BRITISH Airways has announced plans for a major code sharing agreement with giant US carrier American Airlines and promised customers lower transatlantic fares.

But BA's bitterest foe, Virgin Atlantic chief Mr Richard Branson, said the alliance would create a "dominant monster" and that fares would go up.

Now BA and American await approval from both British and US governments for their plan which would create the world's most powerful airline operation.

The alliance, scheduled to start in April 1997, could also help finally sort out the British US attempts to conclude an "open skies" policy across the Atlantic. The United States has been pushing for increased access to and beyond Heathrow Airport since 1977. Only two US airlines American and United currently have landing rights at Heathrow.

BA and American Airlines, the leading US airline, together control 60 per cent of traffic between Britain and the US, the world's busiest long haul routes, and 70 per cent of London New York traffic.

The two airlines will co-ordinate their passenger and cargo activities and will be able to sell their flights as a single, seamless service of connections and baggage transfers. They will also integrate their frequent flier programmes, making them applicable to both airlines.

A number of leading world airlines already have major alliances in place but this one would be the biggest so far.

Mr Branson said the deal was not in the consumer's interest, and would "make it far more difficult for smaller airlines to get off the ground and keep larger airlines on their toes.

Mr Branson urged the two governments not to approve the deal.