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Tue, Feb 05, 2008

Open Skies Equates To Musical Chairs For Airlines

Carriers Shuffle Schedules, Swap Routes Into Heathrow

The news lately has been full of new transatlantic airline partnerships, and with the Open Skies agreement between the US and Europe set to start March 30, the puzzle pieces are starting to form a picture.

The relaxation of what was called the Bermuda 2 bilateral agreement between the US and the UK for years will allow more US flights into Heathrow Airport, considered London's premier business airport and a jewel sought by US carriers. But to open up landing and departure slots at Heathrow, some flights serving European cities from secondary US markets will have to move to London's Gatwick airport, or elsewhere.

The Financial Times reports the changes will be welcomed, for example, by oil executives shuttling between Texas and their projects in the Middle East and Africa. British Airways is shifting its Dallas and Houston services from Gatwick to Heathrow, so connections should be easier. But its flights to Detroit will be dropped, and its flights to Warsaw, Poland will move to Gatwick.

In turn, service between London and Detroit will be picked up by Northwest Airlines starting May 1. Northwest, which was not allowed to serve Heathrow under the Bermuda 2 agreement, partnered recently with Air France KLM to gain access.

Northwest, which carries lots of Boeing and Microsoft execs working with codeshare partner Alaska, will also add service between Heathrow and Seattle on June 1. But European businessmen accustomed to convenient Air France KLM flights to Heathrow from Eindhoven and Rotterdam will see those flights discontinued, to be replaced with less convenient service to London City Airport.

Among other recent partnerships which suddenly make sense are Delta, also working with Air France. As ANN has reported, the two carriers have agreed to share revenues and expenses on some routes. The Times reports starting March 30, Delta will fly between New York and Heathrow twice daily, and serve Atlanta once a day. In exchange, Air France picks up a daily flight to Los Angeles.

Conversely, Air France will drop five of its 12 daily round trips to Paris, keeping only a few flights at peak departure times. In its defense, the airline points out it operates services to Charles de Gaulle and Orly from London City.

For three decades, US airlines have been deregulated, and at least a full generation of US airline customers have become accustomed to losing service on routes that were not profitable for carriers. In Europe, regulation has, until now, preserved many flights businesses found convenient. Open Skies may be a difficult adjustment for executives of European companies, as they suddenly find themselves relegated to less productive schedules and less convenient airports by market forces unbuffered by government protections.

One European carrier known for bold moves is playing it conservative on Open Skies. Virgin Atlantic is holding off on adding service between New York and European cities outside the UK, observing that the Open Skies agreement could face trouble when it comes time for Phase II.

The next step in those negotiations is expected to bring pressure for relaxation on foreign ownership in US airlines, something which has been a non-starter so far in the US.

FMI: www.delta.com, www.virginatlantic.com, www.nwa.com, www.airfrance.com

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