Virgin Atlantic mulls merger if BA-AA cement deal

LONDON (Reuters) - Virgin Atlantic would consider merging with another carrier if British Airways transatlantic tie-up with American Airlines gets regulatory clearance.

“A merger is one of the options open to us if BA-AA gets the go ahead,” a Virgin Atlantic spokeswoman told Reuters on Tuesday.

The U.S. Department of Transportation (DoT) recently gave tentative approval to grant antitrust immunity to BA and American’s planned commercial alliance, which will allow the pair to cut staff and pricing costs as well as combine routes.

Earlier this month, UAL Corp’s <UAUA.O United Airlines and Continental Airlines agreed to combine, while Air France-KLM

and U.S. carrier Delta have been operating as one airline over the North Atlantic for around a year.

BA expects its $8 billion merger with Spain’s Iberia to be complete by the end of 2010 and hopes a three-way alliance with American will generate 5 billion pounds ($7.15 billion) of sales annually.

Virgin Atlantic owner Richard Branson has said a BA-American Airlines tie-up would be anti-competitive and drive airfares up, but analysts have said Virgin will have little choice but to look for a partner if other mergers are approved.

“Virgin should stop moaning about BA and find their own partner and merge because that is clearly the way forward,” said BGC Partners senior strategist Howard Wheeldon.

“I think Virgin should link up with Lufthansa because that would make a lot of sense and I would welcome such a strategic development if it is in the minds of Virgin management.”

BA last week said it hoped its commercial alliance with American would be approved by the DoT and the EU by this summer.

(Reporting by Rhys Jones; Editing by Paul Hoskins, Mike Nesbit)

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