BA deal with American and Iberia seen possible soon

By John Bowker and Jui Chakravorty

LONDON/NEW YORK (Reuters) - British Airways (BAY.L), AMR Corp's (AMR.N) American Airlines and Spain's Iberia (IBLA.MC) are close to forming a transatlantic partnership that would apply for antitrust immunity, a source briefed on the matter said on Thursday.

The airlines could reach an agreement on revenue sharing within a week, creating a new force dominating air travel between the hubs of southeast Britain and the United States and helping the carriers cope with skyrocketing fuel costs.

Talks between BA, American and Iberia were "making good progress," although there was a small chance things could fall apart, the source said.

BA head of investor relations George Stinnes confirmed the talks were ongoing, although he would not comment on the ultimate goal. The airline first said it was in unspecified discussions with American in April.

"We are talking about what makes sense to do together -- what would be best and most effective," he told reporters.

"The truth is one could find something sensible tomorrow, or could never find it. To try to put a time scale on it is unrealistic," he added.

A deal would follow the lead of U.S. airline alliances like the one between UAL Corp's (UAUA.O) United Airlines and Continental Airlines Inc (CAL.N).

BA shares rose 2.7 percent to 209 pence. AMR shares closed up 4.6 percent, or 21 cents, at $4.83 on the New York Stock Exchange. Iberia closed unchanged at 1.37 euros.