Airline Alliances Key To Making It Work, Group Adds
It's been a long time coming... and for some, not long enough.
The much-vaunted Open Skies agreement between the United States and
the European Union comes into effect Sunday... and is set to
radically shake-up the transatlantic air travel market, according
to Deloitte member firm aviation specialists.
As ANN has reported, under
the new agreement airlines will now be able to fly to the US from
any EU airport, not just their home country, and vice versa. Many
in the UK believe the agreement serves greater benefits to American
carriers -- as under Open Skies they are now allowed
relatively open access to Heathrow, space permitting -- than
British and other European airlines.
However, Graham Pickett, partner serving the aviation industry
at Deloitte UK, believes easing on restrictions will provide
windfalls on both sides, if airlines work together.
“The Open Skies agreement could lead to greater
competition between airlines for flights from Heathrow," Graham
Pickett, partner serving the aviation industry at Deloitte UK,
noted.
Previously just four airlines could operate flights from
Heathrow to the US. “However, airlines keen to rival the
incumbent players may find it difficult to secure landing slots.
Trading in slots, a bit of a grey area in terms of regulation, can
be an extremely expensive business, with prime slots potentially
changing hands for up to £30 million ($60.2 million US) a
pair.
“Alliances between carriers are seen as the best way to
open up routes from Heathrow to the US, with members of the Star
Alliance looking to British airline BMI, which has the second
highest number of slots at Heathrow, to help them.
“There may also be some M&A activity as airlines shape
up to this new world, especially in the second stage of the Open
Skies agreement, when current regulations on European investment in
American airlines could soften.
“All this movement and
competition among airlines as they maximize their new freedom is
generally thought to be good for the consumer. Logically, if more
airlines are competing for passengers on the same route, prices
should fall, but these reductions are most likely to favor business
class tickets.”
“US airlines have been preparing for the change. Smart
organizations are already planning for the effects of Open Skies in
rationalizing their networks, hubs and flight operations,”
said Terry Kurtenbach, Co-leader, Global Transportation, and
Deloitte LP partner, "The effects of Open Skies may already be
occurring as a catalyst for consolidation in the US air carrier
industry."
In 1977, the Bermuda II Agreement was signed, allowing only a
handful of airlines -- British Airways Plc (BA), American Airlines
Inc, United Airlines Inc and later Virgin Atlantic Airways Ltd --
to operate between London Heathrow and the US. Widely regarded as
one of the most restrictive bilateral aviation agreements ever,
this will be swept away by the Open Skies treaty in March 2008.
Further analysis on the Open Skies agreement can be found at the
FMI link.