major boost for Bermuda and strengthen its air links with Europe and the US, representatives of both airlines said yesterday.

After months of uncertainty about the future of British Airways' service to Bermuda, local manager Mr. Philip Troake said yesterday, after returning from a briefing in New York, that the deal "could only be good news'' for the Island.

"While it is far too early to say what impact the deal will have, I think this cannot be seen as anything but good for Bermuda,'' Mr. Troake said. "It will strengthen both airlines. And it'll certainly strengthen BA's position in the North Atlantic.

"It is a deal we both want, and it will finally give BA a presence in the US domestic market.'' The move comes after the airline industry's two most turbulent years, marked by slow demand, rising red ink and intense competition for passengers.

The industry's recent woes began with the fall-off in traffic started by Iraq's invasion of Kuwait in 1990 and prolonged by the recession in the United States and other countries.

The deal, dubbed by some to be the biggest airline alliance in the world, gives BA its first major step towards achieving its policy of globalisation, strengthening what it called its current position as the world's leading international carrier.

For USAir the infusion of funds should help counter the fierce fare war major carriers have been waging to lure customers in a weak economy.

BA was the world's most profitable airline in 1991 with a pre-tax profit of $540 million, while USAir is the fourth largest US airline behind United Airlines, American Airlines and Delta. In 1991 it made a loss before tax of $4l4.8 million.

"This alliance will pave the way for a global airline group, providing superior service, better value for customers and, in the longer term, enhanced returns to our quarter of a million owners -- many of them Americans,'' BA chairman Lord King said in a statement.

Mr. Seth Schofield, USAir's chairman and president, said: "Our proposed alliance with British Airways will position USAir to be an even stronger competitor.'' British Airways over the past 18 months has reduced the number of flights to Bermuda from London by four to two. The two-flight plan was launched this spring as a last ditch effort to end huge losses on the route -- $10 million and $19 million in the preceding fiscal years.

In addition, BA in May stopped the continuation of its flight to Tampa from Bermuda to better position the airline to make money on the route.

Mr. Troake said the new programme had so far met projections, adding that the London-Bermuda route had done "very well this summer''. "We are looking to increase capacity and frequency,'' he said.

In the meantime though, both airlines said it will be business as usual.

USAir, which flies four flights a day out of La Guardia, New York, Charlotte, North Carolina, Philadelphia, and Baltimore, has for the past three-and-a-half years shared a local office with BA, which manages USAir's sales desk in Bermuda.

The deal, signed yesterday in New York and still to be approved by regulatory bodies in the UK and US, means BA will buy new convertible preferred shares in USAir with its existing resources or from further borrowings. It gives BA a 44 percent equity stake and a 21 percent voting stake in USAir.

The British airline will also appoint four nominees to the board of the Arlington, Virginia-based USAir and the activities of the two airlines will be integrated by a committee headed by the chief executives of the two airlines.

Shares in British Airways were trading 16 pence higher at 274 pence by yesterday afternoon. They were already seven pence higher ahead of the news and climbed further after the announcement.

The news, however, is a setback for KLM Royal Dutch Airlines, which had been in talks with BA about an alliance that might have included the Dutch airline's stake in Northwest Airlines of the United States.