“Open Air” translates into stormy weather ahead
The signing of the Open Skies Agreement due to take effect next March will create a major storm for US and worldwide airlines, experts say.
That’s the case in part because a handful of American carriers and some European airlines have long dominated transatlantic routes. But the Open Skies agreement will allow US airlines, for example, to drop off passengers in one European country, pick up more and relay them to another destination.
“Now, at last, the reverberations from the agreement are starting to be felt,” writes Business Week.
Delta Airlines and Air France-KLM signed what has been called a “landmark deal” to share costs and revenues on transatlantic routes. Under the agreement, Air France will give three of its slots at London’s busy Heathrow airport to Delta to use for flights to New York and Atlanta. The French carrier also will start a new service between London and Los Angeles.
Analysts figure the arrangement could increase the airlines’ combined annual revenues by $1.5 billion and boost Delta’s annual pretax profit by $125 million to $200 million by 2011, says Business Week.
The deal would also start a wave of similar arrangements among other airlines looking to make money on the newly deregulated market. That should increase competition on North Atlantic routes and help pull down ticket prices.
There is wide speculation on who will be next to join forces.
“What’s clear is that there will be a new wave of consolidation and joint ventures similar to the deal between Air France and Delta,” said Clement Wong, travel and tourism manager at research firm Euromonitor International.
No radical change is expected in cost but prices might tend to go down, airline experts say. Pricing is already competitive, however.
American Airlines might partner with British Airways, analysts say. The two airlines sought an alliance several years ago that failed.
Gerard Arpey, chief executive of American parent AMR, touched on the subject during the company’s quarterly earnings call, saying he remained “optimistic” that a linkup between the two carriers now would get the green light from competition authorities.
Report by David Wilkening
David
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