THE European Commission will tell the British government that the proposed alliance between British Airways and American Airlines will harm fair competition unless changed, a Commission source has said.

The Commission's findings had been expected since January when the Competition Commissioner, Mr Karel Van Miert, warned the British government in a letter that the alliance would eliminate competition on many key routes between the United States and Britain.

But the fact that the Commission's position has not changed increases the pressure on Britain, which argues it has the prime authority to examine the transatlantic air deal, to seek concessions.

Mr Van Miert has threatened the British authorities with legal action if they fail to address the Commission's competition concerns. The Commission shares authority with Britain to vet the deal between BA and American Airlines, which will create the world's largest airline grouping.