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BA shares nosedive after EU move to open up heathrow
Last updated at 09:37am on 06.03.07
BA facing stiff competition following news that other airlines may be able to fly to the U.S. from Heathrow
British airways could face a catastrophic loss of business after the European Union caved in to American demands that Heathrow be opened up to many more foreign airlines.
City experts fear that if the deal is finalised BA could have to sacrifice ten to 15 per cent of its sales, hitting profits hard.
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• Footsie drops below 6,000 as shares continue to tumble
Details of the 'open skies' agreement sent shares in the UK flag carrier down nearly ten per cent at one point yesterday amid chaotic trading. They closed down 6.6 per cent at 496.5p.
The draft agreement heavily favours U.S. airlines and gives little in return to BA, Virgin and other European carriers.
While American airlines would have free access to Heathrow, the ability of European airlines to transport passengers in the U.S. would stay severely limited.
European carriers, including BA, would still be forbidden from controlling more than a quarter of voting shares in U.S. airlines.
BA chairman Martin Broughton dismissed the agreement yesterday as a 'con trick' foisted upon the EU by 'greedy Americans'.
The deal looks set to become a new point of friction between London and Washington at a time when relations are already strained by the timing of
British Gas Britain's exit from Iraq and concern over one-sided extradition arrangements.
BA is furious about changes which would interfere with its domination of the transatlantic market, of which it has a 40 per cent share and which yields half its profits.
It is counting on the Government to stand up to the European Commission and reject the proposal when it is put before transport ministers later this month.
At present, just four airlines - BA, Virgin, American Airlines and United Airlines - can fly between Heathrow and the U.S., a highly profitable and popular route for holidaymakers and business travellers.
The deal would let many other airlines use the airport.
In the short term it could lead to cheaper flights but it could also destroy jobs at British carriers, reducing the prospects of competition in the longer term.
BA expects carriers like Delta and Continental, currently operating out of Gatwick, would transfer to Heathrow in direct competition with its own flights.
It also points out that several of the U.S. airlines are in technical bankruptcy and being supported by U.S. government handouts, undermining the free market.
Worse, BA and other European carriers would still be prevented from picking up passengers on the East Coast of the U.S. and flying them on to destinations further West.
The only new concession is that the Americans would allow BA and other European carriers to collect passengers at U.S. airports and carry them to third countries such as Iceland.
The U.S. domestic market, including flights between Wash-
Gas is to ington, San Francisco and other major cities, would remain 'closed' to European airlines.
Mr Broughton said the agreement was selling Europe short.
The new draft was 'significantly imbalanced in favour of the U.S.' and nothing more than a 'dead end', he said.
He was dismissive of a small concession which would allow airlines such as BA to fly U.S.
government officials and diplomats as 'derisory.' It applies only to remote routes between small
U.S. towns. In an outspoken attack yesterday, Mr Broughton said: 'In aggregate, these crumbs don't come anywhere near balancing up the inherent imbalance in the open skies model.
'The Commission is putting its legal obligation to get the U.S. to recognise the EU single market ahead of the EU's economic interest.' He warned: 'Once the U.S. have achieved their prime negotiating objective of an open skies deal, their motivation to liberalise further will evaporate.' It comes at a difficult time for BA, which is battling a series of problems, such as strike threats from workers over plans to change their pensions.
It also announced a 6.2 per cent dip in passenger numbers in February 2007 compared with the same month last year.
In a separate development, BA said about 900 flights will be cancelled as a result of the sale of regional operations of its subsidiary BA Connect to rival Flybe.
Some 15,000 passengers will be hit by the cancellations which affect flights up to March 24. All are being offered alternative seats on Flybe or a full refund.
Reader views (11)
What prompts some to think that BA is losing custom? Have you ever flown with a US carrier? BA is a fantastic airline and yes they charge excess, as do all other airlines. They have pushed the limts of onboard products in business class and service and it is disgusting that the government has got themselves into a situation that eurocrats can sell them dowm the river to suit Washington. This will be bad for Virgin and BMI too, they are also world class and make the US carriers look amateur. It is time for some to stop listening to media hype and be proud of some very British companies.
- Adrian Cole, Windsor
British Airways is not a fantastic service provider to say the least. They are losing custom to these other airlines already. I am not sure BA will survive this. There is just too much good competition out ther in Europe, Asia and America! Remember transport is a service! Willie Walsh does not appreciate this, coming from a (small) state-owned airliner.
- Georgie, London
Why is the EU determining what happens at Heathrow?
As far as I am aware we have our own government and our own CAA?
- Stuart W, London
This might make BA reconsider its new idea of charging for additional suitcases, when access to other transatlantic flights becomes simpler. BA has the reputation of being a high price premium carrier, but they do not yield the service levels of other similar priced airlines.
- Graham, Reading, England
I fail to see your concern. EU carriers will not be allowed to fly domestically in the US as you state, but US carriers will not be allowed to fly within the EU either. Seems like a level playing field. What this deal will do is break the monopoly of BA and Virgin as the only EU carriers allowed to fly to the US from the UK. That is hardly bad news.
- Marie, Amsterdam
The issue is classic US protectionism. Their airlines were propped up by Federal government subsidies and protected from commercial reality after September 11th, furthermore no "foreigner" can buy a US airline and foreign airlines cannot carry passengers on US domestic flights.
Access to Heathrow is red herring. The only good news to come out of this is that trans Atlantic airfares will fall as BA look to maintain yields. Increased competition means more unfilled seat and more CO2 per passenger carried. As usual this gutless corrupt government will do nothing except cave in without so much as a whimper!
- James, London
This is just more evidence of Britain's status as a province of the new European Union. The country that gave its sovereignty away without its citizens having any say!
- Phil Jones, London
Irrespective of how appalling the airline in question may be does not the fact use of Britain's airport space is ultimately subject to the outcome of political wrangling between Europe and the US paint a chilling picture of what we can expect in future aftering surrendering our sovereignty to the EU?
- Givenuphope, London England
I read about this on Sunday and it was stated that Heathrow would be open to all carriers, European and US for US flights. Has this now changed so that only US companies can use Heathrow for US flights? This appears to be what BA are saying.
- Lloyd, London
BA's service was better up to about one year ago.
- Georgie, London
Nice to see ineptitude duly rewarded, for a change...
- Jonny, London
