Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, March 16, 1993 TAG: 9303160042
SECTION: BUSINESS PAGE: B8 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
USAIR MERGER GETS GO-AHEAD
The Clinton administration approved a $300 million investment Monday by British Airways in USAir but said the deal could be killed next year unless the British government makes new air travel concessions.Overriding opposition from the nation's three largest airlines, Transportation Secretary Federico Pena said he had little choice but to approve the investment for now because of a U.S.-British aviation treaty.
Pena also said British Airways' plans to invest another $450 million in USAir hinges on the British government's willingness to open its skies and airports to U.S. carriers, and to relaxation of a federal law limiting foreign ownership of U.S. airlines.
A foreign company now is permitted to hold up to 25 percent of the voting stock of a U.S. airline. The $300 million investment gives British Airways a 19.9 percent share in USAir, and the proposed additional money would put it over the 25 percent mark.
Foreign investment is seen by many as a key to bailing out the struggling U.S. airline industry, which has lost about $10 billion over the last three years.
But Pena's decision prompted an angry reaction from among the so-called Big Three U.S. airlines - Delta, United and American - which view the deal as a threat to their dominance of lucrative international traffic.
"The net effect ... is to allow British Airways to divert traffic from U.S. carriers to itself by offering products that U.S. carriers are not allowed to sell," said Robert Crandall, chairman of American Airlines.
Pena allowed USAir and British Airways for one year to link their flight schedules between 38 U.S. cities and London, and he let USAir furnish crew and aircraft to operate British Airways flights between London and Baltimore and London and Pittsburgh.
But he rejected USAir's proposal to provide crews and aircraft for British Airways between London and Charlotte, N.C.
British Airways initially proposed investing $750 million at once in USAir but dropped the proposal in the face of likely rejection by the Bush administration.
The deal also was a campaign issue last year, with both Bill Clinton and Ross Perot opposing it. Since the election, Clinton repeatedly has said foreign investment must be linked to equal opportunity for U.S. goods and services abroad.
The new British Airways-USAir plan calls for $300 million invested this year - a transaction that has already taken place - $200 million within three years and then $250 million more within five years.
In return for the $300 million investment, British Airways got the right to appoint three of USAir's 16 directors plus 19.9 percent of the voting stock.