Oct. 30 (Bloomberg) -- British Airways Plc is likely to have to wait until at least mid-November to win U.S. Department of Transportation approval for a sales tie-up with AMR Corp.’s American Airlines, Chief Executive Officer Willie Walsh said.

British Airways may also determine in coming weeks “whether a deal can be done” on merging with Iberia Lineas Aereas de Espana SA, the Spanish partner in the AMR proposal, Walsh said. The CEO added he “remains confident” the U.S. will approve the three-way alliance, even after the regulator put off a ruling planned for this month.

“We’re a little bit disappointed because it was a DOT deadline,” Walsh said in an interview late yesterday at a London event hosted by networking group plus-91.com. “We’ve been patient and continue to be patient.”

The U.K. and U.S. airlines are seeking antitrust immunity for the third time since 1996 on efforts to forge closer ties than in their existing Oneworld alliance. London-based British Airways said Oct. 26 that it will dispute claims by European Union regulators that coordinating schedules and sharing revenue would give the carriers dominance on key trans-Atlantic routes.

British Airways fell as much as 0.9 penny, or 0.5 percent, to 191.4 pence and was down 0.1 percent as of 11:44 a.m. in London trading. The stock has gained 5.2 percent this year, valuing the airline at 2.2 billion pounds ($3.6 billion). Iberia fell as much as 6 cents, or 3.1 percent, to 1.90 euros in Madrid. The shares have declined 3.5 percent this year, giving Iberia a market value of 1.82 billion euros ($2.7 billion).

Merger talks

British Airways and Madrid-based Iberia, Europe’s third- and fourth-largest airlines, have been in merger talks since July 2008.

“We have made a lot of progress in the last month,” Walsh said. “I remain positive toward it.”

Airlines worldwide will suffer losses of as much as $11 billion this year as they cut fares to win back passengers, according to the International Air Transport Association.

“Consolidation is not the whole solution for the industry, but it’s part of the solution,” Walsh said.

Iberia Chairman Fernando Conte said in November 2008 that British Airways’ pension deficit was one of the “difficulties” hampering an agreement.

Walsh, declining to specify outstanding issues in the negotiations, said in the interview that the pension shortfall is unlikely to be a “deal breaker.”

Analysts at Deutsche Bank AG have estimated that the deficit may have widened to 3.6 billion pounds from 1.8 billion pounds at the end of March 2008 as stock-market declines hurt asset values.

British Airways hasn’t specified when it may publish an update of pension funding levels, which were last released in September 2008. The carrier is scheduled on Nov. 6 to release earnings figures for its fiscal second quarter.

To contact the reporter on this story: Steven Rothwell in London at srothwell@bloomberg.net

Last Updated: October 30, 2009 07:47 EDT