A rare event took place at the CAA headquarters in London”s Kingsway last Thursday and Friday. This was a tribunal, technically called a ”scarce capacity hearing”, to decide which airlines could take up some 21 extra return air services between the UK and India agreed upon by the two governments. The last similar hearing was in 1999 regarding the Virgin Atlantic wish to fly to Cape Town, which it now does. For practical reasons 14 of the slots will be available for summer 2005 and a further 7 for winter 2005/2006. At the present time British Airways flies daily to both Mumbai (Bombay) and Delhi, twice weekly to Chennai (Madras) and three times per week to Kolkota (Calcutta). Virgin Atlantic is the new kid on the block operating three times a week to Delhi via a codeshare with Air India. bmi wants to join the fray and all three airlines agree that there is considerable potential, pointing out that many passengers to the sub-continent are now forced to fly on third party airlines usually via a stop-over in one of the Gulf states. With the new capacity, in the main, passengers will prefer non-stop flights should their destination be one of the ”gateways” but for India”s regional cities, and with very competitive fares, the airlines of the UAE are unlikely to miss out. The expanding demand for more seats between the UK and India is a proven fact.
The importance of the hearing was confirmed by the appearance of all three airline bosses to put their cases. Rod Eddington for BA, and knights of the realm Richard Branson for Virgin Atlantic and Michael Bishop for bmi.
British Airways argument is straight forward. It wants to increase its frequencies from Heathrow to both Mumbai and Delhi from a daily to a double daily service, step up the Chennai operation from two to six days, plus start a new three per week service from Heathrow to Bangalore. BA plans a code share with Jet Airways adding seven additional Indian cities and notes that it was the instigator of the new bilateral agreement which has made these new services possible. BA points out that there are presently 22 airlines flying directly or indirectly between the two countries and the award of the routes to the airline would not limit competition. The airline also says that if the additional UK/India frequencies are divided up between all three UK carriers it would weaken the UK's position in the market and Heathrow's status as a hub.
Virgin Atlantic got into India via the back door, in truth an admission by Air India that it was not serving the route properly. The airline began flights in July 2000 and since then has carried almost 200,000 passengers. The financial arrangement between the two carriers has not been made public. What Virgin wants to do now is in effect legitimise its services and operate them in its own right although in theory it could still buy a further code share. Sir Richard Branson is requesting daily flights to Delhi with Mumbai added to the route network also on a seven times per week basis. The airline would probably use the Airbus A340 for which it has a large order back. Virgin Atlantic has limited slots into Heathrow and in order to accommodate an Indian operation it would have to juggle around its flights or purchase extra landing positions from another airline. One would suspect that it would be loath to reduce frequency on any route and with the exception of pure leisure destinations Heathrow is proven to be a much better airport from a revenue point of view than the alternative Gatwick. Moving a service to LGW would not be favoured but maybe necessary. Sir Richard announced during the hearing that he was seeking a partnership and possible investment with an Indian airline. In August, India's Air Deccan said it had held exploratory talks for a partnership with Australia's Virgin Blue, in which Virgin Group owns 25%.
These of course are some of the questions raised at the hearing, the CAA panel consisting of Board members Dr Harry Bush and Roger Mountford, plus Alex Plant, head of international aviation policy, and Geoff Elsbury, manager of airline licensing and consumer issues. As each airline put forward its case it was cross-examined by the panel, and by its two competitors.
What makes the hearing particularly interesting is the application of bmi to operate from Heathrow to India. bmi boss Sir Michael Bishop has always cherished a wish to become a long haul operator out of Heathrow and for a long time focused solely on the lucrative North Atlantic market. Still frustrated, three years ago he established a long haul operation at Manchester flying initially to Chicago, then Washington, last week introducing Las Vegas and at the end of the month services into the Caribbean. There is little doubt that this unit has established itself as a high quality experienced operation that could easily be fitted into the airline”s Heathrow hub. With 14% of the LHR slots bmi would have no difficulty in finding space for the new services which would also work in with its Star Alliance arrangements. bmi is committed to T1 where it is well established and has both business and Diamond Club lounges. Manchester has proven the Airbus A330 operation and the long haul Heathrow route would in effect help promote bmi”s LHR services and visa versa. Fares from Manchester to North America are in the main much cheaper than those out of Heathrow, particularly for premium class passengers.
As part of the new bilateral Air India is adding new capacity on the London sector starting December with five new flights. Five more services will be added in April 2005. By the summer of next year Air India will have a total of 23 flights to UK ” 13 terminating and ten allowed to go on to the USA, a result of arrangements made long ago when it was not possible to fly to the US direct from India. Kuwait Airways also continues this tradition but El Al dropped its New York flights from London some years back. Other Indian airlines are also looking at the routes including Jet Airways, already visible in the UK and with a strong management team in place.
The CAA panel is due to report within 15 working days of the conclusion of the hearing, that is by Friday 3 December. If bmi were to get some slots they would be the first British scheduled airline other than BA and Virgin to operate long haul from Heathrow since British Eagle in the late sixties.
The conclusions will be carefully considered by all parties. There is a right of appeal to secretary of state for transport Alistair Darling which could further muddy the waters. We shall wait and see.