On the face of it the bilateral deal announced last Thursday between Europe and the United States was bad news for UK Ltd. Many thought that they had been let down, the unanimous vote of transport ministers indicating that the current British government had also thrown in its lot with the continentals. Yes bmi has gained its long and hard fought for rights from Heathrow to one of the two New York airports, and deservedly so, with Aer Lingus (which also has slots it can redistribute) hanging on to its coattails perhaps regretting its withdrawal from oneworld. If O”Leary were to purchase the airline and dump EI”s Ireland routes (where he is already strong from alternative London airports) that could be very interesting. A Ryanair A380 out of Heathrow!
But even allowing for the fact that the deal appears to be one-sided is it that bad for the British? True, the European airlines still cannot sell tickets between US cities whilst American carriers, in theory at any rate, could market say Heathrow to any point in Europe. The argument is that America is a sovereign state and it is an internal market, whereas the UK to, say, Luxembourg is between two countries. Foreigners cannot own more than 25 % of US airlines and the ”Fly America” rule, whilst slightly liberated, will essentially still require those in government employ to only use home brewed carriers.
Where the UK does win is with the ability to open up alternative gateways in the United States, and even more interesting, from mainland Europe.
For the American carriers the news is not that good. They mostly fly to the major European cities in any event and to set up an international operation at one of the larger domestic hubs is thwart with problems, from an operational point of view and union-wise. Yes Continental, Delta, Northwest and US Airways have straight away indicated moves into Heathrow, but in a practical sense that will not be so easy. The problem is called slots, and the supplementary question, timings. Trading with your alliance partners is a good idea in theory, but would it actually happen? Virgin has already said that it is exploring the possibilities of services from Amsterdam, Frankfurt, Milan and Paris and there can be little doubt that BA is evaluating possibilities from continental points. There is every indication that British Airways will move its US ” Gatwick operations to Heathrow and rather like Virgin treat the south London airport in the main as a leisure hub as regards the Americas.
Historically the USA carriers dominated the Atlantic but the emergence of a strong British Airways under Lord King and Colin Marshall, and later the very aggressive Virgin Atlantic helped to destroy Pan Am and TWA, the final nail in the coffin being the withdrawal of United Airlines from the New York route, but retaining Chicago. The rules were the rules. Only two American carriers were allowed at Heathrow. Delta Air Lines took over the second US New York slot but was frustrated by only offering Gatwick.
One thing for sure, whilst BA and Virgin are still Europe”s top airlines in terms of winning awards and quality of service, the Americans are catching up fast, Continental with its BusinessFirst and the new upgraded American Airlines business class product very competitive. Delta is also ready to introduce flat beds. Air France would have difficulty in marketing London out of say Chicago, but Virgin (or BA) from JFK or Newark to Paris, that is a possibility.
The statistics (all from OAG) make for interesting reading. British Airways has 44% of all Transatlantic flights out of Heathrow, American Airlines 16% and Virgin Atlantic 14%. If you think that BA is dominating look at the continental gateways. At Frankfurt, Lufthansa take 47%, and at Paris Air France 49%. When it comes down to the most popular European point London leads with about half of all services to and from New York. Heathrow, Gatwick, Stansted and Luton account for 32 flights per day. Paris has 10, Frankfurt six and Amsterdam four.
Will the fares come down? Yes there will be the occasional publicity outburst typified by Virgin offering a ”45 one way economy fare last week as a short term promotion, but during the summer anything under ”400 return is not likely to happen. bmi will certainly come in with strategic offerings in business (J) class but even at the present time there are nine carriers (American Airlines, BA, Continental, Delta, Northwest, Virgin and US Airways + Air India and Kuwait) Transatlantic ex-London carriers , many with heavy loads at the front end. Why discount? See how the market plays out.
Who benefits from the horse trading? In the end the passenger. More competition means a better product. It keeps the current incumbents on their toes and sets new goals for competitors. March 2008 is going to come round very quickly. By then the Boeing 787 will have flown and the A380 introduced into airline service. The fresh North Atlantic rules will actually happen. And a certain new airport opens. It”s called T5 and it is at Heathrow.