USAir Files for Divorce from Partner British Airways

USAir Inc. filed suit Tuesday to break up its 3-year-old alliance with British Airways, claiming it had been betrayed by its partner’s recent plans to join forces with American Airlines.

The proposed linkage of American and British Airways--which would be the biggest in a series of recent global airline alliances--would cripple Arlington, Va.-based USAir by effectively barring it from the lucrative U.S.-London market, USAir contended in the suit filed in federal court in New York.

British Airways, which became USAir’s largest shareholder in 1993 by buying a 24% stake for $400 million, has repeatedly frustrated the U.S. carrier’s efforts to expand service to Britain and other European destinations, the suit alleges. Because of its investment, the British carrier has a strong voice on USAir’s board and a strong say in internal marketing decisions.

On June 11, British Airways and American parent AMR Corp. announced plans to combine operations by sharing passengers; coordinating fares, schedules and ticketing; and pooling profits on some routes. With that, USAir, the nation’s fifth-largest carrier, suddenly found its partner in a rival’s arms.

USAir asked the court to order the resignation of the three British Airways representatives on the USAir board and the “orderly sale� of British Airways’ investment in the U.S. carrier.

The suit also seeks unspecified damages, which could be tripled if the court finds the American-British Airways agreement violates U.S. antitrust laws, as USAir contends. The agreement is under review by the Justice Department.

“In agreeing to form a mega-alliance with American Airlines, British Airways is violating the requirements of its contract with USAir,� said Lawrence Nagin, USAir’s general counsel. “We would be put in a weaker position, we would be competitively handcuffed� if the alliance goes through without changes between British Airways and USAir.

Additionally, USAir wants the rights to fly to London from its hubs at Philadelphia; Pittsburgh; Charlotte, N.C.; and Boston. It was required by the federal government to give up its routes to London from Baltimore, Charlotte and Pittsburgh when its 1993 British Airways deal was approved.

In a statement, British Airways said it has offered to include USAir in its proposed alliance with American. “Discussions between the airlines on this are now underway,� the statement said.

Some Wall Street analysts speculated that USAir’s suit is a bargaining ploy to extract better terms in such a three-way arrangement. USAir would not comment, referring instead to the demands in its lawsuit.

American said it was “astonished and mystified� by the suit. The airline noted that its alliance with British Airways cannot proceed unless the Clinton administration and the British government agree on a new “open skies� pact deregulating air travel between their countries--a step that would create new opportunities for USAir and other carriers, it said.

Negotiations between the two governments on a new air travel agreement resumed Tuesday.

USAir’s stock gained 37.5 cents to $17.75, American depositary receipts of British Airways rose 37.5 cents at $80.875, but AMR’s stock fell 25 cents to $76.875. All trade on the New York Stock Exchange.