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Heathrow on the move

27 Mar 08

A new terminal freeing space in old ones, a new deal with the US freeing the airlines to use the South of England hub for desirable destinations – Rachael Jolley looks at the implications in the UK and beyond

by Rachael Jolley

The skies over the Atlantic have just been legally opened to allow more airlines to fly to and from the United States than ever before.

The “Open Skies” agreement means the repeal of decades-old legislation that allowed only four airlines to fly between Heathrow and the US. Since the end of March, any European or US airline can do so.

But the ramifications go far beyond Britain's biggest airport – other EU countries have to allow services from third-country carriers to operate from their hubs for the first time.

Air France was first to step up to the plate, and is flying from Heathrow to Los Angeles.

This new international agreement between the EU and the US should throw open the market to more airlines to fly to more cities in the US from all over Europe as well as increasing the frequency of services to the most important destinations, such as New York and Chicago.

Along with the Air France service already mentioned, there are new services such as Delta’s from Heathrow to New York’s JFK airport, while Northwest has announced new services to Detroit and Minneapolis. More changes are expected.

Travel from Heathrow to the US had previously been limited to Virgin, BA, United Airlines and American Airlines.

This resulted in years of transatlantic squabbling about restricted markets and anti-competitive measures, and left other major airlines, such as Bmi and Continental Airlines, desperate to fly into the US from London but unable to do so.

Bmi compromised by launching flights from Manchester to the US in 2001 while it was blocked from Heathrow: a sign of its interest in cracking into the US. The airline is not one of the first to take advantage of the Open Skies agreement to add more services from Heathrow, though.

A Bmi spokesman said it was concentrating on its medium-haul services and would assess the UK/US situation no earlier than 2009. However, there is no doubt that the four airlines that previously dominated the UK/US airways will have to line up against Heathrow newcomers such as Delta and Continental, which have just arrived in Terminal 4.

Unsurprisingly, Continental Airlines senior director Bob Schumacher hails the new agreement as “a fantastic step forward” and a move away from the old anti-competitive arrangements. As his airline moves into Terminal 4, it is using the opportunity to add four daily flights from Heathrow, two to Newark, and two to Houston.

Armine Venencie, UK regional director at Delta Air Lines, says the new regime should lead to more choice for anyone making decisions about business travel budgets as airlines such as Delta and Continental start up services from Heathrow.

Some travel managers would previously have restricted themselves to the four airlines with flights out of Heathrow, because of the importance of that connection. Now the field is much wider, he argues.

Delta, which also operates direct flights to the US from Gatwick, Manchester and Edinburgh, would also like to see improvement in the customer experience in Heathrow’s Terminal 4 and believes that with the removal of British Airways to Terminal 5, the drop in numbers should help passengers to move through the airport more easily, potentially relieving the worst of the queues at security and check-in.

The new deal also means the end of old anomalies such as transatlantic services into Ireland having to stop at Shannon as well as Dublin.

But just lifting legal restrictions will not mean every airline is going to be able to start flying into Heathrow. There is a limited number of slots for flights. Few Heathrow slots come up for sale – airlines hold on to them for decades – but when they do come on the market, the price tag is reportedly in the hundreds of millions of pounds. This means few airlines apart from the world’s biggest are able to afford them, and when they do, they are going to use them for the most profitable route they can.

Delta Air Lines’ Venencie says: “Any Open Skies deal is only as good as the slot network.”

However, Graham Ramsey, group chief executive of travel management company ATP, believes we will see more direct flights. “It will increase choice and that will increase the traveller’s ability to book airlines.”

Maurice Veronique, chairman of business travel management firm the Appointment Group points out: “What you have seen in the last 12 months is a lot more exchange of slots from low value routes to potential better yield.”

Veronique also sees a redesign of the pattern of flights out of Heathrow moving towards more long-haul flights, where airlines can maximise their profit. Air France has already exchanged one of its London-Paris service slots for the new Los Angeles service.

The problem with this could be, as Veronique points out, that if short-haul flights to Europe disappear, Heathrow could lose its status as the best connected European airport. If that happens, no doubt Amsterdam and Frankfurt, already popular with Scottish travellers, would be ready to take over the mantle.

As both Ramsey and Veronique point out, the number of slots at Heathrow is likely to stay roughly the same because of the space restriction on its two runways. The difference is going to be where those flights go.

If that difference is fewer short-haul flights, there could be even fewer reasons for Scottish travellers on a European trip to transfer at Heathrow. Regional UK connections have been in decline in the past few years, and with short European flights potentially going the same way, it looks as if other airports may offer better choice as well as service and transfer time.

Schipol continues to offer the convenience of transferring within one terminal, without the hassle factor of Heathrow. And, as most travel experts report, airports beyond the UK continue to be attractive transfer hubs to travellers outside the south of England.

Even apart from the Open Skies agreement, there is massive change ahead at Heathrow this year, with the opening of BAA’s massive new Terminal 5, scheduled for the end of March, due to take most of British Airways’ passengers away from existing

facilities. Terminal 5 will offer up-to-the-minute facilities and the move should relieve pressure elsewhere in the airport. Norman Gage, business travel director at the Advantage travel agency chain, says he expects major changes at Terminals 1 and 3.

“With 30m passengers sucked out of T4 and T1, all the terminals are going to breathe a sigh of relief,” he says.

Basic supply and demand economics suggest that if there is increased supply then fares should get more competitive, though not everyone will admit that this is likely. One business traveller, though, Jane Richards, of the London public relations firm Brighter, says she has booked flights on the Air France service to LA that were significantly cheaper than other options.

Veronique believes that premium fares for the front of the cabin will come under the most pressure. “I expect to see prices there coming down.”

The Open Skies agreement has ramifications for airports outside the UK as well. The EU/US agreement allows UK airlines such as BA to fly from Amsterdam to Newark or Paris to Minneapolis to compete with KLM or Air France, if it sees demand for the service from travellers.

ATP’s Ramsey says: “I think the market will govern the process as well as external pressures.”

Change is already signalled at Gatwick. As carriers move services to Heathrow, questions are being asked about the airport’s more business orientated flights. Delta says it has no intention of pulling out, and with low-cost carriers such as easyJet flying out of the airport, it could end up better connected for short-haul European flights than Heathrow.

All this means more options when cutting an annual travel deal with a carrier or an airline alliance to play off one set against another. Competitors arriving in a market or airport tend to bring special fares to entice regular fliers away from their former favourites. Watch out for this; but look too for differences in service on-board and in reservations that should also be assessed as part of the package.

Ramsey believes that growing concern about the environment and climate change could be a factor in future flying patterns, but so far this is largely unacknowledged by airlines. Some say that passengers show no sign of reducing their flying but will expect operators to improve their environmental performance, and there will be massive pressure, already making newspaper headlines, for airlines to stop flying empty planes, which they sometimes have done to keep an airport slot.

Experts believe a reduction in UK regional flights may put extra pressure on rail companies to provide better services for business people.

Philip Carlisle, chief executive of the Guild of Travel Management Companies, says he believes high-speed trains should pick up the slack. But with UK train fares higher than air fares for some routes and services often under-performing, few regular travellers have the same confidence in UK trains as their colleagues in France or Germany, preferring low-cost airlines.

The much advertised age of the train is yet to arrive, and even the big news from Heathrow is likely to do little to change that.

RACHAEL JOLLEY is a freelance travel journalist and editor of Irrational magazine.


COMING SOON TO A STATION NEAR YOU…

For frustrated regular train passengers the good news is major improvements and investment are both signalled, but the bad news is they’ll have to wait until 2012 to see much difference.

Network Rail has announced a £2.4 billion overall upgrade of Britain’s railways, and that should mean significant changes on the East Coast mainline route between Edinburgh and London.

Much to the delight of those who have fought to find a seat on one of those packed trains recently, new, bigger trains are to going to be arriving to offer extra space, though these Intercity Expresses will not be pulling into Edinburgh Waverley until 2012.

There are also plans to increase the number of trains running on this route to eight an hour during busy periods, and six off-peak.

There will also be station upgrades and improvements to the track to allow diversions when work is being done on the main route. Peterborough station will get a new platform separating East Anglia services from north-bound long-distance trains.

However there are some more immediate changes. With the takeover of the East Coast main line by National Express, passengers in all classes are being offered free access to Wi-fi onboard. National Express has also unveiled a new compensation package for delays starting from 30 minutes at 50 per cent of the cost of that portion of the ticket. The new train operator also claims it will make every effort to improve punctuality. One of the measures it has in its armoury is to have a spare train ready to go in London.

Also signalled is a £300m new line between Edinburgh and Glasgow.

Perhaps the most dramatic upgrade this year has been the opening of the glitzy new London St Pancras station and the transfer of Eurostar from Waterloo, making services more useful for those living north of London.

The transfer was combined with the opening of new high speed track between London and the Channel Tunnel speeding up the services to Brussels and Paris, as well as stations in between.


WHY WOULD ANYONE WANT TO GO THERE?

Ah aroma! Northwest is to start a new service to Seattle, celebrated for its coffee shops – try the independents rather than the chains. The city is most famous as the home of Starbucks Coffee, Microsoft and Boeing – and for its beautiful location. Natives have a hippy image and are known for their love of outdoor pursuits. But did you know the Klondike gold rush started here and a statue has been erected to famous son

Jimi Hendrix?

Delta is adding services from Heathrow to Atlanta, Georgia, famous for being the home of Coca-Cola and Martin Luther King. Watch out for ridiculously high temperatures in the summer, but never head off to a meeting without a suit jacket – the air-conditioning will undoubtedly be on high. Did you know the Atlanta public library has a room devoted to Gone with the Wind author Margaret Mitchell?

You might think you know everything about Los Angeles – as the home of Hollywood it has been rather overexposed. But there's more to LA than “the industry”. Did you know Japanese-Americans from here who were interned during the Second World War returned to the city to create an area called Little Tokyo – and Japanese people were not allowed to become US citizens until 1952? And, ironically, Hollywood started life as a temperance community.

Continental is adding services to Houston – the former home of eccentric millionaire Howard Hughes. The city was founded by two New Yorkers who tried to sell its potential as a port and wanted it to become state capital (that honour went to Austin). It has miles and miles of air-conditioned tunnels to allow locals to escape the summer heat.

Minneapolis is gaining more direct services from the UK. It is one of the "twin cities", the other being St Paul. The city

has a large Scandinavian population and sits on the Mississippi river. Famous sons include the artist formerly known as Prince.

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