What "Open Skies" Means for U.S. Airlines

Last Updated Mar 31, 2008 1:27 PM EDT

You've probably heard a great deal of talk about the wonders of Open Skies between the US and European Union. It officially went into effect March 30, and now the world is a different place . . . right?

Well, not really. From the European perspective, this could open up a great number of new opportunities for flights between the EU and the US. For example, Air France is now flying London to Los Angeles and British Airways is starting an airline specifically to fly from New York to points in the EU beyond the UK. But for those airlines based in the US, it doesn't mean nearly as much.

In fact, this whole agreement is really a one issue kind of opportunity for US airlines: access to London's Heathrow airport. See, while this does allow open skies between the US and EU, the US already had fairly liberal agreements with most of the individual countries that make up the EU. With this new agreement, there are no new flights planned by US airlines other than those to Heathrow.

Previous agreements between the US and the UK allowed only two US airlines to fly into Heathrow airport. There were a host of other arcane restrictions in place on how many airlines could fly to each airport as well. Now, the new agreement wipes all that away and anyone can fly to Heathrow if they're willing to pay the price of admission.

Before yesterday, American and United were the only airlines allowed into Heathrow (rights which they purchased from TWA and Pan Am, respectively). As of yesterday, Continental, Northwest, Delta, and US Airways have all moved at least some of their flights over to Heathrow from Gatwick. Of course, Heathrow is very crowded, so they had to pay multiple millions of dollars to buy slots from airlines that already had them. It's an expensive proposition, but apparently it's worth it for access to London's premier airport.

Other than that, US airlines won't see any new opportunities out of this agreement. What they may see, in fact they already have seen, is more competition from EU carriers on some routes. Ultimately, this agreement could be net negative for the US airlines.