How will OpenSkies fare?
Published: 20 Jun 2008
OpenSkies, the new premium transatlantic airline from British Airways, has launched its first daily passenger flight from Paris Orly Airport to New York John F. Kennedy Airport.
The new airline gives an indication about the potential of the recent Open Skies agreement between the US and the EU.
Coming close on the heels of the collapse of a handful of all-Business Class airlines, this operation – also using older, fuel-thirsty, B757 aircraft - might seem to be another venture doomed to fail. According to Center for Asia Pacific Aviation (CAPA), that will not be the case.
"This is more than any just old all-Business Class operation," stated CAPA.
Here is what CAPA has to say about the latest development in the aviation industry:
OpenSkies, the airline, stakes a tentative claim on French territory, aimed at creating a beachhead into the premium and economy market. It is a low-cost, low-risk operation, using only a single aircraft at first, sufficient to provide a daily round trip to New York, with an overnight return.
Any independent startup airline working on that basis would be asking for trouble; although the B757 has been a great workhorse for BA, a sure way to lose valuable friends is to have a few early technicals and delays. BA however can offer a default backup over Heathrow, less convenient surely, but an alternative. With a de facto partnership with local all-Business airline, L'Avion (whose slots OpenSkies is using and which operates another two daily flights out of Orly), other options are available too.
And, while the business plan shows six B757s operating by the end of next year, the parent airline has numerous options for fleet changes, if the product really takes off – or in case it is necessary to ramp up the threat of competitive retaliation, should Air France and Lufthansa challenge BA's Heathrow hub more aggressively. Air France has already started a Heathrow-Los Angeles service and Lufthansa has its eye on bmi's slots.
Otherwise, operationally, BA has been smart enough to ensure that the new airline is self-standing, with a much lower cost base than the mainline carrier. The B757s are presumably written down to such a level that the capital needs of the airline are simply not comparable to an independent. Then there is the ability to share in BA's contracting power, for fuel, marketing and other services.
Open Skies has the potential to expand in Europe, cherry picking the premium markets (like Amsterdam, Brussels, Frankfurt and Milan) and establishing a new brand for BA.
That's the strategic end of the business. The crunch arrives when it comes to filing seats. There are still seats available out of Paris tomorrow, although apparently forward bookings are healthy. The service is actually three class, with a business, premium economy and economy 82-seat configuration, offering a catch-all for business flyers.
So BA is certainly adopting a low-risk entry, where the concept is vastly more imposing than the market impact. This is probably not a bad approach at this time, with crisis in the air (and echoes of Terminal 5 still resounding).
Perhaps though, a bigger bang might just be necessary to stake a serious claim in Europe. If this is in reality the underlying theme in London Head Office, the potential for a substantial ramp-up is one to watch.
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