As Virgin Atlantic makes its presence felt in the US-UK open skies negotiations, Washington's commonly held wisdom that British Airways holds nearly complete sway over the UK's international aviation policy is being put to the test.
BA, which wants an open skies pact so it can seek antitrust immunity for its proposed alliance with American Airlines, has been blistered by Virgin advertising in London about the supposed anti-consumer effects of a BA-American linkup. In Washington, Virgin has also put out ads harking back to AMR chairman Robert Crandall's infamous suggestion to Braniff president Howard Putnam that he raise prices in concert with American at Dallas.
A contrite Crandall - if there ever was one - was slapped on the wrist for that incident. But this never inhibited him from using public comment or private means of persuasion to push American's agenda. That agenda, it is fair to say, has never been lost on the bilateral negotiators in the US departments of transportation and state, especially as American lobbies to achieve its objective of allying with BA.
So it ironic that a letter has surfaced, castigating BA's influence in UK aeropolitics and pushing to extremes the practice of flip-flopping of lobbying goals that US carriers evince in Washington. Signed by Crandall himself, the letter, to one of the highest ranking political officials in Washington, refers to Martyn Gregory's 1992 book 'Dirty Tricks: British Airways' Secret War Against Virgin Atlantic' and infers BA's competitors have been unfairly abused because of the airline's position of strength at London/
Heathrow. The letter was written in 1994 after the DOT approved extending the BA and USAir alliance. That alliance, remember, was vehemently opposed by American, United Airlines and Delta Air Lines before each one followed suit with their own broad codesharing alliances.
'As you know,' the letter reads, 'we are very disappointed by the US government's recent decision to approve the extension of the British Airways-USAir codesharing agreement, which gives British Airways tremendous competitive advantages versus US carriers. The attached book highlights the fervent support which the British government has long provided for British Airways, records the almost complete domination of British commercial aviation by British Air-ways, and at several points underscores the financial importance which British Airways attaches to preventing competition at Heathrow and on its routes beyond Heathrow.'
Within 'the attached book' are several passages that Crandall - or one of his associates - has highlighted, including parts about how the Thatcher government allowed Laker Airways to be put out of business; a profile of Virgin chairman Richard Branson; alleged price-dumping by BA at Gatwick, where Virgin was consigned before being allowed into Heathrow in 1991; and, of course, the array of alleged 'dirty tricks' against Virgin.
If the book is to be believed - something that Robert Crandall apparently had no trouble with - it has to be considered amazing that Virgin has been able to persist in head-to-head competition against BA in the face of the intertwined agendas of the UK government and BA. Always considered an outsider by itself, the public, the financial community and government aviation officials, Virgin has been able to turn a profit as a result of the marketing power of the Branson persona.
However, the times, the world, and the competition are changing. Virgin Atlantic the raucous outsider is becoming Virgin Atlantic the raucous insider. Though its officials still paint BA as the great Satan of the skies, the airline has, like its owner, become increasingly establishment.
Certainly, this change has been long in the making. It took Branson almost a blink of the eye to get rid of the 'free tickets to entertainers' promotion that heralded Virgin's launch into service. Later came Upper Class, replete with limousines, massages and manicures. Now Branson enters the field as a political heavyweight: astute to the ways of BA's lobbying successes in London and Washington, he has decided to mimic its manner of forcing agendas. Last year, he hired a respected UK Civil Aviation Authority official, Barry Humphreys, to influence decision makers, following the BA habit of offering UK Department of Transport officials new homes in the private sector. And in Washington, Virgin has decided to invest in the not-inexpensive world of high-powered lobbying.
Here it has done the incredible: to ply its case against BA-American it has hired Wilmer Cutler and Pickering's Jeffrey Shane, the Bush administration's assistant secretary for international policy. This is remarkable because Shane has been the point man on the international codesharing alliance trend between airlines, always saying it is the market-based way of breaking down aviation trade barriers between countries. It was Shane who oversaw the authorisation of KLM's investment in Northwest in 1989, and three years later, approved the two carriers' application for antitrust immunity.
Shane, of course, courted Virgin for this assignment, and, at a recent fête honouring Richard Branson at the British Embassy in Washington, termed it 'an interesting opportunity.' He's right: the prospect of Jeffrey Shane working against the biggest airline alliance with the biggest potential to break down market barriers is certainly interesting.
And, of course, ironic. As Branson stood in the embassy's residence, wearing his rumpled linen jacket and speaking in his stammering and aside-laden way about Virgin Atlantic, one BA official looked on with a mixture of fascination and contempt. The look on his face plainly said: 'How did he get in here?'
Source: Airline Business
