Open Skies: a year on
It is just under a year ago that the Open Skies agreement between the US and the EU came into force. Much was expected of this deal, including lower fares, a wider choice for passengers at Heathrow and grand economic benefits.
The majority of the industry welcomed a deal that had been so long coming, some fervently. Jacques Barrot, the then EC transport commissioner, was among is hottest supporters, claiming it would bring "up to €12bn in economic benefits and up to 80,000 new jobs."
Others, while applauding the broad concept of an open skies deal, were more critical over what had been agreed. BA's chairman Martin Broughton was among this number, feeling that the signed deal unduly favoured the US.
It may be difficult now, after months of doom and gloom for the aviation industry, to recall the excitement and hopes that the deal roused, or the scramble for slots. One airline, Continental Airlines paid $209m (then £105m) for four of the coveted slots at the airport.
A year on, how is the deal now seen? First a few facts. The deal, among other provisions, opened up London Heathrow Airport to any carrier which wanted to run transatlantic services from there. Previously, under a long standing agreement, only four, BA, Virgin Atlantic, American Airlines and United Airlines, had been permitted to do this.
Under the new regime, four new carriers began transatlantic services from Heathrow: Continental, Delta Air Lines, Northwest Airlines and Air France. The first two shifted services from Gatwick Airport to Heathrow and these are still operating. Air France stopped its Heathrow-Los Angeles in November after seven months. Northwest, which was taken over by Delta last autumn, ended its service to Seattle in January.
Unsurprisingly the EC, which negotiated the deal with the US, sees it as a success. A spokesman said: "We think it has gone extremely well. Obviously the first year has been overshadowed by the downturn in the economy and its impact on the aviation industry
"But the figures show there has been quite an increase in services. There has been a 20% increase in transatlantic service out of Heathrow compared with 2007 and there is now double the number of direct services to US cities."
Continental and Delta also both see the deal, again predictably, as beneficial. Hershel Kamen, Continental's vp security and regulatory affairs, said: "It has been very positive for us. It has been our aim for many years to get access to Heathrow. We have been working on that for more than a decade.
"It is the preferred airport for London."
Dave Bishko, Delta's managing director for alliances, said: "We have been pushing for this for years and years. Heathrow has completed our portfolio.
"We started as soon as Open Skies came into force on March 30 with two a day to JFK and one a day to Atlanta."
Delta acquired its slots in an arrangement with Air France, a fellow member of the SkyTeam alliance and its partner in a joint venture to pool transatlantic revenues.
Initially, Mr Bishko said, load factors on the flights were "quite solid - fully up to our expectations" but from last spring, the airline industry has been hit first by unprecedentedly high fuel prices and then by falling demand.
Fares have gone down, along with passengers, especially in premium seats. But how much this is to do with the recession and how much to do with Open Skies is hard to fathom. This is a point both carriers, the EC and airline analysts like Andrew Solum, director of Travel Industry Associates, all agree on: there is no way of saying where the blame/credit lies for the drop in fares.
There is also not much sign that the agreement has created $12bn of economic benefits or 80,000 jobs.
But if the aspects of the deal which were expected to yield positive results have not quite lived up to expectations - Delta's and Continental's satisfaction apart - what about the areas which were greeted with scepticism from the start? This is mainly the second stage of the deal .
Again some facts. BA's misgivings were that the first stage of the deal met the wishes of the Americans for full access to Heathrow while the second stage, which would give benefits to the Europeans, had yet to be negotiated. These were, mainly a relaxation in the US's strict rule on foreign ownership of American carriers and cabotage rights.
The first prevents a foreign company owning more than 25% of a US airline while the lack of cabotage rights stops EU carriers from flying from one US city to another. (The current deal allows US carriers to do this in Europe).
BA's views have not changed over the year. "The deal has brought much more competition at Heathrow with extra airlines coming in on transatlantic routes, which is good from a customer's point of view.
"But as we have always said, it needs to go further. We are looking for a more liberalised environment on the other side of the Atlantic to see more competition," it said.
Just how realistic this is is also impossible to say. So many factors are at play. Already two rounds of talks on stage two have been held, both last year, first in Slovenia and then in Washington. Both were held under the outgoing Bush administration so little if any progress was made.
The third set of talks is due to start in late June in Brussels. But again the chances of success look slim.
While Barack Obama's new administration is in power, there is still "a number o f post to be filled" the EC spokesman said. These include the likely people who will run US policy and strategy for stage two.
What that strategy might be, said the EC, is so far "opaque." President Obama made some mild remarks during his election campaign about protecting US jobs and interests which some saw as a nod towards protectionism.
More likely his fellow Democrats in the Senate and the House of Representatives are likely to adopt a tougher stance on this. Congress, in the past, has been where attempts to dilute the 25% rule have faltered. It is hard to see any progress being made this year with the Democrats, the more protectionist of the two major US political parties, more strongly in control.
Cynics might say that it is hard to see any progress being made at all, with the Americans, having secured their prize of access to Heathrow, seeing no need to rush into concessions.
But for the moment and perhaps for many months to come, it seems like a deal half done, a deal that is not finished.
"Gatwick looks a sad place now", Mr Solum said. "And those who expected to see Lufthansa 747s powering down the runway at Heathrow for America or BA Triple Sevens for Rome, well we have never seen them.
"Maybe at this time they can not afford it. But time will tell. The agreement could also expire if the second stage is not agreed."
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