Airlines launching to US may struggle to compete

Airlines launching services to the US at the end of this month may struggle to compete with existing carriers at Heathrow following deregulation of transatlantic routes, according to Virgin Atlantic chief operating officer Lyell Strambi.

Passengers expecting cheaper fares will be disappointed, said Strambi, despite a risk of capacity outstripping demand.

Speaking in New York, Strambi said: “Phase one of open skies to the US will be a damp squib. Fares cannot get much lower.

“Airlines already offer economy prices and new entrants at Heathrow will find it competitive. Existing airlines are ready to do battle.”

Strambi said that carriers already serving the US would have an advantage. “A lot of the battle will be on the ground, with competition to make it easier for customers to get through the airport,” he said.

Virgin opened new facilities at Heathrow Terminal 3 in November. “We offer queue-free check-in and security and Upper Class passengers are getting from check-in to our club house in six minutes,” said Strambi.

“Business-class capacity on London-New York routes has risen 40% in the past two years. There is a danger there will be too much capacity,” he said.

Strambi warned that open skies will unravel without the US making concessions to European carriers. Open skies allows any US or European Union airline to operate from Europe to the US, replacing rules that restrict US services from Heathrow to four carriers – including Virgin and British Airways.

The deal is supposed to mark the first stage of a wider deal. Delta Air Lines, Continental Airlines, US Airways and Air France will begin services to US destinations from Heathrow at the end of this month.

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