British Airways Mulls Cooperation

By Jane Wardell
Associated Press
Friday, May 2, 2008

LONDON, May 1 -- British Airways shares jumped more than 7 percent Thursday, as speculation continued about what kind of deal it might arrange with American Airlines and Continental Airlines and the possibility of wider consolidation among Europe's major carriers.

BA announced late Wednesday that it was "exploring opportunities for cooperation" with the two U.S. airlines, leading to suggestions that it would extend its alliance with American to include Continental.

Analysts said an expanded alliance could seek exemption from antitrust provisions that bar airlines from setting prices and schedules together.

U.S. airlines have been scrambling to combine or form alliances since Delta Air Lines announced plans to buy Northwest Airlines last month, and analysts said the consolidation push could spread.

The British carrier's shares closed 7.5 percent higher, at $4.80, on the London Stock Exchange. On news of lower oil prices, shares of AMR, American's parent company, rose $1.13, or 12.9 percent, to $9.90, and Continental shares gained $1.27, or 7.1 percent, to $19.25, on the New York Stock Exchange.

The three carriers have declined to elaborate on the talks.

Virgin Atlantic, which competes with the three on transatlantic flights, attacked a possible deal as anti-consumer. Virgin Atlantic has an agreement with Continental under which the carriers sell seats on each other's flights and offer reciprocal frequent-flier miles.

Continental said over the weekend that it would not pursue a combination with another carrier right away, after weeks of growing speculation that it would join with United Airlines to create the world's biggest airline.

Mike Boyd, an airline consultant based in Colorado, said a BA-American-Continental alliance would bring in incremental revenue but "not change the world for any of the carriers."

"Such an alliance would have no downsides, even if it involves some capacity-sharing" across the Atlantic Ocean, Boyd said. But it would not lead to direct flights from London to secondary U.S. cities.

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