Aug. 14 (Bloomberg) -- American Airlines and British Airways Plc agreed to create an alliance that would let them operate as a single carrier on trans-Atlantic routes and counter new competitors at London's Heathrow airport.

The airlines said today they will seek antitrust clearance to coordinate prices, capacity, schedules and routes and share revenue on flights between Europe and North America.

The move marks the third bid since 1996 for closer ties between AMR Corp.'s American and British Airways, which dropped their last attempt in 2002 when U.S. regulators signaled that approval would hinge on ceding flights at Heathrow. The airport, Europe's busiest, has since been opened to other airlines.

``The big problem was Heathrow, and since that situation has changed, I think there's a pretty good chance it'll be approved,'' said David Swierenga, president of consulting firm AeroEcon in Round Rock, Texas.

American and British Airways said their venture will boost sales and eliminate duplication, helping them blunt higher fuel prices and grab market share from Air France-KLM Group and Delta Air Lines Inc., which won immunity for an alliance in April.

American and British Airways declined to comment on the revenue or savings that might be produced.

The two carriers would have 48 percent of U.S. flights at Heathrow, according to a presentation created by American. The SkyTeam alliance of Air France and Delta has 63 percent of U.S. service from Paris, while the Star Alliance, led by Deutsche Lufthansa AG and United Airlines, has 76 percent of U.S. service from Frankfurt, according to the presentation.

Approval `Likely'

It is ``much more likely'' Fort Worth, Texas-based American and British Airways will win government approval this time, given the immunity granted to rivals, said William Hochmuth, a debt analyst at Thrivent Financial in Minneapolis, which manages funds holding more than 2 million AMR shares.

The airlines said they'll apply to the U.S. Transportation Department for an antitrust exemption and notify authorities in the European Union. Their accord covers flights among the U.S., Mexico and Canada and the European Union, Switzerland and Norway. The application also includes Spain's Iberia Lineas Aereas de Espana SA, Finnair Oyj and Royal Jordanian Airlines.

The alliance will coordinate schedules and give travelers more destinations and easier flight connections, said Willie Walsh, 46, chief executive officer of London-based British Airways.

Not Ceding Slots

``Our proposed cooperation is an important step toward ensuring that we can compete effectively with rival alliances,'' American CEO Gerard Arpey said in an interview. ``We don't see any rational basis for requiring us to give up slots at Heathrow. We obviously would be opposed to that.''

British Airways fell 1.75 pence, or 0.7 percent, at 253.75 pence in London. Europe's third-largest airline has lost 18 percent this year.

AMR rose 42 cents, or 3.9 percent, to $11.28 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have tumbled 19 percent this year.

Today's accord was made possible after the U.S.-European Union ``Open Skies'' treaty eased travel restrictions at Heathrow in March. Previously, only four carriers could fly between the U.S. and Heathrow: British Airways, American, UAL Corp.'s United and Virgin Atlantic Ltd.

A deeper relationship with American would reinforce British Airways's status as the leading U.K. long-haul operator. No. 2 Virgin Atlantic, which competes between Heathrow and New York, opposes the alliance, and owner Richard Branson has lobbied U.S. presidential candidates Barack Obama and John McCain to block it should they be elected.

`Still Dominant'

Adding Madrid-based Iberia to the partnership extends the alliance's reach beyond the North Atlantic.

Spain's largest airline has one of the biggest networks between European and Latin America, while American is one of the top operators from the U.S. to Latin America. British Airways said July 29 that it planned to merge with Iberia.

Arpey said in a note to American's employees that while the alliance won't cure high jet-fuel costs and dwindling demand, it should help secure longer-term success.

The global airline industry is heading for losses that may exceed $6.1 billion this year, according to the International Air Transport Association. Consolidation and alliances may help carriers avert bankruptcy and trim fleets while boosting sales and paring costs by reducing overlapping routes.

Pilots' Criticism

American's pilots union, which is seeking a new contract and sparring with management over issues including furloughs, called the alliance ``problematic on several fronts.''

``Management should focus first on running a more reliable operation before embarking on a new venture of this magnitude and complexity,'' Allied Pilots Association President Lloyd Hill said.

All five airlines involved in the antitrust application are partners in the OneWorld global airline alliance.

Delta, which is buyingNorthwest Airlines Corp., is a member of the SkyTeam group of airlines, while Continental Airlines Inc. applied last month for U.S. antitrust immunity to join UAL's Star Alliance.

UAL's United, starting on March 30, was allowed antitrust immunity to collaborate with U.K. carrier BMI, a Star partner and the second-biggest slot holder at Heathrow.

To contact the reporters on this story: Steve Rothwell in London at srothwell@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net.

Last Updated: August 14, 2008 17:14 EDT