USAir Sues BA, AA Over Alliance.

<FONT SIZE="+3"><B> USAir Sues BA, AA Over Alliance</B>

By Jay Campbell

The suit filed by USAir against British Airways and American Airlines last week appears likely to redefine both USAir's relationship with BA and the debate over the BA-AA alliance.

"USAir no longer needs BA's investment, and it's looking to get rid of BA so it is unhampered by an agreement that hasn't been very favorable," said aviation attorney Richard Fahy. "USAir's strong management doesn't want to be in a secondary position, and I think this is a means for USAir to gain its independence."

Part of USAir's claim contends that while BA's pursuit of regulatory liberalization was an understood step to be taken in the expansion of their agreement, it was not until BA had negotiated an agreement with AA that it was willing to press for that liberalization.

"Despite repeated opportunities over a three-year period to take steps to promote an open skies agreement between the U.S. and U.K., which both parties understood to be a prerequisite to [later phases of the agreement], BA did not do so," the lawsuit states.

According to USAir, BA had assured USAir that any arrangement with AA would be to USAir's benefit, and that BA and AA were not seeking joint pricing or coordination of seat capacity-which, in fact, are included in the proposed AA-BA alliance that was announced in June. "While BA was saying 'no' to USAir, it was saying 'yes' to AA," said USAir.

According to Fahy, "USAir's claim has some resonance. It was BA's duty under the agreement to cooperate with USAir, and BA has ignored those obligations."

A USAir source told BTN that he believes this claim will put the debate over the AA-BA agreement past the point of rhetoric. "You could make a case here that this action will crystallize the questions of whether this alliance is pro-competitive and whether it raises serious antitrust concerns" he said.

BA and AA will respond to USAir's suit in the federal district court of New York within the month, unless they seek extensions. Judge Miriam Cedarbaum, who is presiding over a Virgin Atlantic suit alleging monopolistic practices by BA, accepted USAir's claim as related and will take that case as well.

Meanwhile, the third round of open skies talks between the United States and United Kingdom is set for later this month.