BA in Dogfight Over Open Skies
By KARL WEST
BRUSSELS bureaucrats have fallen for a ‘con trick’ by ‘greedy Americans’, according to British Airways chairman Martin Broughton.
The airline’s money-spinning grip on transatlantic flights from Heathrow is under threat.
This latest turbulence for BA comes from a draft Open Skies agreement, which could pave the way for more competition at Heathrow. The preliminary accord needs to be ratified and European transport ministers will vote on the deal later this month.
Currently, BA, Virgin Atlantic, American Airlines and United Airlines are the only four carriers allowed to fly from Heathrow to the US. But the European Commission’s draft agreement would allow airliners on both sides of the pond such as Continental, Delta, or BMI to set up rival routes out of Europe’s largest airport.
This could provide BA with a major headache because it makes all its profits on long-haul flights, with 50pc of these earnings coming from its American routes. The market acknowledged the potential threat to future earnings and BA shares fell 35p, or 6.6pc, to close at 49612p last night.
BA says it is supportive of a true Open Skies agreement, but the draft version is a ‘con trick’ that gives too much away to US airlines with nothing in return.
Speaking at an airline conference yesterday, BA chairman Martin Broughton pulled no punches: ‘It’s an old truism that the UK and US are divided by a common language.
It couldn’t be truer than in the discussions over Open Skies.’ The BA chairman noted the deal would mean EU states giving US airlines free access to the European market, but would give European airlines no access to the domestic US aviation market.
Broughton said John Byerly, deputy assistant secretary for transportation affairs at the US Department of State and chief American negotiator on the Brussels draft, was hoping EU ministers would fall for his ‘three-card trick’ at the vote later this month.
Sharing a platform with Broughton at the same conference, Byerly attacked BA and Virgin for fleecing travellers at Heathrow, adding: ‘These carriers make their money by gouging their customers at Heathrow.
‘They are operating legally, but that’s wrong and we should really put a stop to it now.’ Broughton responded by attacking ‘greedy Americans’, saying rival US carriers were only interested in getting their hands on BA’s lucrative takeoff and landing slots at Heathrow. BA currently has 40pc of the slots at Heathrow.
It is angry that the draft agreement creates an uneven playing field for sector consolidation.
Under the deal, restrictions on foreign ownership of US airlines are pegged at 25pc. But foreign airlines are able to buy up to 49pc of a European rival. Broughton said: ‘The US seems uncharacteristically reticent to back itself in a fair fight.
Why not take the gloves off and see how it competes in aviation?’ US carriers have struggled since the terror attacks of 9/11, with many surviving on government subsidies or seeking bankruptcy protection, as in the case of Delta Airlines.
Andrew Fitchie, analyst at Collins Stewart, said: ‘We don’t know if there will be an affirmative vote for Open Skies on March 22. Given the lack of movement on US ownership restrictions, we’d put this at no better than a 50:50 chance.’ Broughton indicated the British government ‘feels quite strongly’ about the commission’s draft proposal, saying Ministers were ‘sympathetic’ to BA’s position.
BA must now hope the government feels strongly enough to stand up for British interests in Brussels, even if this means being in the uncomfortable position of going it alone.
Read more on BA at thisismoney.co.uk/bay
‘ The US seems uncharacteristically reticent to back itself in a fair fight.
Why not take the gloves off and see how it competes in aviation? ‘
‘ I would urge EU ministers to push the negotiators to get a deal that will change the future, rather than cement in the past.’
Martin Broughton, chairman of BA
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