Open Skies

23 August 2007 (Last Updated August 23rd, 2007 18:30)

Willie Walsh, CEO of British Airways, explains how the airline is prepared for the effect of the Open Skies agreement.

By the time the agreement is implemented, we will be enjoying the benefits of our exclusive occupancy of Heathrow's magnificent Terminal 5. After years of cramped passenger conditions and periodic 'chaos' headlines, T5 is the start of Heathrow's fightback. The airport experience for our customers will be transformed. T5 is light, spacious, modern and smart. There will be less queuing, faster baggage systems, better punctuality and smoother connections for transferring passengers.

COMPETITIVE CONDITIONS

New Open Skies entrants to the market will not only have to find runway slots at convenient times – a task that is neither easy nor cheap – but also adequate terminal space. They will be searching for this space at a time when Heathrow's 'old' terminals are in a high state of flux, with incumbent airlines preparing for moves that will follow our vacating of Terminals 1 and 4. Furthermore, BAA needs to turn parts of the airport's central area into a construction site as it redevelops Terminal 2.

"T5 is the start of Heathrow’s fightback."

We do not underestimate our competitors. But they will face an uphill struggle finding terminal facilities that can come close to what we will offer in Terminal 5. One reason we have no fear of competition is because we face it all the time.

One of the great myths in some of the public debate over Open Skies is that the old Bermuda II agreement effectively precluded competition on routes to the US from Heathrow. In fact, four carriers have been allowed to fly these routes: British Airways, Virgin Atlantic, American and United. That is more competition across the Atlantic than from any other European airport. If you look at seats per week, you find that British Airways faces at least five times as much competition to the US from Heathrow as Lufthansa faces from Frankfurt or Air France from Paris.

WIDER LIBERALISATION

If we did not believe in competition, we would have not have led the way in making the case for mixed-mode operations and a third runway at Heathrow. Both these projects will favour new entrants at Heathrow and dilute our overall slot share.

"One reason we have no fear of competition is because we face it all the time."

If we did not believe in competition, we would not have spent the last four years pressing the European Commission to keep to its mandate and negotiate an open aviation area with the US in which all the traditional limitations on traffic rights and airline ownership are removed.

It is an open aviation area that will deliver real benefits to consumers, just as deregulation has within Europe.

We knew such a negotiation would not be easy – which is why we said Europe should not surrender its primary bargaining chip, access to Heathrow, until the US signed up for a genuine, even-handed liberalisation.

We are pleased the UK Government has inserted a clause in the new deal to provide for an automatic termination of this first phase of revised arrangements if the US has not made real progress towards a full Open Aviation Area by 2010. This has not made a bad deal good, but it has made it much better.