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Open Skies

August 13, 2007 By: Jennifer Merritt Travel Agent

Air travel agreement has opened up a wealth of opportunities for U.S. and European carriers

Back in March, transportation officials at the European Union unanimously approved the "Open Skies" agreement, which will liberalize transatlantic air travel, allowing for greater competition between U.S. and European carriers. What's more, many experts believe the agreement may revolutionize the industry, prompting consolidation among European airlines, reducing transatlantic fares, introducing more routes and frequencies and establishing more antitrust immunity among airline alliances.

Come March 2008, when the Open Skies agreement between the United States and Europe
goes into full effect, the landscape of who flies where will drastically
change. Until then, routes, timetables and—perhaps most important—slots at
London's Heathrow Airport are up for grabs, with some airlines aggressively
pursuing certain routes, while others are playing it a little more coyly.

Some of the more exciting points of the treaty allow for
carriers to explore previously unchartered territory, in turn beefing up
competition and travelers' options. For one, the agreement states that European
airlines can operate flights to the U.S.
from any country in Europe, which means a carrier like British Airways can now
fly from Paris to New York,
competing with the likes of Air France
and even all business-class carriers like L'Avion. In fact, British Airways
announced in May that it has set up a project team to review plans to operate
direct services between the U.S. and what it has deemed key EU business cities.
"We are looking at various destinations in Europe such as Paris,
Amsterdam, Frankfurt, Brussels
and Milan,"
said Lisa Lam, a spokesperson with the airline. "In the U.S., New
would be an obvious destination. The service
would provide a premium product targeted at the business market.

 Flights to London promise to change the most dramatically, since most airlines are vying for new flights out of the city's hecti Heathrow Airport one of the busiest airports in the world

Similarly, experts note that larger carriers may also enter markets until now dominated by smaller European airlines, meaning an airline like Lufthansa could march into TAP Portugal's territory in southern Europe—a move the carrier is currently rumored to be contemplating through the possible acquisition of Spanish airline Spanair.

Pursuing Heathrow Flights

Meanwhile, U.S. airlines were quick to jump on the opportunity to fly in and out of Heathrow, a major gateway city to European cities both large and small, as the agreement calls for such airlines as British Airways and American Airlines to loosen their grips on their protected positions at the airport. Carrier campaigns for U.S.-Heathrow routes already have begun. Heathrow Airport

Currently, American is taking advantage of its prime real
estate at Heathrow, moving two of its existing flights between London's
Gatwick Airport and Dallas/Fort Worth and
Raleigh/Durham to Heathrow next March. "Technically, we could already fly
to Stansted pre-Open Skies—our first begins from JFK this October; the second
from JFK next spring—but various movements of take-off and landing times at
Heathrow has allowed us to increase our Heathrow flights as noted above,"
noted Tim Smith of American's corporate communications department in an e-mail
to Travel Agent. "Plus, we have obtained additional Heathrow slots on the
open market. We are currently looking at some additional new routes for next
year, but we are not ready to announce what they might be because of
competitive reasons."

A spokesperson for US Airways echoed that sentiment,
stating, "we're looking at Heathrow, but it's way too early to speculate
when or if we'll be announcing anything." The

That's not the case for Continental Airlines, which in March
was one of the first to file for permission from the U.S. Department of
Transportation to fly between Houston and Heathrow. As it expands into
Heathrow, Continental said it would retain its existing services to
London/Gatwick from its hubs in Houston, Newark, NJ and Cleveland, OH.
"Our customers have always wanted more options for accessing London and the Open Skies agreement will allow us to give
our customers the convenience of choosing between Heathrow and Gatwick for
their London
travel plans," Continental CEO Larry Kellner said in a statement at the

A spokesperson for the airline said gaining access to
Heathrow would allow the carrier to add more routes under existing bilateral
agreements, but declined to disclose exactly where because of competitive
reasons. (As a side note independent of Open Skies, Continental in 2008 begins
service between Cleveland, OH and Paris.)

Northwest Airlines is among the many carriers considering how to alter their flight schedules

Antitrust Immunity

Delta Air Lines also is anxious to gain access to Heathrow, which would like to fly between London's busiest airport and Atlanta. "A key focus for Delta has been to obtain meaningful access to London's Heathrow International Airport," said Jerry Grinstein, Delta's CEO, in a March statement. "We welcome an agreement more broadly in European markets, particularly London's Heathrow airport." LTU is among the many carriers considering how to alter their flight schedules

Meanwhile, SkyTeam, the alliance Delta is a member of, was
the first this July to file for antitrust immunity under Open Skies, which is
expected to ease regulatory hurdles alliances face under current rules. The
filing asked that SkyTeam's participating carriers—Delta, Air France, Alitalia,
CSA Czech Airlines, KLM Royal Dutch Airlines and Northwest Airlines—be allowed
to cooperate in various operational areas, such as codesharing, frequent flyer
programs and route and schedule planning. SkyTeam also filed for antitrust
immunity with the Department of Transportation in 2005, but eventually withdrew
its application. A short while later, the Oneworld alliance, which includes
American, Iberia,
Finnair, Malev Hungarian and Royal Jordanian airlines, also filed for antitrust
immunity. "We believe that an alliance with antitrust immunity is of vital
strategic importance and will help us remain competitive with other
transatlantic alliances that already have such immunity," said American's
senior vice president of planning, Henry Joyner.

Oneworld member Northwest also plans to compete for access
to Heathrow. The carrier in the last year has launched an aggressive European
expansion plan that includes service to Brussels,
Belgium and Düsseldorf, as
well flights between Amsterdam and Detroit and Boston,
thanks to a joint venture with Oneworld partner KLM Royal Dutch Airlines. The
two carriers would implement a similar partnership should Northwest gain access
to Heathrow.

Though a Northwest spokesperson declined to detail expansion
plans, the carrier's recent moves in the market may be a sign of things to
come. In January, the airline launched what it claims is the first and only
nonstop service between Hartford, CT and Amsterdam.
Earlier this year, the airline's Senior International Executive, Phil Haan,
said that more so than any other new international route Northwest has
launched, the success of the Hartford-Amsterdam route depends on attracting
travelers that today are driving to other airports. Haan explained that Northwest
believes that Hartford air market data, which shows the number of travelers
destined for Europe originating from Bradley International Airport, is
underestimated, as it does not include the potential to attract passengers
currently driving to other airports, most notably New York's John F. Kennedy
International Airport and Logan International Airport in Boston.

Smaller Carriers

Also beefing up competition and helping to lower fares is
the entrance of a handful of Europe's roughly 25 low-cost and low-fare carriers
that are taking steps to make affordable flights to Europe
available to Americans. Many of these services kicked off before the U.S. and the EU
agreed on Open Skies, but such services may provide a glimpse of what's to

European carriers like Eurofly, Flyglobespan and LTU are
increasing flight services between Europe and large U.S.
cities like New York and Las Vegas for as much as $200 less than major
American carriers. Of course, the catch is that most flights are seasonal and
some of these carriers charge fees for services like meals and entertainment.

Through November 13, Eurofly is operating nonstop flights
from JFK to Naples, Bologna
and Palermo, as well as Pescara and Lamezia Terme. Because traffic to
Rome is so
strong, the airline is considering extending its services there through the
winter. "For 2008, we're looking at expanding in Italy and in 2009, we may be able to look at
opening other gateways in Canada
or Florida," says Rosario Mariani,
general sales agent in North America for Eurofly USA,
which just kicked off its third season of service between JFK and Italy.
"We'll see where the opportunities lie at that time." Should the
carrier ever expand service to the west coast, Los Angeles would be the obvious choice, he

In May, Scotland-based Flyglobespan began daily service
between Boston and Glasgow,
Scotland, as well as between
New York and Liverpool, England.
Most recently, the airline inaugurated its nonstop flight from JFK to Ireland's West Airport in Knock,
Ireland, which serves as a
gateway to Donegal, Sligo, Leitrim, Roscommon, Galway
and Mayo. The flight operates three times a week and are available through
October. One-way rates begin at $259, exclusive of taxes and fees.

Germany-based LTU International Airlines operates direct
flights between Düsseldorf, Germany and Los Angeles,
New York, Las Vegas,
Miami and Fort
, FL.
In early
June, flights from Los Angeles began operating
five times a week and flights from Las
revved up to twice weekly, with roundtrip fares
starting at $388 for economy class. In the first quarter of 2007, the airline
posted a sales growth of 12.5 percent and it expects to see a five percent
overall annual growth, due in part to the expansion of LTU's long-haul business
in the U. S.

LTU will start operating new service from Melbourne, FL to
Berlin's Tegel airport on November 3, says Pierre de la Motte, a spokesperson
for the airline. In addition, some services are transitioning from seasonal to
year-round, mainly due to demand from business travelers. "We come from
more of a holiday background and now we are looking at business travelers more
and more," de la Motte says, adding that the airline plans to increase its
number of business class seats from 18 to 30. "That is the reason we have
been changing our whole business model." Further U.S. expansion plans are
in the works, he notes, but details were not ready for discussion at press

If one had the time and the perseverance, charting these
potential pairings opens up a bevy of new destinations to sell—though it only
seems come March 2008 will we know the true potential Open Skies has bestowed
on the travel community. Stay tuned.

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