British Airways said today it would announce a schedule-sharing agreement with Dutch rival KLM later this week.

The deal, which comes after weeks of discussions, will allow BA and KLM to sell seats on each other's flights on some routes to the Middle East during the summer.

A BA spokesman said: "We are still firming up final details with KLM before announcing it this week but we don't expect any hitches."

BA - which flies to nine key destinations in the Middle East including Kuwait, Abu Dhabi, Jiddah and Bahrain - last week reported a drop in passengers on Middle East and Africa routes during December.

Both BA and KLM have suffered following the events of September 11.

The industry-wide crisis had led to speculation that the schedule-sharing pact - which is intended to cut costs - could be the first step towards full merger between the airlines, which have slashed jobs and cut routes over recent months.

But the spokesman today said the airlines were not in merger talks.

BA and KLM have held such discussions in the past, but the negotiations broke down in September 2000.