FOR IMMEDIATE RELEASE	AT

THURSDAY, MAY 21, 1998                                                                                                                               (202) 616-2771

                                                                                                                                                                                   TDD (202) 514-1888




JUSTICE DEPARTMENT HAS MAJOR COMPETITIVE CONCERNS WITH AMERICAN
AIRLINES AND BRITISH AIRWAYS ALLIANCE







Slots and Restructuring Needed







	WASHINGTON, D.C. -- The Department of Justice today said
that American Airlines' proposed alliance with British Airways
should not be approved by the Department of Transportation unless
it is significantly restructured.  The Department indicated that
sufficient take off and landing slots should be made available to
ensure that additional airline carriers will provide substantial
new air service between the United States and London's Heathrow
Airport.  

	American Airlines and British Airways are the two largest
air carriers offering service between the U.S. and the United
Kingdom.  

	According to comments filed today with the Department of
Transportation, the Justice Department stated that, if it were
reviewing the proposed alliance under the antitrust laws, the
Department would seek to block the proposed arrangement because
the alliance would significantly reduce airline competition
between the U.S. and the U.K.  

	"The combination of American and British Airways would
result in air travelers paying significantly higher fares for
travel between the United States and Great Britain," said 

Joel I. Klein, Assistant Attorney General of the Justice
Department's Antitrust Division.

	Nevertheless, the Department said, the Department of
Transportation, which has approval authority for international
airline alliances under the Federal Aviation Act, is authorized
to approve the proposed alliance if it finds that it is necessary
to achieve public benefits that clearly outweigh the competitive
harm.  

	In its comments, the Department said that the way in which
the public could benefit from the proposed alliance is if DOT's
approval of the alliance would lead to an "open skies" bilateral
treaty between the U.S. and the U.K.  Such a treaty increases
competition by removing government-imposed restrictions on
airline carrier entry and pricing.

	Although a bilateral open-skies treaty would be absolutely
essential, the Department made clear that such a treaty, by
itself, would not be sufficient to provide substantial public
benefits.  That is so because of the severe constraints that now
exist on service at Heathrow Airport.  

	The Department concluded that, in addition to an open-skies
agreement, the DOT should require slots and related facilities
sufficient to operate at least 24 additional daily round-trips
between the U.S. and Heathrow Airport be made available to
competitors to American Airlines and British Airways.  

	The Justice Department also stated that making slots
available to competitors would not fix the competitive problems
associated with the alliance on routes between Dallas and London
and Chicago and London--where American and British Airways have
hubs at both ends and where entry by new airlines is therefore
highly unlikely.  As a result, the Justice Department recommended
that these routes be excluded, or "carved out," of the proposed
transaction, so that at least some head-to-head competition would
remain.

	"Significant slots and restructuring are absolutely
necessary to preserve and expand consumer choice in this large
and growing transatlantic market," said Klein.  "Placing
additional slots in the hands of other airlines would not only
help restore competition in many of the markets where American
Airlines and British Airways currently compete head-to-head, but
would also allow for new and expanded service from U.S. cities
where nonstop service to London is not currently available.  
	"From a competitive point of view, this is a troubling
alliance and therefore only a very strong remedy could possibly
justify its approval," added Klein.

	American and British Airways together account for about 58
percent of the weekly flights between the U.S. and London and
more than 63 percent of the flights from the U.S. to London
Heathrow Airport, which is London's primary airport.  The two
airlines currently offer competing nonstop service to London from
Boston, New York, Miami, Chicago, Dallas, and Los Angeles.	  	

	The Department's comments were filed at the Department of
Transportation in Docket OST-97-2058.  The Department of
Transportation will make a decision on the alliance later this
year.  Competition authorities for the U.K. and the European
Union are also reviewing the proposed alliance.

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