Branson says to spend millions to block BA/AA deal

Virgin Group chairman, Richard Branson, listens to a question during a news conference as part of the UN General Assembly debate about climate change at U.N. Headquarters in New York, February 11, 2008.

LONDON (Reuters) - Virgin Atlantic President Richard Branson said he was prepared to spend heavily to try to prevent a planned tie-up between British Airways Plc, American Airlines and Spain's Iberia.

"If it is approved we believe Virgin Atlantic will be damaged (along with) ... any smaller carriers on these routes," Branson told reporters on Friday, adding he would spend "millions of dollars" in a bid to block the tie-up.

He said he would start by painting "no way BA-AA" slogans on all Virgin's aircraft and would continue with an advertising campaign claiming the dominance of the alliance on key UK-U.S. routes will put up prices.

The comments are the latest in a series of disputes between Branson and British Airways Chief Executive Willie Walsh, who has accused the Virgin empire founder of getting his figures wrong about the extent of BA-AA dominance.

A BA spokesman said: "This application is good news for customers. They will gain greater access to discounted fares, smoother connections and more frequent flyer benefits," adding there was nothing to stop Virgin seeking its own partner.

But Branson said other carriers felt similarly about the proposed deal, which he argues is a merger in all but name.

"A lot of carriers are keeping quiet as they think that if BA and AA are effectively allowed to merge then anybody will be allowed to merge," he said.

MERGER TALKS

His comments came on a hectic day for European airline consolidation, with sources familiar with the matter saying German airline Lufthansa is in talks to buy Scandinavia's loss-making SAS.

Meanwhile the latest attempt to rescue Italian carrier Alitalia was given another day to avoid failing and the Austrian government prepared to draw up a shortlist to sell a controlling stake in Austrian Airlines.

Branson said he had no plans to take part in any industry consolidation, other than if bmi came up for sale.

British airline bmi is likely to be taken over next year despite the possibility it will make a loss in 2008, as a host of rivals eye its portfolio of Heathrow slots, analysts have said, although near 30 percent owner Lufthansa is expected to be first in the queue.

BA said last month it had agreed a transatlantic tie-up with AA and Iberia and would apply for antitrust immunity which would allow for coordination on pricing and scheduling.

BA and AA have tried and failed to achieve this twice before, but now argue the 'Open Skies' agreement which has theoretically opened up London's Heathrow airport has changed the competitive landscape.

(Writing by Dan Lalor; Editing by Victoria Bryan and David Holmes)