USAir To Sever Ties With BA

<FONT SIZE="+3"><B>USAir To Sever Ties With BA</B>

By Jay Campbell

<I>New York </I>- USAir last month continued to distance itself from British Airways, closing the curtain even further on corporate deals that were either negotiated with both carriers or simply benefited from the synergies they offered.

USAir will end its code-sharing and frequent flyer relationship with BA as of March 29, "in light of the British carrier's proposed alliance with American Airlines." The airline said passengers booked on code-share flights, as well as their accrual of frequent flyer points, are not affected through that date.

BA stated that "a continued alliance between British Airways and USAir is in the best interests of both airlines, their customers, employees and shareholders." But, according to one airline executive close to BA, it was BA that "put a big hold on corporate sales even before USAir's announcement. They may have to wait 30 days to end corporate accounts, but it certainly looks like the BA-USAir thing is dead."

On the morning after the announcement, USAir lawyers traded accusations with BA and American Airlines attorneys in a federal court hearing that resulted in the judge tossing one claim against AA, but reserving judgment on others against both AA and BA. USAir hopes to force BA to give up its 25 percent holding in USAir <I>(BTN</I>, Aug. 5). The judge is not expected to issue a final decision for some weeks.

American said the USAir announcement confirms that "USAir is not so much an 'aggrieved party' as it is a company that wishes to renege on a $400 million deal it now regrets," referring to BA's investment in USAir. USAir does not deny that it wants BA out, calling BA "a gorilla on our back."

Sources said USAir will need another alliance partner to remain competitive. Asked what other partners are available, a USAir spokesman said only that "we've made it clear that we plan to expand our international breadth."

The airline clearly knows the importance of international alliances in today's market. USAir lawyer Shep Goldfein argued in court that "by representing falsely to USAir that USAir would have the opportunity to approve any additional agreements, BA foreclosed USAir from other alliance opportunities it may have had," citing Virgin Atlantic as a would-have-been potential partner. "We will not get additional route authority to London if the DOT believes we're part of the BA family," he added.