Will open skies mean lower fares?

Date: 30-03-2008
Source: The Observer

Business routes like London to Seattle could see fares drop.

Transatlantic air travel is set to change radically from today, as the Open Skies agreement between the US and the European Union comes into effect.

This is the first significant change to Atlantic flying since the 1970s, and it means that any EU airline can now fly to the US from any EU airport, not just from their home country. Until today, only four airlines have been able to operate transatlantic routes from Heathrow: British Airways, Virgin Atlantic, American Airlines and United Airlines.

But the first Air France flight to the US departs from Heathrow today, while Continental Airlines will start flying twice daily from Heathrow to Houston. Also, Delta Airlines will be operating to New York's JFK airport, and Northwest Airlines will be flying to Minneapolis, Detroit and Seattle (pictured above) - both from Heathrow on a daily basis.

So is the agreement good news for consumers? 'Not necessarily,' says Francesca Ecsery, general manager of comparison website www.cheapflights.co.uk . 'It will mean increased choice - more direct routes, so less need to change at JFK or Newark. And there will be more competition, which has to be a good thing. But as fuel costs continue to increase, prices may not drop radically.'

But as well as fuel prices, there is a problem with capacity: without a third runway, the opening of Terminal 5 can offer only a small increase in slots at Heathrow.

Ironically, it seems that business-class travellers may be the only ones to benefit. 'Economy fares are subsidised by business rates,' says Neil Morris, aviation manager at consultancy and accountancy firm Deloitte, 'and with increased traffic on prime business routes such as Heathrow to Seattle and Denver, it will be these fares that come down. There is a very real risk that economy fares may even go up - the four airlines that currently operate the transatlantic routes from Heathrow will inevitably lose a share of their profits to the other companies who start flying those routes. And this loss may well be passed on to the consumer in terms of substantial increases in prices'

In some ways, it's a wait-and-see scenario. Ryanair boss Michael O'Leary has already stated his plans for transatlantic routes (supposedly from 7 pounds one way, exc. taxes), but he has no firm start date, and other UK airlines, such as BMI, have no plans to start transatlantic routes from Heathrow until at least next year.

British Airways is launching a new subsidiary called 'Open Skies', but as it will operate flights to the US out of Brussels and Paris, it will be of little help to UK travellers. Richard Branson has also said that he will not be adding routes to Virgin's schedules, and has called the Open Skies agreement 'a damp squib'. It seems that for economy travellers at least, he may be right.