Tue, Mar 06, 2007
Shares Slip As Control Over Heathrow Threatened
This weekend's news of an agreement between the United States and
the European Union regarding the long-bandied "Open
Skies" deal was met by nearly everyone in the commercial airline
industry with guarded optimism... but investors in British Airways
think the deal flat-out stinks.
On Monday, those investors voted their disapproval with their
money, as shares in the UK carrier experienced their biggest drop
in two years.
The reason for the drop? An Open Skies agreement would expose
British Airways to new competition at London's Heathrow Airport,
according to Bloomberg. Currently, BA competes only with Virgin
Atlantic, United Airlines and American Airlines (which has a
code-share deal with BA) for lucrative trans-Atlantic flights out
of Europe's busiest airport.
The fear is that Open Skies wouldn't only open the airways.., it
would throw open the playing field at Heathrow, as well, for new
carriers to begin service from the airport.
"The deal agreed last week could have deep implications for the
airline, when you consider that the majority of BA's profits come
from routes on the North Atlantic," said Panmure Gordon broker Gert
Zonneveld. As much as 60 percent of the carrier's revenue comes
from trans-Atlantic routes.
Shares in British Airways closed Monday about seven percent
lower, or $9.65. At one point, shares in the airline had fallen
nearly 10 percent.
The tentative Open Skies agreement goes before the European
Commission on March 22. British Airways chairman Martin Broughton
doesn't mince words when asked his opinion of the deal.
"Greedy American eyes are on Heathrow," he said Monday. "We know
that's what they're after, and it's a very single-minded
approach."
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