BA and Virgin Atlantic Likely to lose their lucrative stranglehold

[mahonysherms]

This could cause a shake up:

"British Airways and Virgin Atlantic are likely to lose their lucrative stranglehold over transatlantic flights at Heathrow airport after a European court said that the arrangement is discriminatory and cannot be justified.

In an interim ruling, the European court of justice took the European commission's side against eight countries including Britain and declared that bilateral air transport agreements negotiated with the United States should not discriminate on the basis of nationality.

Under the Bermuda 2 agreement only four airlines - BA, Virgin, American Airlines and United Airlines - are allowed to run flights between London's main airport and the US.

The government has stipulated that, aside from the two American carriers, only those companies majority-owned or controlled by UK nationals should be allowed to offer transatlantic flights. Recent attempts to negotiate a new, more open deal with the US have come to nothing.

The European Commission believes that other European airlines should be able to compete on the same route as BA and Virgin and yesterday's interim ruling opens the way for them to do so.

If that happens BMI British Midland, Britain's second largest airline, believes that the government will have no choice but to throw open Heathrow to other domestic airlines.

BMI announced on Wednesday that it would lodge an official complaint with the competition authorities in Brussels on the grounds that the "carve-up" at Heathrow contravenes the Treaty of Rome.

Sir Michael Bishop, the chairman of BMI, vowed to use the follow-up to yesterday's judgment, expected within the next six months, to seek damages from the gov ernment for being prevented from offering transatlantic flights for so long.

The commission appeared to take BMI's side yesterday and said that the Bermuda deal, agreed between the UK and the US in 1977, is illegal and will have to be scrapped if the court ruling is confirmed. In 80% of cases the final judgment does confirm the initial ruling.

A government spokesman conceded yesterday that there would be implications for Heathrow if the ruling is confirmed but declined to speculate on what they might be. "

. .Sir Micheal has also threatend to sue Stephen Byers and seek compensation for lost opportunities over the Bermuda II.

. .Go Mickey B

[timsan]

This could be good news for those made redundant last month.

I hear that bmi have sent some first officers to Toulouse for A330 conversion training. I don't know how many but they must have some work for them to do, if not transatlantic.

Go BISH ! <img src="eek.gif" border="0">

[mainfrog2]

If other European airlines are going to be allowed access to LHR at the expense of BA and Virgin, maybe those two companies should be allowed rights to compete from other european countries hubs in the same way. If it's good enough for the goose.

[Grendel]

Very Interesting.

The new Eruopean court just decides to junk the whole concept of Bi-lateral treaties. What a can of worms this is going to open up.

Several posters above I believe are correct. If this bilaterial is restrictive so are all the others. Is this some kind of open skies by default? Does this court reserve the right to negotiate on behalf of all member countries?

On the US side, the president or in fact the exeutive branch, negotiates treaties and it is ratified by the senate. It's in the constitution and not likley to be changed any time soon.

How will future agreements be negotiated?

"I was married by a judge." "I should have asked for a jury" Groucho Marx

[mahonysherms]

Mainfrog, "at the expense of BA and Virgin" Bermuda II has allowed these two airlines huge North atlantic Profits "at the expense of" passengers and other U.K carriers that should be allowed a slice of the cake. The days of monopolies are over, Lets open the skies and let the industry settle into those companies who can and those who cannot.

bmi has proved itself successful in many ways despite always having doors slammed in their face.

BA is naturally worried at the moment and let's hope that the future size and shape plan is as ruthless as it needs to be. If it is I believe they will grow back steadily and efficiently.

Virgin in my opinion is in trouble. They have always cherry picked the best routes and all this under the shield of Bermuda II. Their yields will reduce, their passenger numbers will decline as bmi and others take passengers, and all this without the comfort of an alliance. Notice he is selling kensington roof gardens.

So I beleive BA and virgin are simply being put where they should be - in the middle of fair and healthy competition.

[Tandemrotor]

IMHO I don't think bmi have really been in much of a position to compete until recently, as they have had few (if any) long haul assets. I don't think anyone could now reasonably argue against it however, good luck to them.

However, the idea of free competition, supposes a level playing field, and that is most definitely not the case when comparing the likes of BA, and AF, or LH. I very much doubt the US carriers, would like to compete without their snouts in the trough of massive Government subsidies either.

So, fair competion, bring it on, as long as we have a level playing field!

[chrishowley]

I used to be on BMI's side with this one as two years ago when they were campaigning for transatlantic routes they were claiming that UK -US fares were abnormally high. This was their main argument in justifying why they should have a bigger slice of the cake.

When they started flying to Washington and Chicago however their flights were no cheaper than any of the 4 LHR carriers! Haven't checked there prices recently however so it may have all changed by now.

[crewrest]

Where's the quote from notanigel?

[mahonysherms]

Quote is from the Guardian, although it has done the tour of a few european broadsheets this week.. .exile: depart 08feb RTN 15feb busines class uk-chicago: bmi £995.20 BA £4979.90 Virgin (boston) £3821

So to be competitive with bmi, BA and Virgin will have to drastically reduce prices (alongside losing customers). ouch

quotes were from respective websites.

[Magplug]

So BA and Virgin will now be permitted to operate transatlantic out of FRA and CDG ??

Perhaps that deserves closer thought ?

[Thunderbug]

Magplug

Of course the European Authorities wouldn't go that far....that would risk upsetting the French & Germans whom still own large percentages of AF & DL, whilst having far dominant positions at CDG & FRA than BA have at LHR

Couldn't possible make it a level playing field.

<img src="mad.gif" border="0">

[jongar]

The issue is that Heathrow is the prefered jumping off point for transatlanitc flights. The high prices maintained by the quadropoly is sustained through that and the fact that london business (mainly financial) can bare the prices. BA and VS dont care much for the slf in the back, its the J class they want. Both will still offer distinct benifits to their pax. As to VS having part of the stranglehold, VS have expanded but not at the rate they wanted, they have been helt up by BA at every turn, Newark, Tokyo - BA did everything to crush or even stop those routes being opened. And then there was Lagos. BA had a pure monoploy on that route, but VS is making it very profitable. We live in intersting times

[peake]

From the South China Morning Post: Tuesday, February 5, 2002

Tin-pot flights of fancy under threat for flag carriers

JONATHAN BRAUDE

If Antonio Tizzano has his way, bilateral air services agreements between European Union countries and the rest of the world will be regarded as illegal and will have to be renegotiated.

What is more, the days when every tin-pot European nation can proudly boast its own national airline will soon be past. There will be only one European market in air travel and only one European airspace.

The United States response to the new situation may be bellicose ... Another transatlantic trade war may be hard to avoid.

[Tizzano, Advocate General of the ECJ] has just delivered himself of an "Opinion" in a group of cases brought by the European Commission against the governments of Britain, Germany, Belgium, Sweden, Denmark, Finland, Luxembourg and Austria.

.....

The Opinion stops short of recommending the EC be given exclusive negotiating rights over all EU air traffic agreements [but] the effect of ruling exclusive bilateral deals illegal would be similar.

.... And the precedent will affect bilateral agreements with every non-EU nation from China to Chile ... there is not much point in a flag-carrier with no exclusive routes from national airports.

So far the US has said only that it was studying Mr Tizzano's Opinion. But Washington may be reluctant to tear up all its bilateral agreements, especially since it does rather nicely from the separate deals.

Under open skies arrangements, Washington has negotiated bilateral deals with 56 nations. In many cases, these allow US airlines to pick up passengers inside the partner country and fly them to another airport. A US airline could, for instance, carry German passengers between Frankfurt and Berlin. Yet if EU airlines land in New York, they cannot pick up passengers and fly them to Dallas.

.....

What the EU wants is for Ms de Palacio's team to negotiate for the EU as a whole, giving it far more leverage and the chance to negotiate a real open skies agreement with equal rights on both sides to negotiate slots at any airport they choose.

It is an arrangement which would force Britain, for instance, to allow foreign airlines access to profitable transatlantic routes out of Heathrow.

...

But an end to 50 years of nation-to-nation deals would also give a big airline such as BA the chance to buy up a smaller European carrier and fly from its home airports.

If the US is true to its free-trade principles it will recognise that negotiating a Europe-wide open skies deal would be of benefit to both sides. Its own airlines would be able to fly passengers between EU countries in return for similar rights for European carriers flying between points in the US.

If Washington chose to protect its own airlines from European competition on domestic flights, it would have no scruples in launching another trade war.

But at least it would be picking on someone its own size. With the EU, Washington would be dealing with a single negotiating partner of equal weight and economic importance, instead of dividing and ruling a group of 15 minnows.

[peake]

link for the whole column is:

<a href="http://columns.scmp.com/colart/ebrief/ZZZF351H5XC.html" target="_blank">http://columns.scmp.com/colart/ebrief/ZZZF351H5XC.html</a>

mainfrog & magplug: note that this wasn't the Commission v HMG, this was Commission v 8 seperate member states, including Germany, so yes, BA, Virgin, BMI et al would get rights to FRA, and by extension (although France wasn't present) out of CDG

[Donkey Duke]

OOOOOOHHHHH SNAP! SNAP! Sounds like maybe there is a future at LHR for Delta, NW, CO, and USAir.. .Oh, that's right---there isn't any room. Yeah right. Maybe Delta could use Air France's gates,. .and NW use KLM's gates etc.....Hmmmmmm.

Thanks. Donkey Duke <img src="cool.gif" border="0"> <img src="cool.gif" border="0">

[1A_Please]

BA, VS and the British Gov't should have seen the writing on the wall regarding Bermuda II a few years ago. Had they done so, they could have negotiated a reasonable position whereby they allowed other airlines access to LHR-US without sacrificing their natural dominance on the routes.

Now they have allowed the EU and rival airlines to get to a position whereby they control the agenda and the cost to the inbumbents will be potentially far greater.

[Momo]

Two points:. .(1) The almost total lack of success of third-country airlines in operating intra-European routes shows what will happen. No matter what the rules out of any major hub to the US, only airlines (and their alliance partners) that can supply the feeder traffic will be successful.. .(2) The companies, such as mine, that fill up business and first class seats, do not pay anything like the full fares in most countries. The UK seems to be an exception. Recently I flew Geneva-Houston with LH (no restrictions) in Business for 930 pounds. My colleague based near Glasgow flew to and from Houston on the same days, and the cheapest BA fare he could get was over 3,000. This is what the treaty of Rome is getting at when speaking of "Abuse of a dominant position".

[crewrest]

For what it's worth, here's the Virgin line from the press release section of virginatlantic.com

January 31, 2002. .VIRGIN ATLANTIC WELCOMES EUROPEAN ‘OPEN SKIES’ DECISION

Sir Richard Branson, Chairman of Virgin Atlantic, today welcomed the European Court’s opinion that member states’ so-called “open skies” agreements with the United States are illegal.

Sir Richard Branson, Chairman of Virgin Atlantic, said:

“This decision vindicates Virgin Atlantic’s consistent position over the last few years. We have always lobbied for true “open skies” but only if that means full liberalisation of all regulations governing air services within and between Europe and the US.

“Today’s decision presents an historic opportunity for Britain and the European Commission in partnership to negotiate a deal with the United States which would usher in a new era in aviation. Our vision of the future is a complete deregulation of everything from routes and airline access rights, all the way through to mergers and acquisitions. Such a vision would put the industry on an equal footing with other mature industries and bring in cheaper fares, a higher quality of service and a much more efficient industry.

“Among many benefits to consumers it would give the US carriers the right to fly within Europe and British carriers the right to fly within the US.

“I have written to Stephen Byers to encourage him to throw the UK Government’s weight behind the decision and to be a leading influence on the European Commission’s negotiations. The UK’s uniquely dynamic aviation sector stands to gain more than most in Europe from this historic decision.”

Also Flight International's take on it is that it will take years for anything to be agreed.

'........European airline industry's largest shake-up ever'

[ 08 February 2002: Message edited by: crewrest ]</p>

[Sonic Cruiser]

Some competition to VS AA UA BA (Apart From Air India & Kuwait) would be good for the market and pax. Although where are the slots going to come from if others want to start operating. ]

BD obviously have their own to use. SQ also want to fly UK-US, if they started then the four majors would probably feel it, VS espcially as SQ own 49% they would not really be in a position to object.

[Dan Winterland]

Sir Dicky is just asking for a level playing field and not the US idea of open skies which would benefit no European airline. The VS Singapore tie up could open a lot more routes for VS in return for Singapore's acccess to the US.