BA To Launch Europe-U.S. Carrier

British Airways plans to launch an airline serving the United States from continental Europe in June. In a nod to the historic agreement that makes an operation outside its home country possible, the new carrier will be called OpenSkies. It will be run by industry stalwart and U.S. citizen Dale Moss, who left BA in 2006 after 30 years with the airline.

BA said the first route to be flown by OpenSkies would be from New York's John F. Kennedy International Airport or New Jersey's Newark Liberty International Airport to either Paris or Brussels. A second aircraft by year-end would serve whichever of those two European destinations is not chosen for the inaugural route. OpenSkies plans to fly a fleet of elderly Boeing 757s transferred from the main BA fleet. The carrier intends to operate six 757s by the end of 2009.

Although British Airways CEO Willie Walsh last year toyed with the concept of all-business-class service, OpenSkies will fly three classes: business, with 24 lie-flat seats, premium economy, with 28 seats with a pitch of 52 inches, and economy, with 30 seats.

BA's move into the U.S.-continental Europe market is in part a response to the much more significant expansion of transatlantic competition at its home airport, London Heathrow, following the signing of the U.S.-European Union Open Skies deal last April. The agreement takes effect on March 30 and eight airlines already have announced 18 new services from the world's busiest international airports.

An analyst requesting anonymity said the new airline is a Trojan horse to establish a lower cost structure for BA. "Fares are much cheaper from continental Europe to the U.S. than from the U.K.," he said. "The only way it can work for BA is to establish a lower cost structure."

Moss said OpenSkies will target small, midmarket and some leisure segments, and plans to participate in global distribution systems.

OpenSkies will operate under a codeshare with BA and benefit from the entrenched carrier's frequent flyer program, lounge access and sales force, Moss said. However, OpenSkies may not be beholden to BA labor agreements, pending labor negotiations unresolved at press time. "We'll have our own contracts," Moss said, noting "issues that we have to dance around."

London-based JP Morgan airline analyst Chris Avery said getting around BA's existing agreements is not a foregone conclusion, as labor unions "are regarding OpenSkies as something they ought to have their hand in. The deal is not done."

Virgin Atlantic late last year shelved plans to launch a transatlantic business-class carrier, and JP Morgan's Avery said BA's move away from its initial all-business plan "makes you wonder whether they feel the demand is there."

However, all-business-class Eos Airlines founder Dave Spurlock found OpenSkies' premium seating plan encouraging. "The amount of floor space on that airplane that will have economy seats is 13 percent, which is miniscule. The average airplane in BA's fleet is 70 percent economy. This is a sea change."