...Under the present deal British Airways (London:BAY.L - News) and Virgin Atlantic from Britain and U.S.-based American Airlines (NYSE:AMR - News) and United Airlines (NYSE:UAL - News) enjoy exclusive rights to operate direct services between Heathrow and the United States.

Operators such as British Midland , the UK's second-biggest airline, and U.S. package carrier FedEx (NYSE:FDX - News) have been lobbying both governments to let other firms fly the routes.

MIXED REACTION

Britain's leading airlines gave a mixed response to the government initiative, after talks between them earlier in the day.

British Midland, most likely to benefit if more carriers are allowed to fly the routes in question, was positive.

"All airlines that are able to provide transatlantic services from Heathrow ought to be able to do so," a spokesman said. "But an incremental deal, and one that would hold out the prospect of further progress, is better than no deal."

Virgin Atlantic, run by colourful entrepreneur Richard Branson, was less enthusiastic.

"If we give U.S. airlines access to Heathrow, which is all they're really interested in, in exchange for limited access to the U.S., we've lost our only bargaining position," a spokeswoman told Reuters.

British Airways also called for full liberalisation.

"We would like to see talks on full liberalisation between the European Union and the United States, with the UK playing its part," a spokeswoman said. (Additional reporting by Peter Kaplan in Washington)

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