 British Airways and American Airlines need to complete a transatlantic deal to link operations if they are to win the fight against high fuel costs and thwart rival alliances. The two are close to agreeing a revenue-sharing agreement that would create a major force controlling over 50 percent of the lucrative flights between London and the United States, a source briefed on the matter has told Reuters. The move is seen as a shot back at BA's archrival Air France KLM, which has forged a transatlantic alliance with Delta and Northwest. "BA has been totally left behind in terms of the global consolidation of the industry. They need to come to the party and participate," Royal Bank of Scotland analyst Andrew Lobbenberg told Reuters. BA and AA still need regulators to grant the combined entity anti-trust immunity which would allow them to collude on transatlantic routes and pricing alongside a third partner, Spain's Iberia. Four analysts polled by Reuters think there is a better than 50/50 chance an approval will be granted. Fuel costs have soared as oil flirts with $145 a barrel, a trend likely to force all airlines to cut capacity and hike passenger fares to protect margins. "This is a need to do deal," said Andrew Fitchie, an analyst at Collins Stewart. "The high oil price makes many airline operations unsustainable, (and) this sort of deal allows them to get to grips with supply of seats and pricing." He added that where the two airlines currently fly at similar times on the key London-New York route, they could now strip out the duplicate and save cash. Gert Zonneveld at Panmure Gordon added that the move would be both defensive against the current climate and an offensive strike against rivals. "They can come up with a frequency and schedule that is better than what the others have, while also making cost savings," he said. HEATHROW SEEN KEY Two key issues are whether regulators will grant anti-trust immunity and subsequently how they will view the pair's dominance of the world's busiest airport, Heathrow, and some UK-U.S. routes. Virgin Atlantic spokesman Paul Charles told Reuters there were routes between London and U.S. cities such as Chicago and Boston that are only operated by BA, AA and Virgin -- thus reducing competition from three to two carriers in the event of an alliance. "It would reduce competition and push up prices," he said. BA and American have tried twice before to gain immunity, but on both occasions were told they would only get it if in turn they divested a major part of their stranglehold on Heathrow -- a price they were unwilling to pay. But since the launch of the 'Open Skies' agreement earlier this year, any U.S. or EU airline may fly across the Atlantic to Heathrow, albeit at a high price for slots. Analysts suspect that this major industry change will make regulators more sympathetic. Andrew Lobbenberg said there is a good chance that approval would be granted, noting Air France had already won such backing. "The combination of BA and American would have a lower market share than the 'Skyteam' immunized grouping," he said, referring to the Air France KLM-Delta-Northwest deal. The carriers may still be asked to forfeit some Heathrow slots, but fewer than on previous occasions, he said.