labels: British Airways, News reports
BA nixes OpenSkies expansion; to sell 757-200s news
23 January 2009

Reacting to the global crunch in the air travel industry, British Airways has postponed plans for further expansion of its controversial venture to operate direct services between airports in continental Europe and North America, bypassing its global hub at London's Heathrow, a move that was strongly opposed by unions.

It is now seeking instead to sell aircraft in its mainline fleet that had been earmarked for transfer to the venture, known as OpenSkies, which began flying last year. Willie Walsh, BA chief executive, told media on Thursday that a letter of intent had been signed with another carrier to sell for cash 10 or 11 of OpenSkies' current fleet of 15 Boeing 757-200s.

Dale Moss, managing director of OpenSkies, had said last July the airline was aiming to have seven 757s in operation by the end of 2009. These would include two aircraft acquired through BA's takeover last summer of L'Avion, a small French all-business class carrier.

OpenSkies began flying between Paris Orly and New York JFK in June last year. A second route was opened between Amsterdam and JFK last October. But the business has struggled financially, with falling demand and especially weak sales in the premium segment.

BA group operating profits have plunged from last year's record level to just above break-even in the current financial year to March, forcing it to restructure. It had already postponed the transfer of a fifth aircraft to OpenSkies and has chosen to prioritise preserving cash during the current crisis.

OpenSkies was created to take advantage of the "open skies" treaty agreed between the US and the European Union, which came into operation at the end of March 2008. The treaty allows any EU carrier to fly from any point in Europe to any point in the US with reciprocal rights for US airlines in the EU.

Walsh said OpenSkies had to "stand on its own feet". The group could make better returns by selling all its available 757s rather than using some of them in the subsidiary, but it was still possible for OpenSkies to seek to lease other aircraft if there was a business case.

He said the aviation industry was facing the toughest crisis in its history. BA was assuming that the current UK recession would continue into next year, with recovery only emerging towards the end of 2010.

Despite cutbacks in its network and capacity, BA is still creating some new strategic routes. It recently launched a five flights a week service between Heathrow and Hyderabad. India is BA's second largest long-haul market after North America.

Following the liberalisation of the UK-India aviation treaty in 2005, it has increased its weekly flights from London to India from 19 to 48. This will fall to 45 in March, however, when it drops its thrice-weekly service to Kolkata.

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BA nixes OpenSkies expansion; to sell 757-200s