Is Heathrow DL's next destination

[WorldTraveler]

US-EU reach tentative deal on "open skies" pact
Fri Nov 18, 2005 07:14 PM ET

(Adds Virgin Atlantic reaction, paragraph 16)
By John Crawley

WASHINGTON, Nov 18 (Reuters) - The United States and the European Union reached a tentative deal on Friday to dramatically expand aviation service and boost competition on both sides of the Atlantic.

Negotiators made substantial progress in the U.S. State Department-led talks this week on the breakthrough pact, which must be reviewed by EU transport ministers, who meet next month.

Europe is conditioning approval on a crucial side issue -- the U.S. proposal to ease some limits on foreign investment in American carriers. European negotiators first want to ensure the Transportation Department plan is finalized and that it would facilitate greater investment opportunities and wider access to important travel markets.

Daniel Calleja, the European Commission director general for aviation, called the "open skies" agreement a "significant step" and said chances for approval in Europe were good, if the ownership question moves "in the right direction."

The agreement has remained elusive for years and does not require U.S. congressional approval. Nevertheless, there has not been universal support among lawmakers, airlines and labor groups in the United States for further opening the trans-Atlantic market. The Bush administration said it plans to move forward carefully on Capitol Hill.

If approved, the deal would eliminate remaining restrictions on service and routes between European and U.S. destinations. It would also effectively remove fiercely protected competition barriers to London's Heathrow airport, Europe's foremost gateway for international business travel.

The agreement would not impose restrictions on the frequency of service, the type of aircraft used, or routes selected by airlines.

But many large metropolitan airports, especially in the United States, are crowded and space is often tightly controlled for safety. The agreement would grant carriers clearance to apply to regulators for operating rights.

Fares could be set freely and carriers would be granted unlimited rights for service beyond the 25-member EU states and United States to points in third countries.

"We want to open the gates for vigorous competition," said Sen. John Byerly, a senior State Department official and the lead U.S. negotiator.

Negotiators for both sides came close last year to securing a broad-based deal to expand where airlines can fly in the trans-Atlantic market, but European ministers rejected it.

The United States had liberalization agreements with most European countries before the European Union assumed authority for negotiating a universal agreement.

The primary holdout has been Britain, which has been reluctant to give up more access to Heathrow. Currently, only two U.S. carriers - United Airlines (UALAQ.OB: Quote, Profile, Research) and American Airlines (AMR.N: Quote, Profile, Research) can fly there, and only on a limited basis.

British Airways, the dominant carrier at Heathrow, did not fully embrace prospects for liberalization.

"Right now, the U.S. proposal falls short of the legislative solution that could have delivered a very real transformational change to the restrictive ownership and control rules," said Andrew Cahn, the director of government and industry affairs for British Airways (BAY.L: Quote, Profile, Research) .

Virgin Atlantic [VA.UL] was also critical of the deal. The airline founded by British entrepreneur Richard Branson said Europe rejected last year's proposal for favoring the United States. "Nothing has fundamentally changed," Virgin Atlantic chief executive Steve Ridgway said in a statement.

Earlier this month, the Bush administration transportation planners proposed to ease restrictions on overseas investment in U.S. airlines, giving foreign investors more input into marketing, routing and fleet planning.

Seventy-Five members of the House of Representatives, including 22 Republicans, have written to Transportation Secretary Norman Mineta opposing the ownership change. (Additional reporting by Jeff Mason in Brussels)

 

[JFK777]

HOW MUCH OF DL'S LHR WOULD JUST MOVING ATL & CVG FROM LGW? JFK WOULD GET A FLIGHT OR TWO BUT SLOTS WOULD BE THE ISSUE. ARE KLM OR AIR FRANCE GOING TO GIVE DL THEIR SLOTS? AN AGREE MENT GIVES DL THE RIGHT TO BID FOR SLOTS BUT NOT A SLOT AT A DESIRABLE TIME. GOOD LUCK.

 

[lpbrian]

I can just picture a thousands of Londoners just dying to see Atlanta.

You know WT, there is a whole wide world outside of Atlanta.

 

[WorldTraveler]

I know there's a big wide world out of Atlanta... which is why Delta has more flights from ATL than any other airline has from any other city in the universe. And it's also why DL has built ATL into one of the largest transatlantic gateways in the US. Maybe it's because DL knows how to provide exceptional air service to a city AND connect hundreds of other cities to the rest of the world far better than any other airline.

And I don't believe I ever said LHR access for DL would be exclusively from ATL. In fact, DL has long said they want to serve London from more US cities which is exactly what I would expect them to do. And yes, they will need to obtain slots but DL and CO both will spend the money it takes to obtain a competitive presence at LHR... although the agreement is not likely to take effect for another year. And right now the US Senate is justifiably ticked that the DOT has taken it upon itself to change treaties (particularly airline ownership restrictions) on its own since that function constitutionally belongs to the Senate. Why is why the topic is a question and not a statement of fact.

 

[JFK777]

In the last 10 YEARS Delta has stated on several ocasions by various managements from Bob Allen to Leo Mullin to the present regime that LHR would get Delta service from 4 points: Atlanta, Cincinnatti, Boston and JFK. Today that may not hold true, I see only 3 points being practical today(not Bos) but JFK should be the first for competitive reasons.

 

[whodoyouthinkyouare]

The problem I see is that it's going to be very easy for the US to roll back the ownership changes but to suddenly deny access to open skies is going to be more difficult.

I don't believe the EU has gotten the best deal out of this and I'm disappointed we're giving access to Heathrow without more substantive change.

As to DL in LHR, it would require someone else to give up their slots. DL would also have to come up with some cash to pay for them... last time I looked DL was bleeding cash. It might not be anytime soon before you see DL at Heathrow, I think you'll see the CO colours at LHR before DL.

 

[WorldTraveler]

Of course the EU didn't get the best deal because LHR was so tilted in Britain's favor that nothing could compensate for the imbalance. Don't doubt for a minute, though, that the EU 3 heavyweights are going to move very quickly to start flying from the little EU airline's countries. All of these alliances with a half dozen European partners will get a little stressed when the 800 lb gorilla decides it isn't satisfied with dominating markets from its home country. This will be much more interesting to watch on the Euro side than on this side of the pond.

Of course, slots will have to be bought but you can bet Uzbekistan Airlines will have to weigh the value of holding valuable slots to LHR or deciding to fly to another London airport. And in reality, LGW and STN will benefit because there will be increased demand for US-London flights and some of it will spill over to the other airports. There is some capacity at other LON airports but ultimately the least economical use of slots at LHR will cave. And BA will undoubtedly expand its transatlantic offerings from LHR and will be forced to move more destinations elsewhere.

 

[boeing787]

Worldtraveler...your so full of crap...stop coming over to the UA board and worrying about our "problems." You have enough of your own.

 

[WorldTraveler]

sounds like the response I would expect from a whiny little twit that can't come up w/ a decent answer.

OBTW, brain surgeon, we're on the DL board.

 

[peasant]

Wouldn't it make much more sense for Air France to fly LHR-ATL and codeshare with DL?

They have the slots, so can just reassign from LHR-PAR to LHR-ATL. No need to purchase. They have the aircraft too, and the product.

Ditto NW and KLM.

Given the relative strengths of the EU airlines vs the US ones, I can see much of the benefits going to the EU carriers, as they switch their shorthaul flying from LHR to longhaul.

 

[B.O.B.]

I don't see DL at LHR anytime soon or at all for that matter! I think they should be more concerned about the Pilots going on strike, if the BK judge tosses their contract.

No Pilots = No LHR and No Delta!

 

[WorldTraveler]

peasant,
you may be correct that Euro carriers would like to convert some of their LHR shorthaul flying to longhaul flying but that doesn't necessarily mean that DL is interested. DL, CO, and NW are interested in gaining access to LHR because it increases their revenue opportunities. Having a European partner serve the route may not do anything for the US carrier. It is possible that a revenue sharing agreement could be put in place but pilot contracts just like the one that DL is trying to toss include provisions that limit the ability of foreign carriers to fly a route that could/should be flown by DL pilots. So, your theory makes sense only if DL can get revenue from giving up the route to a partner and if the issue of a foreign carrier flying a route is too small of an issue relative to other issues that the DL pilots give it up; I just don't think they will give up that kind of opportunity very easily. I don't think DL has revenue sharing agreements in place with its European partners other than on the transatlantic routes between their home countries but I may be wrong on that.

I'm not convinced that LHR is the end all and be all that some make it out to be since I believe DL could have a reasonable presence in London using one of the other two airports as well. I also think that the supply of seats to London will grow so quickly that the financial benefits will shrink fairly quickly. Nonetheless, DL has to develop some sort of presence from London to the Northeast and the risks of failure are much higher if they try to do it from another LON airport than if they just spend the money and buy what is needed to get into LHR. There are still alot of flights into LHR operated by other airlines that could be profitably moved to another LON airport; it will be economics driven by BA's desire to hold onto and control LHR slots that will determine how much expansion the non-incumbent US airlines will be able to do in London. Given the negative comments made about the agreement by BA execs, it seems apparent they expect to have a piece of their hide taken out as a result of the new agreement with not near enough gained in return.

 

[JFK777]

DL will fly from LHR to JFK from the beginning since that is the most obvious place to start service to. Most service by Usairways, Continental & Delta will be moving existing flights from Gatwick. Some new service will comence like DL from JFK to LHR but CAL will still fly from Newark, Houston and Cleveland. Boston may see a second US airline but I don't expect an avalanche of new service to LHR with a continuation of LGW service at the current level. DL 777 will soon be a sight at LHR.

 

[WorldTraveler]

764s, not 777s. 764s are more than capable to fly the 4000 miles or less to DL's east coast gateways. The few 777s need to be seen in Asia.

I doubt seriously that there will be enough slots and gates available (or the money to pay to get it) at LHR for any non-incumbent LHR carrier to move much of their operation to LHR from LGW. DL and CO will almost certainly have a split operation in London. I'm not sure NW will even bother serving LHR; US might move their couple flights in total - that's my prediction.

The agreement has to pass first and it isn't a slam dunk on either side of the atlantic.

 

[JFK777]

Back in 1991 this happened to airlines from other parts of the world. One thing most of us on this board overlook in error is how LHR effects only the USA. From 1977 until 1991 not even Virgin could fly from LHR, then the heavens opened when UA & AA became the US airlines at LHR, Cathay, ANA among others from the non-americas parts of this world moved there London terminals to LHR. Every major and secondary airline from Asia flies to LHR: EVA, ASiana and others. Just because back then it didn't do anything for US airlines, the rest of the world has been through this dance before, no its BMI's turn too.