KLM expects Mideast BA deal

January 7, 2002 Posted: 0909 GMT

LONDON (CNN) -- KLM, Europe's fourth-largest airline, said on Monday it expects to agree a deal with British Airways to co-ordinate services to stem losses.

A code-sharing agreement could be reached by the end of this week, KLM said. This would allow the two airlines to sell seats on each other's flights on routes to the Middle East.

"We are engaged in talks with BA at this very moment," KLM spokesman Hugo Baas told Reuters. "We are looking for short-term tactical cooperation."

"These negotiations are still going on, and I expect that in the course of this week we can give more details...These are not negotiations leading to a merger,"  he added.

BA, Europe's biggest airline, and KLM said last October they were in talks on a limited short-term schedule co-ordination. The two airlines ended merger talks to create the world's second-largest airline in September 2000, amid regulatory concerns.

Since September 11 the European Commission, the executive arm of the European Union, has indicated that it was not opposed to airlines forming short-term pacts to ride out the storm. Both airlines have been suffering as passenger numbers slumped on flights to Middle Eastern destinations.

The International Air Transport Association has said global airlines will make a loss this year of about $12 billion because airlines reported passenger number have fallen by about a third.

KLM, like its European rivals, has cut jobs and grounded aircraft to improve profitability. On Friday, the Dutch carrier said passenger traffic picked up in December, but remained eight percent down from a year earlier.

KLM's stock rose 1.9 percent to 13.95, while BA lost 1.7 percent to 237.6 pence in early Monday trading.