British Airways believes the scheduling and traffic benefits that it expects to arise from its planned transatlantic cooperation with American Airlines and Iberia may well allow it to launch non-stop service to several additional U.S. cities.
Introduction of the Boeing 787 to British Airways’ fleet from its 2012-13 financial year (which ends on March 31, 2013) may also give it the chance to launch non-stop service on routes to U.S cities which BA has not found commercially viable propositions to date, according to Simon Talling-Smith, executive vice president Americas for British Airways.
One such city is San Diego, he says.
“There are plenty of markets already in the U.S. that BA sort of examines on a yearly, twice-yearly basis for whether they’re viable and they always just miss our main profit criteria for flying to a city,” says Talling Smith. “But in our alliance with American and our ability to optimize where we fly, between us, then some of those cities may well become likely for a direct flight.
“The other thing I would add on top of that is when the 787 joins our fleet, we’ll also have the opportunity to consider a number of those almost-viable cities on the basis of longer, thinner routes [which would be potentially profitable because of] the lower costs and more efficient operation of the 787,” adds Talling-Smith.
“The sort of thing that would be in a category to take a look at: San Diego. We have flown there in the past, it doesn’t make a profit as a behind point – i.e., a one-stop on a BA service, a bit of connecting traffic with American – but with a 787 we’d probably take a look at whether we’d fly that direct,” says Talling-Smith.
British Airways has served San Diego in the past as an additional leg on its London-Phoenix service. The airline already serves 24 cities in the U.S., Canada and Mexico, operating 47 daily flights on 27 routes from four UK airports. BA serves 41 destinations overall in North America, Central America and the Caribbean, according to Talling-Smith.
American Airlines, British Airways and Iberia – all of which are members of the oneworld Alliance – received preliminary anti-trust immunity (ATI) approval from the U.S. Department of Transportation (DOT) in February for their proposed transatlantic cooperation. The three carriers prefer to call the deal a “joint business arrangement” (JBA) rather than a joint venture because in strictly legal terms the entity would not actually be a joint venture.
BA, American and Iberia also require ATI approval from the European Union (EU) for their planned JBA and upon prompting by the EU offered slot concessions at London Heathrow, mainly to reduce their service on Heathrow-U.S. markets in which they are now very dominant, such as Heathrow-Dallas/Fort Worth, London-Boston and Heathrow-Miami. (They also agreed to give up some Heathrow-New York slots if competitive conditions change in the market, which now has 10 competitors flying daily.)
The EU has already given its preliminary ATI approval for the JBA and, following detailed responses from the three airlines to EU questions about the proposed transaction, is market-testing their proposed concessions, having promised it will give its final decision before the end of July.
Should the final decision be negative from either the EU or the DOT, the airlines have several potential avenues of appeal in Europe, but fewer avenues in the U.S. However, the partners say they are confident of receiving final approval for their proposed JBA from both the DOT and EU. – particularly since both the DOT and EU have already issued preliminary approval for the planned JBA and have previously approved similar, though even larger, transatlantic joint ventures among Star Alliance and SkyTeam Alliance member airlines.
“You’ve got to remember that the key fact is that the other two alliances have already got their approval, so what we’re getting is catch-up approval,” says Talling-Smith.
If approved, the intra-oneworld JBA (which would also peripherally involve Finnair and Royal Jordanian, also oneworld members, though their participation does not require ATI approval from the EU) would involve revenues of about $7 billion a year.
At inception – which Talling-Smith says would be in October if the partners received final approvals before the end of July – it would include approximately 100 transatlantic flights a day and its members would be flying to some 500 destinations a day in approximately 100 countries. Looking only at American, British Airways and Iberia, the three airlines combined would have 70 million frequent-flyer-program members and they operate some 200 premium-class lounges globally.
Within the JBA, the five airlines would initially code-share with each other in 192 markets (34 of them transatlantic) and 1,798 flights and this could grow to 367 markets and 3,182 flights, according to senior BA and American Airlines executives speaking at BA’s Investor Day on May 21.