ON THE SOAPBOX: A Year of Progress
On the first Monday of each month we invite a true personality in the air transport industry to say a few words on a subject of his choice. In June 2004 Sir Michael Bishop, chairman of bmi, articulated on the UK ” USA bilateral air agreement, known as Bermuda II. Little did we all realise that 12 months on Sir Michael would have realised his dream, of operating long haul out of Heathrow, but instead of the glory trail to the US, he would be celebrating as the breakthrough his first route to India. We can only speculate what another year will bring. Sir Michael believes that the government of India has in fact been more forward looking than that of America, the home of free enterprise. He explains.
”Last month I travelled to India to launch our first ever bmi long-haul service from Heathrow to Mumbai.
India is an amazing country and Mumbai an exciting and vibrant city. I hope as many people as possible take the chance to visit and sample what the destination of Mumbai has to offer.
The launch of our four times a week service has come at a significant time when India and Mumbai is forecast to grow over the coming years and this will have a positive impact on the number of businesses and tourists it attracts to the area.
However, India was not our first choice of destination to begin operating long haul flights from Heathrow.
For many years we have made it clear that we wanted to enter the market between Heathrow ” our main operational hub ” and the United States. More than 16m people fly between the UK and the US each year ” even in the tough travel market of the last few years.
It is also one of the most heavily regulated. Only two British and two US airlines are allowed to fly from the world”s busiest international airport, Heathrow, to the United States. And even from other UK airports, there are a string of regulations that hinder competition.
This is somewhat ironic. After all, the United States and the UK have been at the forefront of air travel deregulation in their own markets. The US blazed the trail for liberalisation of domestic travel and we saw the results as their market boomed.
The UK led Europe in introducing domestic deregulation, allowing my own airline, as well as others, the opportunity to bring new services to the consumer. It was then at the forefront of encouraging deregulation in Europe, creating a massive, open market in air travel.
No traveller would argue about the benefits this has brought. European air travel is now more competitive than at any time in the history of the market. Even the airlines would accept that, whether willingly or not, they have developed healthier and more effective businesses as a result of new competition. The proliferation in the number of low cost carriers has only been possible through the creation of an open sky environment within the EU.
So how strange that a quirk of history means the UK-US market is the least competitive ” and most expensive ” in Europe. Because of Bermuda II, most business class fares from Heathrow to the States are higher than from equivalent European airports where and open skies agreement is in place.
It is therefore timely that if you need any justification on why deregulation benefits passengers and airlines you only have to look at our recent entry into the Indian market. The introduction of much needed competition at Heathrow has had an immediate and tangible affect on the market between the United Kingdom and India.
This has happened in two ways.
Firstly, we have already seen major shifts in the fare levels as a result of the entry of a third UK long haul carrier onto this route. Since our entry onto the London ” Mumbai route we have witnessed a fall in fares by an average of 15%. As we have done on every route we have entered, we have come in with lower, more competitive fares, which have forced our competitors to follow suit.
And secondly, there has been a real benefit for passengers who want to travel to and from India. Until the recent progressive deregulation agreed by the UK and Indian governments which enabled bmi to enter the market, a staggering 53% of all passengers flying between the two countries were forced to fly via a third country. By being forced to fly indirectly, usually via the Middle East, passengers were being denied the opportunity to take quicker, more convenient flights and home carriers, both in the UK and India, were losing out to airlines from neither the UK or India. With deregulation of the market creating greater access and more capacity being offered to more destinations, this totally unacceptable burden on travellers between the two countries is being lifted.
The Indian Government”s courageous move means there is now more competition, greater choice and lower fares for passengers and a market that is stronger and favours home carriers.
The USA and UK administrations would do well to look at the way India has adopted this evolutionary approach to opening up the routes to bring about genuine competition. The opportunity is there for real progress to be made in escalating the market between the UK and the United States. The governments must set aside the arguments from those vested interests who believe they have much to lose from deregulation and move forward so that, as in India, passengers and airlines can prosper in a free and open market”.