Virgin Atlantic attaches caveats to ‘Open Skies’

© Virgin Atlantic

With both sides of the Atlantic agog over the imminent debut of Open Skies, Virgin Atlantic Airways appears more cautious about its benefits.

Phase One of Open Skies opens up transatlantic competition. United States carriers can effectively fly unfettered to European Union airports, and vice versa. Previously, complex bilateral agreements governed that kind of traffic.

Less well known is the fact that the pact lets U.S. airlines fly between European cities, but — and here’s what rankles Virgin Atlantic and some other European carriers — European carriers aren’t allowed to fly between two U.S. cities. Not yet anyway.

That’s Phase Two. Virgin says “Phase One (open transatlantic competition) will automatically end if there is no progress on Phase Two, which is due to be in place by 2010”. Inherent in the new agreement is this provision: members of the European Union can let the transatlantic component of Open Skies lapse should they vote against the next stage, a stage that would enable EU airlines to control and own U.S. carriers.

It is precisely that control issue which delayed for months the premier of San Francisco-based Virgin America late last summer. The Department of Transportation would not give the go-ahead to the airline until foreign ownership issues were resolved.

There are other reasons why Virgin Atlantic seems cool to Open Skies. The pact “will not bring any sweeping overnight changes, because new entrants to Heathrow face the same formidable task of obtaining [takeoff and landing] slots that holds back Virgin’s growth,” Lyell Strambi, the airline’s Chief Operating Officer, contends. “Fares can’t get much lower, as airlines are already offering economy tickets at their lowest level in years.”

Strambi asserts that any new airlines — and he’s talking about new-entrants here — “will find it difficult to gain a toe hold,” on the transatlantic.

One area where he sees a real glut of seats is Business Class, particularly between New York and London. Capacity has ballooned 40 percent over the past two years, and with Open Skies the Virgin exec maintains: “There's a real danger there will be too much capacity for too little demand.”

One casualty of that perceived excess capacity may well have been MAXjet Airways, the bargain-priced Business-Class carrier that went belly-up not long ago. It flew specially fitted 767s from New York to London Stansted (STN).

© Cheapflights Ltd Jerry Chandler