British Airways Loses Its Smooth Ride to London : Transportation: A deal that gives United and American airlines choice spots at Heathrow Airport may cost the U.K. carrier passengers and profits.
The U.S.-British aviation accord clinched Monday is depressing news for British Airways, long the dominant carrier on routes between London and North America.
British Airways’ main competition has been Pan American World Airways and Trans World Airlines, two of the weak sisters of the U.S. airline industry.
But the accord eliminates all international obstacles to the planned sale of Pan Am’s landing slots at London’s Heathrow Airport to United Airlines and TWA’s to American Airlines.
As a result, industry analysts predict that British Airways will suffer a sharp drop in passengers and earnings from its highly profitable U.S.-London routes.
British Airways had 39% of the passenger traffic carried by all airlines between Britain and the United States, according to an airline official. Analysts said the routes contributed about 35% of the airline’s profits, at least before the U.S. economic recession and the Gulf War caused traffic to plummet.
“Now, that all changes,” asserted Kevin Murphy, an airline industry analyst at Morgan Stanley & Co. “They’ll be competing against the United States’ two premier carriers.”
Timothy Pettee, an analyst with Alliance Capital Management in New York, said United and American stand to gain a bigger share of the British market than Pan Am and TWA had. They are financially sound and are much more likely to attract “feeder” traffic from smaller U.S. cities for their transatlantic flights. Pettee said United and American have much better reputations among passengers than Pan Am and TWA have and also offer better frequent-flier programs and can tap their widely used computer reservations systems.
The accord also gives new rights to Britain’s second-largest carrier, upstart Virgin Atlantic Airways, including some at British Airways’ expense. Much smaller Virgin, which for some years has offered cut-rate flights between the United States and Britain, for the first time will be allowed landing slots at Heathrow. Until now, British Airways was the only British carrier permitted to use Heathrow for flights to and from the United States.
That airport, the world’s busiest, is more popular, especially among business travelers, than Gatwick, the other London airport, where Virgin flights currently alight. Virgin will also be allowed to increase its total number of flights to the United States.
In a press conference at the British Embassy in Washington, David Moss, the British undersecretary of transportation and the chief British negotiator on the accord, praised the agreement as “a balanced deal” that affords British carriers “unprecedented opportunities to compete in the U.S. market.”
The accord does give British Airways some significant new rights, including increasing the number of cities in Latin America, Canada and Asia to which the airline’s flights can continue after stopping in U.S. cities.
British Airways will also be permitted to operate one flight per day from Seattle to Sydney, Australia. And the British carrier will be allowed to haul passengers to the United States on flights originating in six European countries--Belgium, France, Germany, Ireland, Luxembourg and the Netherlands.
British Airways’ displeasure with the overall agreement, however, seemed clear in a statement it issued. It said in part, “Today’s agreement between the U.K. and U.S. governments on air services will be to the advantage of the very large U.S. airlines which have acquired routes to and slots at Heathrow.”
However, John W. Lampl, a British Airways spokesman in New York, said the airline isn’t intimidated by the new challenge from United and American. “We are not afraid,” he said. “We have been in a competitive state for many years, and British Airways will remain competitive.”
Analysts said the new routes and privileges permitted to British Airways will eventually offset the losses from head-to-head competition with United and American, but not completely and not soon.
Lampl said late Monday that he hadn’t yet learned all of the details of the new accords. But he said it may be some time before British Airways takes advantage of the new rights to have flights continue on from the United States to other destinations and to carry more European passengers.
He noted that British Airways recently scaled back its flights between the United States and Britain due to the U.S. recession and drop in passenger traffic. (Separately, British Airways said Monday that its February traffic declined more than 26%.) He said the airline probably will wait until there are clear signs of a recovery in international traffic.
“It would be way too early to speculate on when we might take up and utilize” the new rights, he said.
Officials at Virgin, however, seemed ecstatic about finally being allowed to use Heathrow and said it is cutting all of its fares by 15%. “Virgin Atlantic Airways (is) now able to play on a more equal playing field to British Airways,” the airline said in a statement. Virgin carries passengers on scheduled flights from New York and Los Angeles and will soon add Boston. It also expects to add service to San Francisco, Washington, Chicago and Orlando, Fla. A spokeswoman said no decision had been made yet on which of those flights would land at Heathrow.
Times staff writer Oswald Johnston in Washington contributed to this report.
AIRLINE PACT
The agreement allows landing rights at Heathrow Airport to be transferred from one U.S. airline to another. A1
