WASHINGTON -- The Clinton administration let stand yesterday a $300 million investment by British Airways PLC in USAir and approved jointly operated direct flights to London out of Baltimore-Washington International Airport and three other U.S. airports later this year.
The $300 million is the first of a three-stage investment the British carrier plans to make in USAir, which has nightly flights from Baltimore to Gatwick Airport near London.
U.S. Transportation Secretary Federico Pena said approval of the joint flight operations was for one year only, adding that an additional $450 million British Airways wants to invest over the next five years would depend on congressional action and renegotiation of the U.S.-British aviation agreement.
The deal was opposed by the big three American airlines: United, Delta and American. They complained that it gave British Airways unlimited access to the U.S. skies without opening British air routes to U.S. carriers. British Airways already provides about 38 percent of all seats available on the U.S.-London route, offering nonstop flights from 14 U.S. cities, including Baltimore. USAir controls about 3 percent of the nonstop U.S.-London seats.
American Airlines Chairman and President Robert L. Crandall said the new trans-Atlantic partnership would shift passengers, revenues,profits and jobs from U.S. carriers to British Airways at a time the domestic economy and workers "need active, vigorous support."
Mr. Crandall said he was "particularly distressed" that approval was given before the "dreadfully unbalanced" bilateral aviation agreement between the U.S. and Britain was renegotiated. The decision was "inconsistent" with the Clinton administration's commitment to fair international trade, he said
USAir officials responded that the Big Three dominated both trans-Atlantic and domestic airlines, and that the British Airways partnership would produce more equitable competition.
"I think most consumers would prefer there should be more rather than fewer airlines," said Susan Young, spokeswoman for USAir.
John Stodden, transportation analyst with Duff and Phelps, Chicago investment researchers, said the partnership would produce a formidable alliance.
"It's not like two weak sisters are wrapping their arms around each other," he said. "These are two strong carriers and they both bring resources to the table, and they will be felt by the competition."
For BWI, the administration's decision ensured continuation of the direct nightly flights to London's Gatwick. USAir will operate the flight until its partnership with British Airways takes effect locally, later this year. USAir has 91 daily flights in and out of BWI daily, and its regional wing USAir Express offers 95 daily flights in and out daily.
Theodore Mathison, administrator of the Maryland Aviation Administration, which operates BWI, welcomed the investment approval and said he would work with the two airlines "to ensure the promised benefits to BWI and the traveling and shipping public who look first to BWI for convenient services become a reality."
The first joint USAir-British Airways service to London will start from Philadelphia May 1. Flights from Pittsburgh will begin June 1.
British Airways will take over USAir's nightly route from BWI to Gatwick airport in September or October -- the precise date has not been fixed -- leasing USAir Boeing 767s and flight crews.
The planes will fly under British Airways' colors, with the American flight crews wearing British uniforms and passengers carrying tickets bearing a British code. Charlotte, N.C., will be the last airport to offer the service.
British Airways already has route authority from Baltimore to London, but has not exercised it since it abandoned the route as unprofitable several years ago.
Once the joint service starts, USAir's BWI-Gatwick route authority will be available to another U.S. airline, if any wants to continue American-based trans-Atlantic service from Baltimore.
Mr. Mathison, the airport administrator, noted last night that the joint service would operate with Boeing 767s, each carrying about 200 passengers, leaving room for another carrier with similarly sized planes to enter the market.
Under the settlement of a civil antitrust suit brought by the Justice Department yesterday to challenge the USAir-British Airways transaction, USAir agreed to offer its London routes for sale to British Airways within 45 days of the designated carrier code-sharing service starting from its gateway airports, including BWI. If no sale is completed, the Department of Transportation will assume authority to authorize another carrier to use the route or seek to fly to London from another city.
In an unusual move, the Justice Department announced both the filing of the suit and a consent decree under which USAir agreed to settle it, subject to approval of a federal judge. The legal maneuver was meant to mitigate the loss of USAir as a direct competitor for U.S.-London passengers by opening its route to another U.S. carrier, while preserving the advantage of opening the direct Pittsburgh-London service and linking many interior airports to London and beyond through the joint service.
Last year British Airways sought to invest $750 million in USAir, but withdrew the offer when it became clear the Bush administration was opposed to it. Under U.S. law, no more than 25 percent of an airline can be foreign-owned, and the British investment would have been pushing the limit.
Under the agreement, British Airways will lease USAir planes and crews until it has enough of its own hardware and personnel to service the route, likely, according to British officials, to be five years or more away.