I was very interested to read Sir Richard Branson”s Soapbox column a few weeks ago and his personal views of the negotiations between the United States and the European Union.
I totally agree with Sir Richard that international aviation regulation needs to be brought into the 21st century. I have been saying the same thing since well before Virgin Atlantic took to the air.
I am also pleased that Sir Richard welcomes competition. We already compete on services to Mumbai where bmi”s entry into the market saw fares drop. Let”s give the same benefit to passengers travelling from Heathrow to the US.
Our latest research shows that normal business fares from Open Skies countries are consistently 20-30% lower than comparable fares from Heathrow to the US.
However, Sir Richard takes umbrage at the accusations that Virgin Atlantic Airways is protectionist. The fact is that Virgin Atlantic is protected in the transatlantic market by the outdated, illiberal and illegal Bermuda II agreement. This agreement has inhibited UK-US aviation, kept fares artificially high and protected the incumbents from competition. The European Court of Justice ruled it illegal in 2002.
bmi knows a thing or two about removing protectionist barriers. We were the first to break down the monopoly on domestic trunk routes out of Heathrow to Edinburgh, Glasgow and Belfast. We were the first to take advantage of European open skies attacking the cosy duopolies on European routes from Heathrow to Amsterdam, Dublin, Paris and Brussels. Where bmi entered the market, fares plummeted and we did so offering a product more than equal that of the existing carriers.
I can well remember a review conducted by the CAA that observed that on routes where there were no new competitive services by bmi, the competition between the two national airlines serving a route was described as ”less than vigorous”.
Thanks in part to bmi”s efforts those days in Europe are gone. It took over a decade of change. We now have a truly liberal internal market governing aviation within Europe. That in turn has helped bring about competition not only from traditional full service carriers, but also from the proliferation of no-frills carriers.
On the other side of the Atlantic, the United States government took a similar approach to their domestic market in the 1970s. The process again took several years and several steps, but the effect was the same. Old monopolies were dismantled. Fares came down. Passengers got greater choice.
Unlike the other major European aviation players, the UK has resisted Open Skies. Why? Is it because, as BA and Virgin say, it is an unbalanced deal? Or is it, because Open Skies threatens their protected position at Heathrow?
We are told that in return BA and Virgin need access to the internal US market. I applaud Sir Richard”s attempts to launch a domestic US carrier. I believe he can succeed as he has done in Australia. But, his plans should not be allowed to hold Open Skies as hostage.
And, despite what others say, European carriers already have significant access to the US domestic market through alliances and other marketing partners.
In the meantime, the US has announced an important change regarding their internal policy on foreign control of US airlines. The US proposal would permit minority foreign investors greater say in the day-to-day commercial decisions of a US-based airline.
When the European Commission was granted the mandate to negotiate with the United States, I said that we supported the ultimate goal of an Open Aviation Area ” effectively combining the two biggest internal and international markets into one aviation bloc. However, like most observers we recognised that just as happened within the EU and the US, liberalisation would need many years and several phases to achieve that ultimate goal.
On 18 November, the Commission and the US Administration concluded a first phase package for EU-US air services. That agreement, still subject to approval by the European Union member states, would allow any EU or US airline to fly between every city in the European Union and every city in the United States without restrictions on frequencies or fares.
I believe that this agreement is a major milestone on the road towards an Open Aviation Area. It covers not only the traffic rights that are traditionally part of aviation bilaterals, but also regulatory convergence, essential to give us certainty in planning our business and to ensure that similar regulation applies to both sides.
I firmly believe that this proposal offers further and significant market access opportunities. It helps create the environment against which the EU-US deal can be approved.
We have reached a very important stage of the EU-US negotiations. This week, the European Union Transport Ministers meet to discuss the progress in those negotiations and the proposed US policy change on ownership. I am confident that we will see a positive message from the ministers” deliberations paving the way for formal approval of the EU-US agreement next year. If approval is not forthcoming, then this will be a major blow to liberalisation and a victory for protectionism.
Sir Michael Bishop ” chairman bmi