British Airways and Virgin Atlantic joined Heathrow-owner BAA in celebrating the enormous traffic on flights to New York yesterday but the benefits of liberalising transatlantic air traffic have all gone to the airlines, according to a leading industry analyst.
Heathrow reported 3.6 million passengers flew between the airport and New York in the past year, adding: “Flights between the two cities are so frequent you would often wait longer for a pizza, a train or a cab.”
BAA chief executive Colin Matthews confirmed London-New York as Heathrow’s “top route” and Sir Richard Branson said transatlantic flights were “crucial in connecting two of the world’s most important business hubs”.
However, analyst James Halstead, senior associate at Aviation Economics, reported the global airline alliances – Oneworld, Star Alliance and SkyTeam – account for 75% of passengers and revenue on the routes and said: “The main point of alliances is to create pricing power for airlines.”
Speaking at the Institute of Travel and Meetings in Oxfordshire last week, Halstead said the biggest benefits of airline liberalisation between Europe and the US three years ago had been on transatlantic routes, where “the increase in margins is considerable”.
Until April 2008 only four airlines, including BA and Virgin Atlantic, were allowed to fly between Heathrow and New York. At the time of deregulation, the European Commission insisted it promised cheaper fares for passengers.
Halstead said: “Regulators believed the deregulation would reduce prices. But where you have three companies with 75% of the market you would expect to see prices rise for the consumer, and that is what has happened.”
The alliance between the merged BA-Iberia and American Airlines is at the core of Oneworld. Lufthansa and United-Continental dominate the Star Alliance, and Air France-KLM and Delta largely make up SkyTeam.