The ailing airline Swissair pulled out of a fledgling deal to join the Oneworld alliance with British Airways (BA) on Thursday owing to the costs involved, but said it was still looking for a new tie-up with another major airline.
  
The chairman of Swiss International Airlines, Pieter Bouw, said after the sudden announcement that the airline was still looking intensely for an alliance.
  
"Participation in an alliance is a priority," Bouw told journalists as the company's move revived speculation about a possible tie-up with the German airline Lufthansa.
  
Swissair said it will not join the Oneworld alliance with British counterpart British Airways because of the costs involved and "other drawbacks".
  
"Sizeable costs"

The airline pulled back from integrating its frequent flyer programme with that of Oneworld, a key part of the alliance arrangement.
  
"The sizeable costs of such an integration and the drawbacks it would bring currently outweigh its projected mid-to-long-term benefits," Swiss said in a statement.
  
"As the abandonment of the proposed integration also means that the bilateral agreement between Swiss and British Airways cannot be put into practice, Swiss is unable to join the OneWorld alliance at the present time," the airline added. 

"Participation in an alliance is a priority,"

Pieter Bouw

The company added that bilateral arrangements with other Oneworld members were not affected by the decision to drop the alliance. 

Commercial pact secure

In London, BA said certain parts of its commercial pact with Swiss would remain, including the exchange for eight Heathrow daily slots.
  
BA and Swiss codesharing between London Heathrow and Geneva will continue for a further three years subject to agreement of commercial terms, but would not be extended further, effectively not covering flights to Zurich.

BA chief executive Rod Eddington said: "We are disappointed that Swiss has decided to step back from our agreement but we accept that it is up to Swiss to decide what is in its best interests."
  
"We are pleased that we have reached an amicable conclusion," he added. 

Swiss in need of credit facility
  
Lufthansa said on Thursday there were no discussions underway but that it was still open to the principle of an alliance with Switzerland's top airline.
 
"Swiss must decide what course it wants to take," a spokeswoman for the German airline said in Frankfurt.
  
Under the deal with BA, Swissair had obtained a guarantee of 50 million Swiss francs ($37 million) from Barclays Bank to shore up its finances.
  
After cutting its staff and services by about one-third, Swissair cut its annual loss by about one-third in 2003 to 687 million Swiss francs.
  
It also posted better results in the first quarter of 2004 by reducing losses to 78 million Swiss francs.
  
However, the company was still battling to secure its declining liquidity and has so far failed to obtain a 300 million-Swiss franc-credit facility from banks despite months of negotiations.

Swissair's share price on the Zurich stock exchange rose by 8.3% in less than an hour of trading, to reach 12.45 Swiss francs, but later fell back.