price collapsed in the mid-'80s. It also further compounded the firm's growing financial problems at the time, culminating in the financial crisis that led to its takeover by archrival BA. In July 1987 BA publicly announced its intention to take over its ailing, home-grown rival British Caledonian. This led to a counter bid from ILG who sought to take over British Caledonian themselves and merge it with Air Europe. Although Air Europe eventually failed to merge with British Caledonian, its management succeeded in having the rival BA bid referred to the Monopolies and Mergers Commission (MMC), a forerunner of today's Competition Commission, by claiming that this deal would destroy the UK's entire independent airline sector if approved without requiring BA to make any concessions to redress the resulting competitive imbalance. The decision by the MMC to require BA to give up 5,000 annual slots at Gatwick to competitors and to re-apply for some of British Caledonian's most important short haul feeder routes, as well as the subsequent decision by the CAA to award all of these routes to rival, independent airlines left BA's Gatwick operation with only ten short haul routes. This reduction in the number of short haul routes the airline continued to serve from Gatwick was accompanied by a corresponding reduction in the company's Gatwick-based short haul fleet from 14 to ten Boeing 737-200 Advanced aircraft. The routes the CAA had awarded BA's independent rivals included the most profitable former British Caledonian short haul routes that had generated a substantial amount of transfer traffic for that airline's Gatwick-based scheduled operation, such as London Gatwick — Paris Charles de Gaulle and Gatwick—Brussels. It also included a number of British Caledonian's loss-making domestic routes, such as Gatwick—Glasgow, Gatwick—Edinburgh and Gatwick—Manchester, which were important feeder services for that airline's profitable long haul routes. The loss of these vital routes to rival airlines and the consequent reduction in the number of passengers making connections between BA's short and long haul flights at Gatwick threatened the company's ability to continue operating profitably on the long haul routes it had inherited at Gatwick from British Caledonian. BA's acquisition of the bulk of Dan-Air's scheduled activities at the end of October 1992 was intended to create the basis for a new in-house, low-cost unit that would enable the airline to reverse the heavy losses its own mainline operation's Gatwick-based short haul services incurred by transferring