlines, which bitterly opposed the renewal, said in a statement that the agreement "gives (British Airways) extraordinary access to passengers who would otherwise be carried by U.S. carriers, without offering U.S. carriers any opportunity . . . (to compete) in B.A. markets beyond Heathrow."

Transportation officials, meanwhile, have said that completion of British Airways' proposed investment in USAir would require Congress to modify restrictions on foreign ownership of U.S. airlines.

Earlier this year, the department said it would support legislation to allow a foreign firm to acquire up to 49% of the voting stock of a U.S. carrier, but it added that any such reform would depend on reciprocal agreements granting access rights for U.S. airlines and investors overseas.

Last week, British Airways indicated that it would not proceed with further investment in USAir, whose operating costs are among the highest in the airline industry. Its investment so far has been $400 million.


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