Europe Sets Heavy Price for Airline Merger

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Europe will approve the proposed British Airways-American Airlines alliance, but at a price that may kill the deal. The EU's top regulator Wednesday ruled that approval would depend on the airlines' shedding up to 267 takeoff and landing slots a week in London, and reducing the frequency of flights from London to Chicago, Dallas and Miami if their competitors demand it. And with Virgin's Richard Branson charging that the EU wasn't harsh enough, the pressure on British-American isn't likely to let up. "There's no certainty that this deal will finally be consummated," says TIME reporter Bernard Baumohl. "The extent of the sacrifice demanded by the EU regulators makes the venture a lot less lucrative for the two airlines than it once seemed."

Similar cutbacks will be required of a proposed Lufthansa-Scandinavian Air Services-United Airlines alliance, and the EU is expected later this year to set strict requirements for the European alliances planned by Delta and Northwest. With the importance of European markets growing amid Asia's decline, the battle for the continent's skies looks set to be the fiercest since 1945.