Sunday, December 09, 2007

Open Skies: Shakeup Coming in Transatlantic Business-Class Markets

British Airways, as mentioned in yesterday's post on the troubles at MaxJet, is creating a new mini-airline that will fly transatlantic routes from various European cities.

The service will start next spring after the Open Skies agreement takes effect at the end of March. The agreement between the European Union and the U.S. greatly relaxes rules on which cities international airlines can serve between Europe and the U.S.

The name for B.A.'s new subsidiary hasn't been announced yet, but B.A. has been developing it under the code-name "Project Lauren." There's lots of speculation about the name, and I'd point out that the domains, along with and the .eu and .de extensions all were registered and parked in early October by someone.

Several months ago, B.A. chairman Willie Walsh said he wasn’t sure whether the anticipated new service would be all business class or a combination of business class (which B.A. brands as Club World) and premium economy (which B.A. calls World Traveller Plus).

B.A. has now decided to launch the airline starting in May. The new B.A. airline will fly 757s most likely configured with two cabins — business class and premium economy, though I don't know yet whether B.A. will brand the business cabins Club World. Initially, B.A. will devote only two or three 757s to the new routes.

The strategy, as Walsh described it to me months ago, is to fly from various U.S. gateway cities with heavy business travel demand to premium-market cities in Europe — he named Paris, Frankfurt and Amsterdam and said others were possibilities — using 757s.

Given British Air's worldwide networks and alliances, a B.A. entry into the boutique end of the transatlantic premium market would be bad news for MaxJet, since MaxJet flies out of the B.A. bastion at JFK. MaxJet uses 767s that are 18 years old on average.

But it probably wouldn't be good news for Silverjet, sincer Silverjet has long-0range plans to expand after Open Skies. And Eos can't be applauding the prospect of a new layer of premium service by the formidable B.A. B.A. flying a new premium service between Paris and the U.S. is bad news for l'Avion as well.

Not known: Where is the also-formidable Virgin Atlantic on this new strategy? Virgin -- whose luxury Upper Class business-class service is a high-shelf competitor to B.A.'s on the transatlantic London markets -- also has been talking about a new premium service niche between European cities and the U.S.

So there's a realignment in store over the Atlantic, come spring. And there could be casualties, perhaps well before spring.

MaxJet, which abruptly halted trading in its shares on Friday without explaining why, was said to be scrambling for emergency financing. In a statement today, it said it was continuing to operate flights and take bookings.


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