Predictions of falling fares to the US following a deal on open skies are wildly exaggerated and only business travellers may benefit, say senior industry figures.
The deal between the European Union and the US, ratified by EU ministers last week, will de-regulate transatlantic flying from the end of March 2008. It will permit any EU or US airline to fly from anywhere in Europe to any city in the US and open Heathrow to any carrier with landing slots.
The European Commission suggested EU-wide savings on fares would total £7.7 billion by 2013, and BMI claimed UK travellers “could save up to £250 million a year”.
However, the impact on economy fares is likely to be minimal, since carriers subsidise their cheap fares through profits made on business class.
EasyJet founder Sir Stelios Haji-Ioannou said prices were unlikely to fall. “The current business model of British Airways or Virgin Atlantic is probably as efficient as it gets.”
Virgin Atlantic sales general manager Paul Wait agreed. “Cheap transatlantic travel is already here,” he said. “At its lowest, London-New York probably costs £120 return.”
The benefits for corporate travellers may also be mixed. BMI predicted a drop in business-class fares from Heathrow, which it claimed are double the rate from mainland Europe.
But few companies pay the full rate and analysts suggest no more than a 5%-10% fall. Head of industry affairs at travel management company HRG Mike Platt warned capacity problems at Heathrow may limit rather than increase the number of departure times. “Fewer slots could be available for each carrier,” he said.
The US and EC will begin talks on a second phase of the agreement almost immediately, with the UK Government insisting it will revoke landing rights for US airlines without further liberalisation.
However, British Airways chief executive Willie Walsh described the EU as “naïve to believe the US will deliver on the next stage of liberalisation”.
- Travel Weekly Blog:BA will buy superjumbos, predicts Flight blogger