BA to sever USAir link with sale of 25% stake

British Airways will end its increasingly acrimonious relationship with USAir by selling its 24.6 per cent stake in the American carrier. The move follows conditional approval earlier this month for BA to forge a new transatlantic alliance with American Airlines.

BA said it expected to dispose of the shareholding at a premium to the $400m it paid in 1993. In accordance with the terms of the original agreement, BA has offered to sell the shares back to USAir but neither airline would disclose the price.

The decision to terminate the relationship with USAir heightened speculation that BA would accept the undertakings tied to approval for the alliance with American, principally that the two carriers surrender 168 take-off and landing slots at Heathrow to rival airlines.

Bob Ayling, chief executive of BA, said BA had taken the USAir decision with regret but he added that such a move had become inevitable. "It would clearly be unwise to pursue an alliance with an unwilling partner. Provided a sale can be achieved at an acceptable price, I intend to bring our relationship with USAir to a close."

Although USAir is suing BA and American in the US courts, alleging that the alliance breaches anti-trust rules, Mr Ayling said this had not sparked the decision to sell the stake. He said BA believed the action to be "groundless".

USAir welcomed the announcement, describing it as an important first step in its attempts to become an independent, effective competitor at Heathrow airport. A spokesman said USAir would continue to pursue its lawsuit against BA and American.

Industry observers suggested BA would seek to raise about $500m from its stake of various classes of untraded preferred stock. If converted into ordinary stock it would be equal to 19.3 million shares. USAir shares were trading at $22.13 yesterday. When BA made its investment, they were valued at $15. USAir has 60 days to decide whether to accept BA's offer.