I have to blog about the proposed “open skies” agreement between the U.S. and EU – if you don’t know what I am talking about click here. If you don’t care about it then perhaps ignore this blog.
Substantially the arguments come down to this. Any European carrier will be able to fly from any European country to any city in the United States. And in return any U.S. carrier will be able to fly to any EU country.
And now the sticky bit. The U.S. carrier will be allowed to fly onto another EU country (effectively getting fifth freedom intermediate rights and thus behaving as an EU carrier), whereas European airlines won’t get the same rights in the U.S. So Europe becomes one big open market for the U.S. carriers, but the USA effectively remains “50 individual countries” that you can’t fly between.
The US already has “open skies” with at least 20 Europe countries, but of course, getting the right to fly around France is hardly worth a candle compared to being allowed to fly between the EU member states.
Not surprisingly, carriers like Aer Lingus, and Iberia are delighted – the agreement will give them new rights. BA and Virgin are fuming because they are based at London Heathrow, and this is what the whole deal is really all about.
The UK-U.S. routes account for 40 per cent of trans-Atlantic traffic and Heathrow is by far and away the most important airport (only BA, Virgin, United and American can fly between Britain and the USA from here). BA is said to make three quarters of its profits on the trans-Atlantic routes because of the premium traffic it generates.
From the UK business travelers’ point of view:
“Open skies” will be a big win. No doubt about it. Next week I am flying Business from London to New York –it is half price if I go via Paris, Frankfurt, or in my case Zurich than if I go direct. “Open skies” will give more competition.
But – and this is something often overlooked – at the back of the bus, in economy, the UK price is very cheap because there is so much capacity. The cheapie seats are sold off in the discount market as incremental revenue to the higher-yield business seats.
From British Airways' and Virgin's point of view:
You are right to oppose the agreement. BA stands to lose its crown jewels with nothing in return. Virgin has already been refused permission to fly in the U.S. on spurious ownership grounds. It is clear the U.S. is not about to open up its domestic market in real terms, and anyway, who wants to take on American, United and JetBlue on their home turf besides Sir Richard?
From the European regulators' point of view:
You have got the best deal you could, but it is not good enough. You are so desperate to get a deal before the U.S. presidential election gets in the way that you have sacrificed Europe’s biggest airport and the airline for whom America is the most important market, for the sake of everyone else. You will regret this when you are bailing out European carriers in the future.
From the Americans' point of view:
You can’t believe your luck. Europe has agreed to open up the continent, and you have given beads back in return. Your airlines may be basket cases today, but that won’t be forever. Nope. This is a winner takes all. And you have scooped the pot.
p.s. Don’t listen to the nonsense about how Heathrow is already full. It is full but that doesn’t mean any carrier that is determined can’t and won’t buy slots to start flying from there. Remember, American Airlines only started with a handful of slots when it began at Heathrow, but still managed to grow like a weed.
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