EU-US Open Skies Agreed
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EU-US Open Skies Agreed
Well it seems to have taken place:
http://news.bbc.co.uk/1/hi/business/4451440.stm
Everyone seems to be talking as though all issues have been dealt with excluding the ownership one. Even so very exciting news, I dont think many expected an agreement today!
http://news.bbc.co.uk/1/hi/business/4451440.stm
Everyone seems to be talking as though all issues have been dealt with excluding the ownership one. Even so very exciting news, I dont think many expected an agreement today!
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From enplaned.********.com
http://enplaned.********.com/2005/11...-pry-open.html
Tentative EU-US Deal Would Pry Open Heathrow
Reuters breaking news. Here's our quick-and-dirty.
Key point:
The deal, if approved, would allow every EU and American-based airline to fly between every city in Europe and the United States. The deal would effectively remove fiercely protected competition barriers to London's Heathrow airport, Europe's foremost gateway for international business travel.
But still things on which the deal could founder:
Europe still wants to see if a crucial side issue -- the U.S. proposal to dismantle some limits on foreign investment in domestic carriers -- is finalized and whether it would truly facilitate greater investment opportunities in American commercial aviation companies and greater access to the biggest cities.
So no one should count their chickens. This ain't over.
We've always been cynical about the attitude of Europe (and especially the UK) towards these things. Restricting US airline access into Heathrow (LHR) has always been an article of faith for the UK govt because British Airways (BA) and Virgin Atlantic simply benefit too much from the restrictions. Between them, BA and Virgin control far more than 50% of the key NYC - London market, for instance. In fact, BA's share is above 40%, if we recall correctly.
The stated desire of the Europeans for access to the US market (such as the right to own a greater proportion of US carriers) is also something we find inexplicable. The US airline business is, empirically, a bad investment. So do the Europeans really want these rights, or is it simply a way of preventing full Open Skies by asking for something that they know the US govt can't give?
(It's worth noting that we fully support the elimination of all ownership restrictions on airlines globally, not that we think that will happen any time soon).
But let's be optimistic. Who wins and who loses? Single greatest winner is Michael Bishop and British Midland Airways (BD), which owns the second largest number of slots at LHR but can't use them to the US and so uses them mostly for money-losing European routes. Pre-9/11 Bishop bet big that he'd get LHR-US rights and ordered four A330-200s, aircraft that BD's struggled to use profitably ever since after that bet failed (insert comment about counting chickens before they're hatched). BD will be sitting pretty now.
Biggest loser might be Virgin Atlantic. Virgin has a great onboard product, but at the end of the day we think the biggest reason why it's successful across the Atlantic is that it doesn't face much competition. Virgin might well be forced into a defensive merger with the LHR operations of BD (with, perhaps, the BD's low cost operation, bmibaby, spun out). Richard Branson has certainly discussed a Virgin-BD merger before. The combination of the two in an open LHR would be extremely powerful, and be a key member of Star, assuming BD stayed in that alliance.
For BA and AA it's a mixed bag. Losing the competitive restrictions means they'll face more competition. However, if they can trade that for anti-trust immunity, it finally gives oneworld what Star and SkyTeam have, and that's worth something.
For Continental (CO), Newark (EWR) to LHR is the single biggest hole in its network and one it will want to fill as soon as possible. The rub is paying for slots. Getting the right to fly to LHR is one thing, buying LHR slots so you can actually do so is another. LHR slots are very expensive, we've heard figures like 10 million pounds sterling per slot pair. Painful given the financial circumstances of the US industry, but for CO, likely something it will want to pay (though it will do its best to force slots to be given to it, something we think will probably not work). CO is already the dominant airline in the NYC area, LHR access would cement that. There's no reason why CO shouldn't eventually be one of the top two or three airlines in the NYC to London market. Just think of all those I-bankers going out to Newark to fly to LHR...
To a lesser extent the other non-LHR incumbent US carriers would face the issue of paying up for LHR slots. Hard to see any of them not doing so, ultimately. LHR is such an important source of traffic from which CO, Delta, Northwest and US Airways have been blocked. You'd figure they'd all pay up for at least some slots to access LHR from their main hubs. LHR could look very different in a year or two, if open skies really happens. Slots now used for other purposes will be shifted to the Atlantic. We suspect most of those slots are currently being used for European routes (certainly likely to be true for BD slots). So European traffic will move to other London airports--that benefits Ryanair, easyJet and friends.
It's also potentially bad news for MaxJet, the new transAtlantic entrant (there's also EOS, but we think EOS is much less likely to survive than MaxJet: selling business class for an economy fare -- Maxjet's business plan -- seems more viable to us than selling first class for a business class fare -- EOS -- especially from London Stansted, which is hardly the preferred London airport). There's going to be a lot more capacity to the US from LHR in the future, if this happens. That will drive down pricing. In particular, if CO enters NYC-London, and British Midland tries to force its way in, then we're going to see a real jump in capacity in this market, with lots of deals. None of that is beneficial for a new entrant whose primary value proposition is price. We're not saying it's a fatal blow, but it's not a good thing.
Oh, this one will be fun to watch
http://enplaned.********.com/2005/11...-pry-open.html
Tentative EU-US Deal Would Pry Open Heathrow
Reuters breaking news. Here's our quick-and-dirty.
Key point:
The deal, if approved, would allow every EU and American-based airline to fly between every city in Europe and the United States. The deal would effectively remove fiercely protected competition barriers to London's Heathrow airport, Europe's foremost gateway for international business travel.
But still things on which the deal could founder:
Europe still wants to see if a crucial side issue -- the U.S. proposal to dismantle some limits on foreign investment in domestic carriers -- is finalized and whether it would truly facilitate greater investment opportunities in American commercial aviation companies and greater access to the biggest cities.
So no one should count their chickens. This ain't over.
We've always been cynical about the attitude of Europe (and especially the UK) towards these things. Restricting US airline access into Heathrow (LHR) has always been an article of faith for the UK govt because British Airways (BA) and Virgin Atlantic simply benefit too much from the restrictions. Between them, BA and Virgin control far more than 50% of the key NYC - London market, for instance. In fact, BA's share is above 40%, if we recall correctly.
The stated desire of the Europeans for access to the US market (such as the right to own a greater proportion of US carriers) is also something we find inexplicable. The US airline business is, empirically, a bad investment. So do the Europeans really want these rights, or is it simply a way of preventing full Open Skies by asking for something that they know the US govt can't give?
(It's worth noting that we fully support the elimination of all ownership restrictions on airlines globally, not that we think that will happen any time soon).
But let's be optimistic. Who wins and who loses? Single greatest winner is Michael Bishop and British Midland Airways (BD), which owns the second largest number of slots at LHR but can't use them to the US and so uses them mostly for money-losing European routes. Pre-9/11 Bishop bet big that he'd get LHR-US rights and ordered four A330-200s, aircraft that BD's struggled to use profitably ever since after that bet failed (insert comment about counting chickens before they're hatched). BD will be sitting pretty now.
Biggest loser might be Virgin Atlantic. Virgin has a great onboard product, but at the end of the day we think the biggest reason why it's successful across the Atlantic is that it doesn't face much competition. Virgin might well be forced into a defensive merger with the LHR operations of BD (with, perhaps, the BD's low cost operation, bmibaby, spun out). Richard Branson has certainly discussed a Virgin-BD merger before. The combination of the two in an open LHR would be extremely powerful, and be a key member of Star, assuming BD stayed in that alliance.
For BA and AA it's a mixed bag. Losing the competitive restrictions means they'll face more competition. However, if they can trade that for anti-trust immunity, it finally gives oneworld what Star and SkyTeam have, and that's worth something.
For Continental (CO), Newark (EWR) to LHR is the single biggest hole in its network and one it will want to fill as soon as possible. The rub is paying for slots. Getting the right to fly to LHR is one thing, buying LHR slots so you can actually do so is another. LHR slots are very expensive, we've heard figures like 10 million pounds sterling per slot pair. Painful given the financial circumstances of the US industry, but for CO, likely something it will want to pay (though it will do its best to force slots to be given to it, something we think will probably not work). CO is already the dominant airline in the NYC area, LHR access would cement that. There's no reason why CO shouldn't eventually be one of the top two or three airlines in the NYC to London market. Just think of all those I-bankers going out to Newark to fly to LHR...
To a lesser extent the other non-LHR incumbent US carriers would face the issue of paying up for LHR slots. Hard to see any of them not doing so, ultimately. LHR is such an important source of traffic from which CO, Delta, Northwest and US Airways have been blocked. You'd figure they'd all pay up for at least some slots to access LHR from their main hubs. LHR could look very different in a year or two, if open skies really happens. Slots now used for other purposes will be shifted to the Atlantic. We suspect most of those slots are currently being used for European routes (certainly likely to be true for BD slots). So European traffic will move to other London airports--that benefits Ryanair, easyJet and friends.
It's also potentially bad news for MaxJet, the new transAtlantic entrant (there's also EOS, but we think EOS is much less likely to survive than MaxJet: selling business class for an economy fare -- Maxjet's business plan -- seems more viable to us than selling first class for a business class fare -- EOS -- especially from London Stansted, which is hardly the preferred London airport). There's going to be a lot more capacity to the US from LHR in the future, if this happens. That will drive down pricing. In particular, if CO enters NYC-London, and British Midland tries to force its way in, then we're going to see a real jump in capacity in this market, with lots of deals. None of that is beneficial for a new entrant whose primary value proposition is price. We're not saying it's a fatal blow, but it's not a good thing.
Oh, this one will be fun to watch
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Sorry boys and girls, but no US air carrier will be paying for slots at LHR, just like BA and VA do not pay for access to US airports, other than landing fees.
LHR will now have to be opened to every Tom, Dick and Harry US air carrier, otherwise the US will have to put restrictions on BA and VA.
You know what they say, can't have your cake and eat it to!
LHR will now have to be opened to every Tom, Dick and Harry US air carrier, otherwise the US will have to put restrictions on BA and VA.
You know what they say, can't have your cake and eat it to!
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Great news, up to a point ... It looks as if they've agreed everything but the key sticking point ... the quid quo pro between ownership and LHR access.
To be frank, I've always believed that BA's announced intention to buy AA was really a call for something it knew was never going to happen and thus, to obstruct the whole Open Skies process.
What happens if things don't go according to plan? What if the deal collapses early next year over this point? We in Ireland have already agreed a peculiarly Irish version of Open Skies and as egregious as it is, it's better than nothing and it certainly seems unfair that every other country should be held back because of access to LHR and ownership of US carriers, something the vast majority of carriers aren't remotely interested in.
And what of regional access to LHR once new slots are created? These are already declining and with the likes of BD and BA stripping them down further to add new US routes (one presumes BA will want to bring some of its LGW-US services to LHR?), won't this mean that places like BHD, INV, ABZ, LBA and NCL may be affected?
To be frank, I've always believed that BA's announced intention to buy AA was really a call for something it knew was never going to happen and thus, to obstruct the whole Open Skies process.
What happens if things don't go according to plan? What if the deal collapses early next year over this point? We in Ireland have already agreed a peculiarly Irish version of Open Skies and as egregious as it is, it's better than nothing and it certainly seems unfair that every other country should be held back because of access to LHR and ownership of US carriers, something the vast majority of carriers aren't remotely interested in.
And what of regional access to LHR once new slots are created? These are already declining and with the likes of BD and BA stripping them down further to add new US routes (one presumes BA will want to bring some of its LGW-US services to LHR?), won't this mean that places like BHD, INV, ABZ, LBA and NCL may be affected?
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Interesting bit of politics this. So LHR opens up and the entire EU gets the benefit of open skies to the US. Hhhmm that sounds like a good deal for the UK. I thought when you had the EU presidency and a "friendly" Trade Commissioner that you were meant to do the screwing over and not the other way around. With this stunning piece of diplomacy I can't see the rebate staying either. Still gives more ammunition for the opt out of EU mob, perhaps that will be Blairs swan song and he is more cunning than a cunning thing?
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As it stands the proposed deal is very good for the USA but much less so for Europe and the UK.
The USA gain rights to fly worldwide out of the UK and Europe and in theory Europe and the UK gain the rights to do the same ex USA. The potential value to the USA would however be far greater than for the Europeans. For example a US carries could operate to anywhere in the world out of London, giving a mix of short and long haul possibilities. Where would a European carrier go out of the USA? S America, Transpacific and Canada are the 3 possibilities and none of them very attractive in terms of either investment required ( transpacific) or markets ( S America and Canada).
Also , whereas the USA could start services ex UK to all those places it already has open skies deals with already ( eg a number of Far Eastern countries) immediately, the UK/Europe would have to negotiate new open skies bilaterals with any countries they wanted to serve ex USA. To gain these it would have to grant open skies to, for example, all the Far Easterns ex UK/Europe, so UK would face prospect of these operating worldwide ex UK. Fancy the idea of high quality/ excellent service/lower cost oriental carriers on across the Atlantic? Great for the customers but a real headache for the Europeans.
Think about it....................................
The USA gain rights to fly worldwide out of the UK and Europe and in theory Europe and the UK gain the rights to do the same ex USA. The potential value to the USA would however be far greater than for the Europeans. For example a US carries could operate to anywhere in the world out of London, giving a mix of short and long haul possibilities. Where would a European carrier go out of the USA? S America, Transpacific and Canada are the 3 possibilities and none of them very attractive in terms of either investment required ( transpacific) or markets ( S America and Canada).
Also , whereas the USA could start services ex UK to all those places it already has open skies deals with already ( eg a number of Far Eastern countries) immediately, the UK/Europe would have to negotiate new open skies bilaterals with any countries they wanted to serve ex USA. To gain these it would have to grant open skies to, for example, all the Far Easterns ex UK/Europe, so UK would face prospect of these operating worldwide ex UK. Fancy the idea of high quality/ excellent service/lower cost oriental carriers on across the Atlantic? Great for the customers but a real headache for the Europeans.
Think about it....................................
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Diesel8
Funny old thing but if BA or VS want new slots at LHR then they have to buy them just like everyone else. Perhaps if new American carriers don't want to pay for LHR accesss like the rest of the world does then AA and UA can give up some of their slots? Honestly, it makes you wonder what they're spending all those massive government loans on!
BTW, which US airports are slot constrained because I don't ever remember being given a CTOT at any US airport?
Sorry boys and girls, but no US air carrier will be paying for slots at LHR, just like BA and VA do not pay for access to US airports, other than landing fees.
BTW, which US airports are slot constrained because I don't ever remember being given a CTOT at any US airport?
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The three slots controlled airports in the US is JFK, LGA and Washington National.
If my readings are correct, slots at LHR are not sold, however, dealings do transpire between air carriers for slots and/or times.
As I said, it is doubtful that US air carriers will be buying slots at LHR, one since that is not how it is done and secondly, because there supposedly are none. The US air carriers will undoubtedly be demanding accesss to LHR, so I guess the slots will simply have to be found.
I don't think DAL, NWA, CO will buy the argument that they simply cannot have access, I knowI wouldn't if I was them.
I guess BA, VA, BMI will have to give up slots.
The EU have been pushing for open skies, Rod has been most outspoken about it, well, it is a give and take. Restricting access to LHR will simply not work!
If my readings are correct, slots at LHR are not sold, however, dealings do transpire between air carriers for slots and/or times.
As I said, it is doubtful that US air carriers will be buying slots at LHR, one since that is not how it is done and secondly, because there supposedly are none. The US air carriers will undoubtedly be demanding accesss to LHR, so I guess the slots will simply have to be found.
I don't think DAL, NWA, CO will buy the argument that they simply cannot have access, I knowI wouldn't if I was them.
I guess BA, VA, BMI will have to give up slots.
The EU have been pushing for open skies, Rod has been most outspoken about it, well, it is a give and take. Restricting access to LHR will simply not work!
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So what your suggesting is BA, VS and BD have to give up slots at LHR, lets say 10% of their slots each, grounding aircraft and laying off staff in the process, so that DL, NW and CO (two of which are bankrupt) can come in in their place. Do you really think the EU are going to sign up to that?
On the matter of slots simply 'being found', there is an interesting chart here detailing slot demand and slot utilisation at LHR. Put simply, the slots are highly unlikely to just 'be found' Any latent capacity would have been exploited a long time ago. There are plenty of minnow airlines operating into LHR who could sell their slots, thats where the newcomers will have to find their slots. So far all the USA are offering is unrestricted point to point access between the EU and the USA (no benefit for UK operators) and some loose commitment to easing foreign ownership rules which Congress will probably block. There's not much 'give' there really, is there.
On the matter of slots simply 'being found', there is an interesting chart here detailing slot demand and slot utilisation at LHR. Put simply, the slots are highly unlikely to just 'be found' Any latent capacity would have been exploited a long time ago. There are plenty of minnow airlines operating into LHR who could sell their slots, thats where the newcomers will have to find their slots. So far all the USA are offering is unrestricted point to point access between the EU and the USA (no benefit for UK operators) and some loose commitment to easing foreign ownership rules which Congress will probably block. There's not much 'give' there really, is there.
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Can I then ask is it the caes that BA must fly their southern US routes from Gatwick? Dallas, Houston and Atlanta I am sure would be better off at Heathrow with an improve business yield.
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Almost certainly, but to do so would require new slots or the transfer or services (probably short haul) to LGW. Handing over a large number of slots to US operators would probably preclude this happening.
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The desired slot policy from the EU is slot trading and there is a lot of work going on, on how it's to be done. Slot trading is the most economical and most effective way of allocating slots, it will sure come in the future (finally we'll get rid of all these stupid grandfather rights).
US Airlines have to buy slots at LHR, like all other airlines. The FAA already announced it is open to the discussion, as long as the treatment is the same for all airlines.
With the Open Sky Agreement, I'm sure we'll see other US airlines looking for slots and, with no other chance, buying them.
vc10: excellent statements!
BTW: There is a veery interesting study on slot allocation, done by NERA (london based research institute) for the EU. Don't have the link, but it's worth reading it (about 400 pages)
US Airlines have to buy slots at LHR, like all other airlines. The FAA already announced it is open to the discussion, as long as the treatment is the same for all airlines.
With the Open Sky Agreement, I'm sure we'll see other US airlines looking for slots and, with no other chance, buying them.
vc10: excellent statements!
BTW: There is a veery interesting study on slot allocation, done by NERA (london based research institute) for the EU. Don't have the link, but it's worth reading it (about 400 pages)
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Can I then ask is it the caes that BA must fly their southern US routes from Gatwick? Dallas, Houston and Atlanta I am sure would be better off at Heathrow with an improve business yield.
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I am not certain,but I believe that LHR slots are allocated,but not sold.
The selling occurs between airlines,as ALL the slots are currently allocated,and there aren't any spare.
If there is to be open skies,then I'm sure there would have to be a total reallocation of slots,where EVERY slot would have to be applied for(meaning ones currently held ),and some system of fair allocation worked out. Quite how this would be done is hard to see,but to give all applicants a bite of the cherry,clearly BA would suffer enormously.
The selling occurs between airlines,as ALL the slots are currently allocated,and there aren't any spare.
If there is to be open skies,then I'm sure there would have to be a total reallocation of slots,where EVERY slot would have to be applied for(meaning ones currently held ),and some system of fair allocation worked out. Quite how this would be done is hard to see,but to give all applicants a bite of the cherry,clearly BA would suffer enormously.
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Voeni...
"US Airlines have to buy slots at LHR, like all other airlines. The FAA already announced it is open to the discussion, as long as the treatment is the same for all airlines"
....How does that tie in with the fact that so many major US companies are now competing with other carriers from the cosy confines of chapter 11 protection....is this what the FAA mean by the same treatment for all airlines..????
"US Airlines have to buy slots at LHR, like all other airlines. The FAA already announced it is open to the discussion, as long as the treatment is the same for all airlines"
....How does that tie in with the fact that so many major US companies are now competing with other carriers from the cosy confines of chapter 11 protection....is this what the FAA mean by the same treatment for all airlines..????
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OshkoshGeorge is right, at least according to the documentation, british, that I read concerning the issue. Slots are not sold, but allocated, however, airline with LHR slots do trade them.
If a slot is forfeited it goes to the pool, to then be handed out to eligible airlines, actually those that have put in for them.
I doubt you will find many US pilots who support this, since I am still at loss to what the US carriers gains, just like someone fails to see what british air carriers gains. So, why push for it, why does BA want it? What airports are they restricted from serving in the states.
However, I will still maintain, that slots will have to be provided at LHR for the US carriers that wish for them. LGW or STN might be nice, but the businessman prefers LHR for access to London and for onward connections.
If a slot is forfeited it goes to the pool, to then be handed out to eligible airlines, actually those that have put in for them.
I doubt you will find many US pilots who support this, since I am still at loss to what the US carriers gains, just like someone fails to see what british air carriers gains. So, why push for it, why does BA want it? What airports are they restricted from serving in the states.
However, I will still maintain, that slots will have to be provided at LHR for the US carriers that wish for them. LGW or STN might be nice, but the businessman prefers LHR for access to London and for onward connections.
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Diesel8
you may or may not know that LHR is a saturated airport. Well, it is. To give ANY carrier preferential treatment would be unfair. You may also recollect that BA (and others) are in LHR since a very long time, therefore having grandfather rights to slots (but not to new ones). You want to come, show you have traffic rights and queue up, like everybody else.
Why in Gods name should any US carrier get any form of preferential treatment?
you may or may not know that LHR is a saturated airport. Well, it is. To give ANY carrier preferential treatment would be unfair. You may also recollect that BA (and others) are in LHR since a very long time, therefore having grandfather rights to slots (but not to new ones). You want to come, show you have traffic rights and queue up, like everybody else.
Why in Gods name should any US carrier get any form of preferential treatment?