Atlantic advantage

Kevin O'Toole LONDON

A study of the summer schedules suggests that capacity growth on the North Atlantic may be about to ease. It may also hold lessons about the winners from open skies As the summer season opens once more, eyes will again be trained on the key battleground of the North Atlantic. Battle-weary carriers will be looking for evidence that capacity growth is easing and on that score, the early indications are encouraging. For alliance strategists, too, there is interesting evidence that code-sharing Europeans may have done better from US open skies deals than conventional thinking would allow.

As the major carriers put the finishing touches to their summer schedules, the signs are that seat capacity will indeed ease again this year on the North Atlantic. The rate of growth in seat kilometres offered had already slowed to the 6-7% range last year. That was itself an improvement after the challenging summer of 1999 when capacity soared by double digits, propelled by a retreat from crisis-hit Asian routes. This year the consensus seems to be for growth in the 3% range says Craig Jenks, president of Airline/Aircraft Projects in New York and an experienced observer of strategies and schedules across the Atlantic.

That number tallies with the 3.7% growth suggested by a provisional pull from the OAG schedules database. The figures come with the usual warnings. This is only a snapshot, and a provisional one at that, based on the schedules currently filed with OAG. Jenks also notes that capacity may actually fall faster than these schedule calculations suggest, as the trend towards lower aircraft seating densities feeds through. On the evidence of the schedules, British Airways looks set to cut capacity by around 5% in the summer, but the carrier itself is talking of a 10% fall as it tears out seats to provide premium comfort.

However, while capacity growth may be slowing, the focus on raising frequencies and adding destinations continues. A more detailed analysis of the summer compiled by Jenks looks at the route additions and deletions planned for the season ahead. That shows 13 services will be dropped but 27 added, giving a net gain of 14. Included in the gains are five new points added to the transatlantic map. From the USA, San Diego and San Jose get new daily services to London and Paris. From the European end there are renewed links for a rehabilitated Belgrade, plus Berlin and London Stansted. All had lost a service in the last decade.

Codeshare seventh freedom

Jenks believes that there are other lessons in the latest schedules. Not least is the question of who profits most from the continuing growth of code-sharing within the transatlantic alliances.

As Jenks points out, conventional wisdom has it that the US carriers should favour the status quo and that it is the Europeans who have the most to gain from full liberalisation. Until they can push through a transatlantic common aviation area (TCAA) or a similar concept, open skies deals remain stuck at national level. So Lufthansa can offer any US destination out of Frankfurt but nothing out of London. US carriers, on the other hand, may use any open skies deal to fly on nearly every city pair. "Consistent with this is the fact that the TCAA is gaining ground in Europe but not in the US," says Jenks. He adds, however, that it may actually be the US carriers which are currently losing out.

Jenks reasons that European carriers are able to take advantage of their US partnerships when flying to any US city. For example, Lufthansa is putting the United Airlines code on all new US services that it launches this summer. The German carrier clearly gains at major United hubs such as Denver, Los Angeles and Washington Dulles, but also stands to benefit from the association at less obvious destinations such as Phoenix. But United can only use the Lufthansa code when it "lands on friendly turf" in Germany and must go it alone to London or Amsterdam.

The point is eloquently made by the plans for the summer. The major European alliance leaders, with the enforced exception of BA, are codesharing on all of their new routes, even when the destination is not a frontline hub for their partner. US carriers are sharing codes on only a handful of services (four compared with 14) and all to partner hubs.

The implication is that while US carriers may have cause to remain suspicious of a full-blown TCAA, it could be in their interest to push for a first step which allowed them to take advantage of what Jenks calls "virtual" or "codeshare" seventh freedoms. That they are pushing in the opposite direction is a "striking paradox" he adds.

Elsewhere Jenks observes some surprising signs of life for traditional fifth freedoms. Singapore Airlines will launch new services to Chicago over Amsterdam and Frankfurt. He concludes that, having filled the more convenient fifth freedoms from Asian neighbours (for example, one-stop Chicago via Tokyo is over 4h shorter than via Europe), Singapore nevertheless feels that it has the brand name to carry it off.

Jenks also notes a trend the other way as US carriers launch new one-stops to India. United will operate via London using old Pan Am rights, while from October Northwest Airlines has flown a second daily to Delhi/Mumbai via Amsterdam. Delta too may add service. Since these flights extend existing services they are not listed as additions, but Jenks points out that they nevertheless use up aircraft and slots which could otherwise add transatlantic seats. Perhaps such fifth freedom flexibility could further take the edge off capacity growth this summer.

Source: Airline Business