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DOT MAY BLOCK ALLIANCE OF AIRLINES

DOT MAY BLOCK ALLIANCE OF AIRLINES

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A proposed alliance between USAir and British Airways is expected to be blocked by the U.S. Department of Transportation.

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Despite an appeal by British Prime Minister John Major, who urged President Bush on Sunday to support an alliance between USAir and British Airways, both supporters and opponents of the deal say the United States likely will prevent the transaction.

British Airways has offered $750 million to USAir Group Inc. to acquire 44 percent of USAir's equity and 21 percent of its voting shares.The alliance would give British Airways access to the U.S. air market, while USAir would become part of a system that would compete internationally.

USAir employs more than 4,000 people in the Triad.

Airlines opposed to the alliance have insisted that Britain should be required to relax restrictions on foreign airlines operating at its airports.

USAir has been losing money.

In 1991, the airline lost $349.6 million. During the first nine months of this year, USAir lost $203.3 million.

USAir officials have said they would use the infusion to pay a$2 billion debt.

Transportation Secretary Andrew H. Card Jr. is expected to recommend blocking the deal or to impose conditions unacceptable to British Airways.

Card has said that he will make a decision by Thursday - British Airways' self-imposed deadline for the agreement between the airlines.

If the United States blocks the deal, consumers, stockholders and employees stand to be the big losers, according to a Triad man who is an airline industry consultant.

Dr. Frederick Harris, industry consultant and associate professor of management at Wake Forest University, says that although the alliance would be good for all involved, lobbying efforts against the move by other U.S. airlines appear to be winning out.

Harris says an alliance could expand both airlines' hubs, which in turn would result in lower costs to be passed on to air travelers.

USAir could use some of the $750 million to develop a more sophisticated pricing and inventory management system, Harris said.

``Price is the name of the game in airline competition today, and North Atlantic air travel especially will become more, not less competitive, as a result of the operating efficiencies arising from the alliance,' Harris said. Denial of the alliance by the Department of Transportation would be the worst of ``regulatory capture,' he said.

Economic regulation would serve special interests in competing firms, to the detriment of the traveling public, he said.

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