BRITISH Airways was last night given clearance to return to the top flight of the London stock market.

The restoration of the airline as a blue-chip company was confirmed following a quarterly review by the FTSE Equity Indices Committee.

It was a day of double celebration after the European Union gave its blessing for BA's franchise partner, GB Airways, to form an alliance with Spanish flag carrier Iberia.

It said the deal would result in lower fares as the airlines would be able to co-operate extensively in areas including joint network planning, capacity, pricing, sales, use of profit-sharing and joint pricing and management of freight.

The return to the FTSE 100 will go some way towards restoring faith in BA, which has been publicly lambasted by budget airline Ryanair as well as being hit by strikes in recent months.

BA, which will make its return to the FTSE 100 Index on December 22, lost its premier status in March after its share price crumbled to 86p in the build-up to the Iraq war.

However, BA is now among London's 80 biggest companies, with a market value of £2.38bn. Shares have trebled in the past nine months to 249p, although shares were down 7p to 220p in a weak market yesterday.

BA has been promoted along with recruitment services company Hays, which is returning to the top flight after a brief absence. The pair will replace Provident Financial and pubs group Mitchells and Butlers.

* Newly floated Northumbrian Water has sailed into the FTSE 250 official list.

The company was effectively a 250 company by size after taking full listing on September 23.

But yesterday marked its formal indexing, when it was ranked the 219th largest company on the London Stock Exchange.