q BA’s OpenSkies to Stop Growing; Is Death on the Horizon? – Cranky Flier

BA’s OpenSkies to Stop Growing; Is Death on the Horizon?

British Airways, OpenSkies

Looks like we’re seeing the beginnings of yet another failed attempt at using the EU-US open skies agreement to open new business opportunities. OpenSkies, British Airways’ attempt at launching an all-premium airline to fly to New York from Continental Europe, will keep running for now, but all future growth plans have been put to a halt.

Originally, OpenSkies was supposed to get a few more planes as BA’s 757 fleet was slowly pulled out of mainline service. Now, Financial Times is reporting that the remaining 11 of BA’s 757s will be sold. I’d bet those planes will go to a cargo carrier, though a BA spokesperson simply said that “British Airways is reviewing possible opportunities for the 11 Boeing 757 aircraft in the mainline fleet at Heathrow.” That leaves only the four airplanes currently flying for the airline (2 for OpenSkies and 2 under subsidiary L’Avion).

Sounds to me like BA has given up on this one. They’ll let them continue flying New York to Paris and Amsterdam or now, but if they see no future growth opportunities to the point where they’re selling all their other 757s, then this has to be living on borrowed time, I’d imagine. I suppose it’s not a surprise in this climate, but if they saw any hope for recovery, they wouldn’t sell off all those 757s.

It will be interesting to see what happens to the airlines super-premium economy class called Prem+. This class if far better than the World Traveller Plus that BA flies on its mainline aircraft, but it received rave reviews. I wonder if we’ll see Prem+ migrate to the mainline fleet at some point or whether it just didn’t make economic sense.

Once again, an attempted use of the open skies policy has failed. Maybe the ill-advised United/Aer Lingus plan will work, but somehow I would be surprised to see that one even get off the ground. I’ll be very curious to see when some airline is finally able to figure out how to profit off these new freedoms.

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19 comments on “BA’s OpenSkies to Stop Growing; Is Death on the Horizon?

  1. I still think that more policy changes need to take effect to see some real changes. An adjustment of U.S. policies affecting foreign ownership would be nice.

  2. Foreign ownership policies are unlikely to change so long as the government views and occasionally employs the US airline industry as a CRAF (Civil Reserve Air Fleet) for military airlift.

    I agree with that policy. At the same time, perhaps reviewing the rules on cabotage might make things interesting.

  3. Optimist – Hmm, interesting comment about the CRAF. I hadn’t thought about that and it makes good sense for the ownership rules.

    As for OpenSkies being put on hold, I wonder how much is an effect of the global economy. My meager business travel has been greatly reduced and I assume big time super premium international travel has been cut as well. Why grow something where there is no demand? Now if the stock markets were making new highs and the economy was running like a well oiled machine I bet BA might be more open to trying more routes. Right now, not so much.

  4. Optimist – I’ve heard the CRAF argument, but I still don’t buy it. You can simply put some restrictions on foreign ownership. That may be unpalatable to some owners, but that’s for them to decide. I’m with Dan Webb on this one.

    A – If they were simply putting it on hold and keeping the 757s in the fleet, I would agree with you. But the fact that they want to sell the 757s tells me that they aren’t really expecting to need them even when the economy improves again.

  5. CF – I like the policy because it’s fairly neat and clean. “Based here, owned here, flown here, eminent domain here.”

    Operating restrictions open up all kinds of potential loopholes after the lawyers get done. Imagine the interpretive mess with the virtual airline scenario. Who owns it, where does it operate, who’s plane is it and can they refuse because they were not a party to the agreement.

    Open up the transcons to SQ, QF, BA, EK, LH and those guys. That’s really probably all they’d be interested in. We’d see food in coach on the domestic boys mighty quickly after something like that.

  6. The problem with cabotage is that US airlines are much weaker compared to some European cash cows. The benefit for the US at least on the airline level is non-existent and it will most definitely drive a few of the big players and their massive labor forces out of existence. What politician would want to do that? I expect a change in policy only when a few American airlines can compete with their European counterparts and take advantage of those deals.

  7. Optimist – I think the foreign flags would be interested in buying a US airline more than developing a ton of their own service. There needs to be some serious restrictions – for example Thai couldn’t just bring in a fleet of low paid employees to work US flights – but in the end I think we’d see a great benefit.

  8. Ari – how long will it take for the likes of American and United to be able to compete on service level with Air France and Lufthansa ? If politicians provide neither the carrot nor the stick, there is no incentive for things to change. The big 5 US passenger airlines are pretty much bid-proof (even ignoring the recession). Can you think of any US-based company that would want to buy any of AA, UA, CO, WN or DL ? The companies know this, and thus have slightly less incentive to provide a good product.

    Yes, some US carriers may need time to get themselves up to Asian or European standards – but if Govt doesn’t at least set a timeframe for this to happen (e.g. market liberalisation), then nothing will happen.

  9. US carriers may never rise to the levels of their European and Asian brethren. While we may wants such service as customers the US carriers have mastered the fact that we’re simply not willing to pay for it. Mass production started with Henry Ford and got translated all the way to Bob Crandall – build it cheap (tons of seats) and only in basic black (no frills).

  10. CF – Are they selling the 757’s because they are excess capacity in the main line fleet? My guess is that BA wants to make some $$$ from those airplanes while they’ve got a chance. If the economy remains weak for some time, which I fully expect, plenty of aircraft will be retired to places like Pinal County and Victorville. How many planes sent there after 9/11 have returned to service? From what I’ve heard those places aren’t only ancient L1011’s and DC-9’s. BA could be betting on an ample supply of mothballed 757’s when the demand returns.

  11. A – That’s a dangerous game to play. There are plenty of 737s and Airbus narrowbodies out there, but I believe the 757s are still quite scarce. Boeing ended the production line too early considering that the 757 has had a resurgence as a long, thin international aircraft. They aren’t very easy to come by these days. BA will probably have a tough time getting these back.

  12. All F class airlines fail, its just the history.

    If you are wealthy enough, you have your own jet, if you only occasionally have the dough, you aren’t flying enough.

    McClain, AirOne, MGM, SilverJet, EOS, that one out of LUV, Regency, etc….

    The model doesn’t work, not sure how Privatair is doing, and we know the Concorde was barely at break even most years.

  13. I don’t think there is anyway BA will be wanting those or any 757s back.

    I’m pretty sure you’d agree that BA wouldn’t put 757s on any mainline transatlantic flights as they just don’t support the product.

    Clearly OpenSkies is different product which suits 757s better.

    Historically BA doesn’t launch these things and then try to support them to death – e.g. GO.

    Presumably OpenSkies had the chance to ‘bid’ for these a/c and the OpenSkies management couldn’t justify the ‘price’ over the cold cash someone else has offered.

    I don’t think the initial plan was for OpenSkies to get all the 757s anyway, plus the L’Avion purchase got them to this size quicker than they wanted.

    I bet OpenSkies sticks around a while, but if it is constantly losing a ton of money, there isn’t anyone to fund it indefinitely.


    You know all the US boys really wanted to do something like OpenSkies but never got round to it, so you’ve got to give them credit for trying it and seeing what happens.

  14. I question why BA doesn’t redeploy the 757’s to long haul thin routes like US carriers have (think PIT-CDG on DL.) This could be LHR-US covering any airport in the eastern 3rd of the US (IND, CLT, BDL, DTW, BNA), maybe even DCA or LGA if the McCain bill passes. DCA/LGA-LHR on an Open Skies type configured plane even operated by BA mainline with 757’s would print money. Other places such as northern India, northern 2/3’s of Africa, or anywhere in central Asia would also be in range (as shown by the great circle mapper.) 757’s are in short supply since they have so much flexibility, and I find it interesting that BA can’t find any use for them, with Open Skies or on mainline. Does their route planning have any imagination? Couldn’t JFK-Milan work against a disfunctional Alitalia, the worst airline ever? Especially into Linate instead of Malpensa, I keep thinking of great uses of these planes for BA.

  15. Randy – Good question – the deployment of 757s on long haul has been primarily a US phenomenon. I wonder if the crew costs are prohibitive for them to make it work. I know Air France has done some long haul exploration with its Airbus narrowbodies, primarily to oil locations. And ANA has a couple 737s doing longer routes, but there isn’t much else that I can see.

    BTW, they can’t do LaGuardia or National, because even if the perimeter rule is lifted, there won’t be customs and immigration. So only Canada and potentially Ireland, where they have preclearance, could operate there.

  16. I wonder if LHR could add pre-clearance as Ireland has, or establish it at DCA or LGA in light of potentially longer haul flights if the McCain bill passes. While I have seen pre-clearance for US customs at many places in the Carrib and in Canada, how did Ireland get to be the only distant foreign country with pre-clearance? Lufthansa is the only other carrier other than ANA or AF that I can think of operating narrow bodies long haul,

  17. Randy – I suppose it’s possible that Heathrow could try for it, but I just don’t know the circumstances under which the exemption was granted in the first place. I actually doubt Heathrow could do it, because it would be a VERY large operation that would require a tremendous amount of terminal space. I bet they won’t be offering up any space for it anytime soon.

  18. A lot of debate on US airlines being able or not able to live up to European standards. Such as Lufthansa, Air France, etc. What standards?? I cross the pond frequently in business (about once a month, if not more, doing 350,000 miles/year) and I use Sky Team mostly (I am based in Atlanta). I do not see much difference between the boxes across the pond from ATL. None of the airlines, except BA, have true flat beds (although Delta is now installing them on Asian destinations). And everything else (food, IFE, service, courtesy, etc. etc.)… pretty much all the same. And not that great.

    Obviously there is a big difference with Asian based carriers…

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