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American 'exploring opportunities' with British Airways, Continental

American Airlines confirmed that it is "exploring opportunities for cooperating" with Continental Airlines and British Airways, talks which may result in an alliance among the three airlines.

Rumors have been swirling since Sunday that the three carriers are negotiating some type of partnership, after Houston-based Continental rebuffed a merger proposal with United Airlines.

Under federal law, foreign airlines like British Airways cannot merge with domestic airlines like American or Continental. So the deal would more likely be a marketing coalition that allows the airlines to sell seats on each other's flights and coordinate programs like frequent-flier awards, while continuing to operate as separate companies.

A three-way hookup could also include a new application for antitrust immunity on service across the Atlantic. That's something American and British Airways have long sought but have never been able to win from government regulators.

In a short statement Wednesday, British Airways said it is "exploring opportunities for cooperation with American Airlines and Continental Airlines. Further details will be announced when appropriate."

Charley Wilson, a spokesman for Fort Worth-based American, confirmed the talks but declined to give further details. "That's in keeping with our policy of not discussing potential strategic activities," he said.

Continental belongs to the SkyTeam airline alliance, which includes Delta Air Lines, Northwest Airlines and Air France. But analysts say a pending merger between Delta and Northwest could force Continental out of that coalition.

The talks may result in the Houston carrier joining Oneworld, an international alliance that includes American and British Airways. Analysts say such alliance can be worth hundreds of millions of dollars in revenues for airlines.

But Darryl Jenkins, a longtime industry analyst and consultant, said an antitrust agreement among the three carriers would be the real prize. That would allow them to coordinate schedules, planning, marketing and other operations on trans-Atlantic flights - a lucrative arrangement that would essentially allow the three airlines to operate as a single carrier on flights across the Atlantic.

"If I was in American's place, I'd be at the Department of Justice at dawn every day arguing this case," he said. "They have a lot more leverage now."

American and British Airways have tried to negotiate antitrust in the past, but were told they would have to give up some of their slots at London's Heathrow Airport. Regulators argued that the airlines have an unfair advantage at Heathrow, because they were two of just four airlines allowed to fly across the Atlantic to the airport, which is Europe's busiest.

But a new aviation treaty between the United States and the European Union makes Heathrow available for more service. Jenkins says that could give a fresh boost to American's antitrust hopes, and having Continental on board could make for a stronger case.