The British government is taking a new hard line in its negotiations with the United States on the regulation of civil air traffic between the two countries.
With diplomatic negotiations on the so-called "Bermuda Two" agreement under way, the British are signaling that they are not prepared to accept American proposals for a freer market in Anglo-American air travel unless the U.S. government acts to rectify what they see as an unfair competitive advantage for the American airlines.
Today the British also announced they will prohibit discount fares between the United States and the United Kingdom, The Associated Press reported. The announcement by the Civil Aviation Authority of the United Kingdom coincided with a crucial booking period for North Atlantic carriers, who have been relying on the discounts to stimulate business. Britain is the most popular European destination for U.S. travelers.
"We're sort of back to a Square-One situation now," said John Lampl, a New York-based spokesman for state-run British Airways, which had been participating in a growing fare war that offers travelers up to $200 off customary fares.
The British government gave no public explanation for the ruling, which was effective immediately and which covers American carriers as well as British. But it said that tickets already issued under the discounts will be honored. The deadline for purchasing such tickets had been April 15.
In a speech delivered last week to the American Chamber of Commerce in London, British Aviation Minister Michael Spicer said, "We simply cannot and will not expose our airlines to risks where . . . the cards are stacked against them. True competition can only exist where there is proper and adequate access to the market."
According to British government officials, the large American airlines have an unfair competitive advantage because of the "hub-and-spoke" system that has come to dominate the American domestic air market. American travelers who use an American carrier to reach a "hub" city are more likely to fly on to Europe with the same American carrier. In Britain, there is no large domestic air market to feed British passengers into the international routes of the British carriers.
The British believe this advantage is magnified by the computer booking systems used by American travel agents, which give priority to American airlines. They cite the London-Dallas route, where American Airlines has a much larger market share than British Caledonian, as a case in point.
"That is so outrageous," said Matthew Scocozza, assistant transportation secretary for policy and international affairs, in Washington. "What do they want, Montana to develop a hub?
The United States will not alter its domestic transportation policies to please the British, Scocozza said. Besides, British Airlines is one of the most powerful airlines in the world and should not need protection from the government, Scocozza said.
The United States and Britain should "stop protecting their companies," Scocozza said. "Both of our countries should practice what we preach" regarding free trade.
The capacity control section of the Bermuda Two agreement provides each of the two nations with a portion of the market on each U.S.-U.K. route. Negotiations began in January on a replacement for the current agreement, which expires in July. American officials are known to prefer a new system allowing much freer competition.
British officials refuse to speculate on what will happen if a new apportionment agreement is not reached, but Spicer's speech is being seen here as suggesting Britain might prefer to impose controls unilaterally rather than see the annex expire. One idea British officials are considering is an explicit guarantee of 40 percent of the market to the British carrier on any U.S.-U.K. route.
The British also have taken a tougher line on a related issue, the applicability of U.S. antitrust law to British airlines. Last week, the British government directed two British airlines not to comply with an American court's request for information relating to two lawsuits stemming from the collapse of Laker Airways in February 1982.
The British blame the long-running Laker antitrust suit against British Airways for delaying the privatization of the state-owned airline. That suit was settled out of court last July, and privatization was widely expected this summer.
But this month, in a surprise announcement, the British government said British Airways' privatization was suspended indefinitely, because the possibility of future antitrust cases against the company made it impossible to write an accurate prospectus for share flotation.
In his speech last week, Spicer told the American businessmen: "It is simply not acceptable to us that the U.S. should permit the unilateral application of its domestic antitrust law, its courts and its procedures, including the claimed jurisdiction over persons and documents in the U.K., . . . and potentially to award huge treble damages against the airlines."
Spicer called on the U.S. government to accept the British view that the agreement supersedes American domestic antitrust law. But British officials say they are not linking the antitrust issue to the negotiations about the capacity control part of Bermuda Two.