<B> Issuing Fight Plans</B>
<I>AA, CO Heat Up Transatlantic Competition</I>
By Jay Campbell
New American and Continental airlines transatlantic services that go head-to-head with competing airline alliances could be the start of the kind of competition that travel managers have been waiting for since the establishment of Open Skies policies and antitrust-immunized alliances. The routes, announced late last month, are scheduled to begin next spring.
The many new aircraft that will be delivered to carriers in the next few years also promise to further fuel this trend toward expansion and increased competition between global alliances.
"Subtly, there is a suggestion here that these carriers are jockeying," said Rolfe Shellenberger, the Palm Desert, Calif.-based senior consultant for Runzheimer International. "A move-countermove approach is taking place right now."
Of course, numerous factors play into a carrier's decision to fly a new route, but if the industry crystal-balling is true, the new flights--Continental's daily Newark to Brussels and Zurich, American's daily Chicago-Amsterdam and New York-Frankfurt, as well as US Airways' new Philadelphia-Amsterdam service--could be signaling a move away from years of near-universal retrenchment by the airlines toward a new aggressiveness.
Many observers have noted that the airlines rarely have taken advantage of the rights granted them when the United States adopted an antitrust policy in the mid-1990s and challenged the now-immunized incumbent alliances. The policy granted foreign fllag carriers partnering with a U.S. carrier antitrust immunity in exchange for Open Skies, permitting both partnering carriers to fly between any two points in either country.
In some cases, carriers even pulled back from competing on their own with incumbent airlines and pairs of airlines--as when American pulled out of New York-Brussels and New York-Zurich last year, for example (<I>BTN,</I> Aug. 25, 1997). But with these new announcements from American and Continental, there is at least some hope that the times are a-changing.
"This does strike me as encouraging," said Jeffrey Shane, a partner at Wilmer, Cutler & Pickering and the former assistant secretary for policy and international affairs at the U.S. Department of Transportation. "Alliances are not necessarily a blessing if they go unchallenged. Maybe prices drifted upward where the Delta alliance dominated in Brussels and Zurich, that's why Continental is filling in."
Prices, indeed, have drifted upward between Brussels and Zurich and the United States, but it's difficult statistically to isolate whether that's due to the lack of new entries. However, peeking into the central reservation system to compare business class fares in the Brussels-New York market, Business Travel News found that Continental's entry is not lowering fares, at least not on a published basis.
The competition, however, may be found in corporate discount programs meant to snag and keep corporate accounts. Continental was very clear in its announcement that it was demand from corporate clients that drove the airline to pick Brussels and Zurich for its fourteenth and fifteenth European destinations.
"We listened very carefully to our corporate customers in the New York and New Jersey area," said Continental's vice president of national sales, Dave Hilfman. "They have been asking for those services for over two years, and now that we're getting the aircraft, we were able to meet their needs. We have commitments from a lot of corporate folks to help support the service."
Earl Foster, global travel manager at the New York-based Joseph E. Seagram & Sons and president of the Association of Corporate Travel Executives, agreed that the New York area needs the lift to those places. But he was a bit skeptical that a new era of competition is at hand. "I'm not sure competition will reign supreme," he said. "I agree that after Open Skies there was this kind of 'Okay, Open Skies, that'll do it for us. Let's see who does this.' And then, the airlines kind of just sat back. I think I'd call these moves more protecting their own interests than competing."
Shellenberger notes, however, that protecting interests can increase competition. "I wouldn't say the new flights you're going to see are necessarily offensive or defensive," he said. "It could be defensive in that these guys are simply filling in their networks and getting closer to the point where they can say they or their alliance partners can serve all of a corporation's needs."
American Airlines certainly will be filling in some big holes with new services to Amsterdam from Chicago, and to Frankfurt from New York. In the latter case, Continental, Delta and United-Lufthansa already have five daily services between New York/Newark and Frankfurt, so it's hard to imagine any reason for AA to jump in, besides the simple fact that it's a major market not already covered by AA or its partners. AA and its partners can't allow themselves to be shut out of corporate contracts because the Star Alliance offers the route and AA does not.
Chicago-Amsterdam, although now only served by KLM-Northwest, is a similar example in that it is an important market required by many corporate clients negotiatinging multinational air contracts with an alliance. It gives travelers originating in points south and west of Chicago an alternative to KLM-Northwest in flying to Amsterdam, Shellenberger said.
"It's all a game of chess anyway," Shellenberger said. "And the rules and the atmosphere are changing."
Continental's daily Newark-Brussels flights, operated with a 242-seat DC10-30, will begin May 3. Newark-Zurich service, using a 172-seat B757, will start April 14.
Both of American Airline's new routes will use 165-seat B767-ERs. Chicago-Amsterdam service begins May 3, and New York-JFK to Frankfurt service is scheduled to begin May 16.