Electronic Telegraph, UK
 BA accuses Lufthansa over price war - By Mary Fagan
 BRITISH Airways has complained to the European Commission claiming
 that Lufthansa, the German airline, is trying to force it off key
 routes by launching an all-out price war.
 The group's wholly-owned Deutsche BA subsidiary has been elbowed out
 of the lucrative Frankfurt to Munich route by Lufthansa's price cut-
 ting and has had no help from the Federal Cartel Office in Berlin.
 Deutsche made its plea last week to Neil Kinnock, the Transport Com-
 missioner, as the European competition authorities view the case as
 a national issue within Germany.
 According to Carl Michel, chief executive of Deutsche BA: "Lufthansa
 has 98 per cent of the domestic market from Frankfurt and it is very
 hard for anyone else to get into that market. But we also want a
 wider investigation of competition within the European airline
 market. On the big routes we need free and fair competition."
 Deutsche, which had a turnover of DM500m last year and carries 2.7m
 passengers annually, gained enough take-off and landing slots at
 Frankfurt to operate eight services a day on the Frankfurt/Munich
 route. The route is one of the top three in Germany.
 But the services, which began in November, were abandoned in March
 after a price war. According to Michel, there were a total of 12
 price cuts in a very short period. There were rumours in the indust-
 ry that Lufthansa would go as low as necessary to squeeze Deutsche
 BA and the company saw no option other than to pull out. "What we
 are talking about was quite severe," he said.
 The situation is said to have incensed Bob Ayling, BA's chief
 executive. Ironically, it comes at a time when the airline group
 faces possible action from the European Commission over its own
 marketing practices under BA's performance reward scheme for travel
 agents.
 The Commission has been investigating BA's scheme following com-
 plaints from arch-rival Virgin Atlantic and both companies are re-
 sponding to a preliminary ruling on the matter which raised the
 prospect of large fines for BA.
 BA believes that there are no competition issues with the scheme
 as all other airlines operate similar incentive schemes and is un-
 likely to accept any attempt by the Commission to ban the PRS with-
 out a fight. One insider said: "We are already one of the most
 open markets in the world." He said the situation Deutsche BA faces
 in Germany is one illustration of that.
 -------------------------------------------------------------------
         BAe in row over Airbus carve-up - By Mary Fagan
 A ROW is brewing over the future structure of Airbus Industrie, the
 commercial aircraft joint venture which includes British Aerospace,
 Aerospatiale, Dasa of Germany and Spain's Casa.
 The transformation of Airbus from a loose economic grouping to a
 full corporate entity was due to be complete by January 1, 1999.
 But disagreement has developed over where the business should be
 incorporated, how to value the parts of the business and partic-
 ularly how profits should be shared.
 One insider said integration could be delayed until 2000. The Ger-
 mans are said to be blaming BAe for dragging its feet, but BAe
 insiders say the company is more interested in getting the structure
 right and in securing maximum value for its shareholders than
 rushing the negotiations through.
 BAe, which has 20 per cent of Airbus, refused to comment. But ana-
 lysts say it believes that the wings, which it manufactures,
 represent a major chunk of the value on the larger aircraft and
 that this should be reflected in the profit-sharing.
 One industry observer said: "There is an unholy row brewing and it
 will surface before long. But BAe takes the view that the share of
 profits should reflect the value of work done and it is determined
 not to sacrifice shareholder value. That is how it should be."
 Another problem is demands by the French that the new group should be
 based in France, despite the view held by some partners that this may
 not be the most tax-efficient solution.  One industry insider said
 that the dissent within Airbus could threaten the wider restructuring
 of the European defence industry, in which BAe hoped to take a lead-
 ing role. The company recently announced that it would take a major
 stake in Saab of Sweden. BAe does not disclose profits from Airbus
 but analysts estimated that it made - 140m last year at the operating
 level.
 ===
--- DB 1.39/004487
---------------