European and US carriers have outlined varying plans following the new transatlantic Open Skies agreement. So who is likely to do what, and when?

It had been a long time coming, so it was no great surprise when several major European and US airlines almost instantly unveiled their near-term transatlantic network plans the moment European Union transport ministers ratified the first phase of the EU-US Open Skies agreement on 22 March.

But not all of the majors have reeled off elaborate plans to take advantage of the new accord. Some have preferred to take more of a wait-and-see approach before committing to anything.

One of the first carriers off the blocks in the race to secure increased access to the US market was Aer Lingus. On the day the agreement was ratified, the Irish carrier unveiled plans to begin three new US routes from Dublin before the end of this year. Although Open Skies does not take effect until 30 March 2008, Ireland had previously secured its own bilateral with the USA, which provided Irish carriers with access to three additional US destinations from November 2006.

Aer Lingus unveils plans

Aer Lingus will begin services to Washington Dulles in September, followed by flights to Orlando and San Francisco in October, with plans to launch additional US services next year. "We are looking at a number of routes to the US for next year and the East Coast continues to be an interesting market for us," says Enda Corneille, commercial director at Aer Lingus. "Open Skies is huge for Aer Lingus because we want to replicate the level of growth we've had in our short-haul operations on our long-haul network. It allows us to increase our footprint in the USA."

Another fast-mover was Continental Airlines, which immediately filed an application with the US Department of Transportation (DoT) seeking authority to inaugurate service from Houston to London Heathrow. Before the Open Skies agreement, Continental had been excluded from operating transatlantic services to Heathrow - a right previously reserved for American, British Airways, Virgin Atlantic and United Airlines.

One potential loser in Open Skies could be London Gatwick, which is likely to lose some of its transatlantic operators to Heathrow. British Airways chief executive Willie Walsh says he plans to move BA's Gatwick-Houston service to Heathrow.

Craig Jenks, president of the Airline/Aircraft Projects consultancy, believes more of BA's business routes will follow, such as Atlanta and Dallas. "What will happen next March is that there will be somewhat of a stampede from Gatwick to Heathrow," says Jenks. "The question right now is: which flights are going to move, and how quickly?" He believes that US carriers operating from Gatwick to US destinations that are served by BA from Heathrow will be among the first to move.

For example, BA flies from Heathrow to Detroit, New York JFK, Newark and Philadelphia. These cities are now served from Gatwick by Northwest, Delta, Continental and US Airways, respectively. Dallas is served from Gatwick by both American and BA but Jenks says "it is very likely that American will move some or all of its Dallas Fort Worth-Gatwick flights to Heathrow".

Aside from transferring Houston, BA does not plan to make major changes to its US network. It will not dramatically increase the number of US routes served, with Walsh adding that he does not anticipate any other airline matching the carrier's 24 North American destinations. However, he says there are still "growth opportunities" in the US and that BA will be looking into some level of increase in its US operations.

The key issue for BA is its continuing quest for antitrust immunity with oneworld alliance partner American, a goal Walsh believes will not be made any easier under the first phase of Open Skies. He says the US regulatory bodies would "still impose penalties on us", similar to those which have prevented previous attempts to secure antitrust immunity between the two carriers.

Another carrier eager to secure antitrust immunity with American is Iberia which, before Open Skies, was prevented from making an application because Spain did not have its own bilateral agreement with the USA. "We need to come closer to American," says Iberia chairman Fernando Conte, adding that the Spanish carrier will not only seek to codeshare with American but will also be looking into forming some kind of joint venture with the Dallas-based airline.

In terms of its own US operations, Iberia announced before Open Skies that it would increase its capacity to the USA by 22% this year, with the launch of flights from Madrid to Boston and Washington Dulles, as well as the addition of extra frequencies on existing routes to Chicago, Miami and New York. Conte says that "for the time being", no further US destinations are planned.

Lufthansa's waiting game

Back in the wait-and-see camp, Lufthansa is not planning to make any near-term changes to its US operations, but sees possible opportunities in the future. "In the immediate term, there are no dramatic movements in the pipeline," says Lufthansa chief executive Wolfgang Mayrhuber. "Beyond that, in the medium term, we see opportunities coming as the aviation landscape changes. We will make use of [Open Skies], but not now."

Star Alliance partner bmi, which has long campaigned for increased access to the US market, plans to shortly announce details of its first flights to the USA from Heathrow. Jenks believes bmi is "deliberately keeping everyone in suspense" because of the "huge impact" the carrier's decision will have.

What is known is that bmi and alliance partner United have applied to the US DoT to request the removal of conditions on antitrust immunity between the two airlines from next March.

SkyTeam's Delta Air Lines is also relying on increased co-operation with alliance partners to enable it to achieve its post-Open Skies goals. "We will turn to our alliance partners for Heathrow slots and we think that, despite all the press reports [about slot prices] we can reach an accommodation," says Samantha Barnett, director of government affairs at Delta. However, she adds that Delta has no intention of abandoning its strategy of developing networks into secondary European markets from both its Atlanta and New York JFK hubs.

Barnett believes that rather than weakening the SkyTeam alliance, the new Open Skies regime will strengthen it and likely lead to closer co-operation.

American, while being tight-lipped on its post-Open Skies plans, acknowledges that the agreement "may provide the opportunity for us to co-operate more fully with our partners at other airlines". It adds: "Near-term we expect London Heathrow will become more competitive and we are prepared to fully compete in that environment."

One thing is for certain under the new Open Skies agreement: slots at Heathrow, already in short supply, will be like gold dust and carriers will be falling over themselves to secure the vital commodity. Virgin Atlantic is one of the airlines looking to build further slots at the airport to enable it to launch additional US destinations in the future.

While Virgin has not announced any new US routes from Heathrow, it is studying whether it makes sense to operate nonstop flights to New York from key European hubs, including Frankfurt, Amsterdam, Madrid, Zurich, Milan and Paris. The study, which began in early March, is expected to last several months and, if the airline decides to go ahead with the plan, it will entail a £100 million ($200 million) investment to take place within two years.

Whether legacy carriers decide to jump wholeheartedly into Open Skies or take a more laid back approach to see how competitors react, one threat looming on the horizon is the prospect of an influx of low-cost transatlantic operators entering the market. Zoom Airlines plans to begin low-fare flights from Gatwick to New York in June, and is considering additional routes. "Obviously we want to do new destinations, probably in America," says Zoom chairman Hugh Boyle, adding that the carrier will look at high traffic markets such as San Francisco, Los Angeles and Boston.

Looking further into the future, Ryanair chief executive Michael O'Leary has outlined plans to launch a no-frills transatlantic airline around the turn of the decade. So far, however, existing transatlantic operators are not displaying signs of panic. Corneille of Aer Lingus points out that "four years is a lifetime in the aviation business", while Mayrhuber confidently says Lufthansa is "ready for it".

Source: Airline Business