BA poised to offer Heathrow landing slots - at a price

British Airways is set to accept the conditions imposed by the Office of Fair Trading on its alliance with American Airlines by offering take- off and landing slots at Heathrow to rival carriers.

However, BA will insist that it should be allowed to sell the slots rather than being forced to surrender them without any financial gain.

The airline's formal response to the OFT is due to be submitted early next week ahead of the 10 January deadline set down for replies. Other carriers, notably United Airlines and Richard Branson's Virgin Atlantic, will argue strongly that the OFT's conditions do not go far enough, allowing BA to strengthen still further its dominance at Heathrow.

Ian Lang, President of the Board of Trade, announced last month that he would not refer the tie-up to the Monopolies and Mergers Commission provided BA and AA released 168 slots a week to other airlines wanting to operate transatlantic services.

Initial estimates suggest the slots could fetch up to pounds 180m. A BA spokesman said: "We don't see any justification for simply relinquishing these slots. No other transatlantic alliance has been asked to do so and they have a far greater share of slots at their hub airports than we do. Lufthansa, for instance, controls 60 per cent of slots at Frankfurt. If we have to release slots we will look for suitable payment from whoever takes them over."

The European Commission is due to publish guidelines shortly on how airport slots might be freely traded. However, there appears to be a split in Brussels over the desirability of slot trading with the Transport Commissioner, Neil Kinnock, supporting the move and the Competition Commissioner, Karel Van Miert, being less enthusiastic.

In tandem with UK government approval for the alliance, BA and AA are about to seek clearance from the US Justice Department and US Department of Transportation. The BA spokesman said a formal application for approval would be submitted to the two government agencies early in the new year. The aim is to begin operating the alliance formally in the spring.

Separately, BA sources poured scorn on reports from Taiwan that it was preparing to pay pounds 120m for a 16 per cent stake in China Airlines.

According to local newspaper reports in Taipei, BA has shown a keen interest in acquiring a stake from the China Aviation Development Foundation, which owns 82 per cent of the airline.

A BA spokesman in London said it was not the company's policy to comment on rumours and speculation about possible alliances or investments. But other aviation sources said there was not a lot in the reports from Taiwan.

The Hong Kong-based investment bank Wheelock NatWest has been commissioned to advise on the share sale and is thought to have approached a number of European airlines. But no serious discussions have taken place and the deal to bring foreign investment into China Airlines is not expected to be concluded until later in 1997.

BA's existing alliances are with Qantas, Deutsche BA, TAT and Air Liberte, which it took formal control of on Monday. BA has made no secret of its desire to find a partner in the Pacific Rim.