(Adds more details, BA chairman comments, share price)
By Rod Stone
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- British Airways PLC (BAY.LN) Wednesday said it is
establishing a new subsidiary that will offer flights between continental Europe
and New York, in a move designed to capitalize on a new transatlantic air
The unit, called "OpenSkies," will start a service from New York to either
Brussels or Paris Charles de Gaulle airports from June using a Boeing Co. (BA)
757 plane. OpenSkies will serve both European airports by the end of 2008 with
the arrival of a second plane, and the unit is set to operate six 757s on the
service by the end of 2009, BA said. The U.K. carrier had announced previously
that it planned to start services from the continent to the U.S. under an
initiative known as "Project Lauren."
The service is being made possible by an aviation treaty between the European
Union and U.S. that comes into force in April. From then, any European airline
will be able to fly to any U.S. destination from any E.U. airport and American
carriers will have the same entitlement on the continent. Presently, European
carriers aren't allowed to fly direct to the U.S. from outside their home
BA isn't the first European carrier to take advantage of the agreement. Air
France-KLM (AKH) and Delta Air Lines Inc. (DAK) have announced a revenue-sharing
joint venture covering their transatlantic operations that will see Air France
offering direct flights to the U.S. from BA's home airport of London Heathrow.
Currently, only two U.K. carriers - BA and Virgin Atlantic Airways Ltd. - and
two from the U.S. are allowed to fly direct to the U.S. from Heathrow.
BA is yet to decide whether the new unit will serve New York City from Kennedy
Airport or Newark Airport in New Jersey, according to a spokeswoman. This will
depend on the runway slot allocation available following a review of capacity at
the congested New York areas airports, she added.
All of the 757 airplanes for the new unit will be sourced from the current BA
fleet. The British carrier has ordered a number of new fuel-efficient aircraft,
including wide-bodied Boeing 787s and Airbus A380s. The 757s will carry up to 82
passengers in three cabins with just 30 economy seats.
In a statement, Chief Executive Willie Walsh said BA is looking to build on
the strength of the British carrier's brand in the U.S. and Europe. BA is
already a major transatlantic operator into the U.S., but by flying into Paris
will be competing head-to-head with Air France-KLM.
Chairman Martin Broughton told Dow Jones Newswires on the sidelines of a
company lunch in London that the venture is relatively low-risk given the few
number of airplanes involved even if trading gets hit by the economic slowdown.
BA is eyeing additional destinations in Europe such as Milan, Frankfurt and
Amsterdam, a company spokesman said separately.
BA said it will continue to lobby for further liberalization of the
transatlantic aviation market when talks between the E.U. and U.S. take place
later in 2008.
The E.U. backed the current agreement, known as 'Open Skies,' on condition
that the U.S. agreed to talks aimed at allowing European carriers to take
majority stakes in U.S. carriers and enter the domestic American market. This
isn't allowed under the initial pact and the E.U. has threatened to unravel the
current deal if progress isn't made.
Virgin Atlantic - which is jointly owned by Richard Branson's Virgin Group
Ltd. and Singapore Airlines Ltd. (C6L.SG) - has put on hold its plans to start
direct flights to the U.S. from continental Europe in 2009. It is concerned that
the initial pact might be thrown out as the next U.S. Administration may not
agree to open the market further.
The launch of the BA service comes at a time when many analysts expect a
slowdown in long-haul business travel during 2008 due to weaker economic
conditions. Although a much smaller operator than the likes of BA, U.S.-based
business-class-only transatlantic carrier MAXjet Airways Inc. was forced to file
for bankruptcy late last year due to high oil prices and a lack of funding.
BA said it will file an application shortly with regulators for the new
By 1502 GMT, its shares were down 2.8%, or 8p, at 276p in London while the
blue-chip FTSE 100 index was off 1.1%.
Separately, BA also said Wednesday that it will start flights between Heathrow
and Hyderabad in India from this October. India is BA's largest market outside
of North America.
Company Web sites: http://www.ba.com
-By Rod Stone, Dow Jones Newswires; +44 207 842 9295; firstname.lastname@example.org
(END) Dow Jones Newswires
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