Open Skies

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 York would be an obvious destination. The service would provide a premium product targeted at the business market.

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.

Currently, American is taking advantage of its prime real estate at Heathrow, moving two of its existing flights between London's GatwickAirport 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 Situation

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 time.

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.)

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."

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 come.

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 adds.

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 WestAirport 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 Myers, FL. In early June, flights from Los Angeles began operating five times a week and flights from Las Vegas 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 time.

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.