All About BA's New Airline,
BA's response to the various - and now
failed - premium cabin point to point trans-Atlantic
Avid plane spotters
will note an interesting thing in this picture. The
plane is one of OpenSkies two 757s, but it has specially
modified wingtips added to give it greater range and fuel
Part 1 of a three part
series on OpenSkies - please
(Business Bed) review
The OpenSkies concept was
initiated by BA
in mid 2007, in the height of a series of new trans-Atlantic
lower cost premium cabin airlines starting up, and with the
euphoria of a shortly to be announced open skies agreement
between the EU and the US making it easier for new airlines to
start service between anywhere in the EU and anywhere in the US.
With the depressed business
climate today, and with oil prices that swung way high before
dropping, but which could go back sky high again at any moment,
and with all the startup trans-Atlantic carriers now having
failed, one wonders if BA would again start a new airline today
the same way it did 15 months ago.
But, the most important
question of all for us as passengers is simply this :
Should we give this new airline our business or not.
Background to the launch of
The mid 2000s saw a sudden
rush of new international airlines start, offering service
between a secondary airport in London and flying to New York with planes fitted
with only business or first class seats. Maxjet, Eos and
Silverjet all launched these types of services, and a French startup, L'Avion,
attempted to emulate the apparent success of these three
companies by flying between Paris' Orly Airport and Newark.
The main selling point of
these startups was that they offered business class type service
but at a massively lower price than the major airlines, and by
flying medium sized 757s, their planes had fewer than 100
passengers on board making boarding and leaving the plane quick
and simple, and with fewer delays to checkin or get luggage at
the other end.
For a while it seemed the
three startups were succeeding, as they added extra planes and
flights to their initial schedules and issued brave press
releases about meeting targets and being pleased with their
Improved convenience, a good
quality travel experience, and a great value fare all seem to be
appealing points for travelers. As such, the major
airlines, charging twice or more the amount that these new
carriers did for comparable or inferior service, felt threatened, even though the new
startups had very little capacity compared to the massive number
of seats being flown across the Atlantic each day by the major
airlines such as BA, AA, UA, VS, etc.
The major airlines
also had two points in their favor - the fact that they offered
feeder service into and out of the two airports on either side
of the Atlantic, making it easier for people flying from and/or
to further away points to connect through their services, and
they also had frequent flier programs and major route systems
either in the US or Europe, corporate sales networks (and
corporate discounts - sometimes as much as half off the
published fares), and other such marketing tools at their
airlines responded in three ways - most of them yawned and
ignored the new startups. But American Airlines launched a
competing service at massively discounted rates on the same
route between JFK and Stansted Airport in London, while British
Airways perhaps decided 'if you can't beat them, join them' and
announced plans to create its own similar airline as a wholly
owned but independently operated subsidiary, initially known by
the marketing code name 'Project Lauren' and then publicly named
as OpenSkies when the new airline was formally announced at the
beginning of 2008.
Whether it be due to the
spiraling costs of jetfuel, toughening economic times making it
difficult for the startups to get additional financing, or the
competitive impacts of American Airlines (and probably it was a
mix of all three), the three startups all closed down between late
2007 and mid 2008. This is discussed in our article on
these startup airlines failed.
As soon as the third of the
US-UK airlines folded, AA immediately discontinued its own
service, but BA has pressed ahead with its OpenSkies subsidiary.
It is notable, however, that BA currently does not operate
OpenSkies flights on any routes where it would directly compete
The Early History of OpenSkies
OpenSkies was not a direct
competitive response to the three airlines operating between
London and New York. Instead, it was an oblique copying of
the business model, with first flights planned to operate
between New York (JFK) and Paris (ORY) - it being more in
competition with French startup airline L'Avion's service between New York (EWR) and
The first OpenSkies flight operated on
19 June 2008, and two weeks later it announced it was to
purchase its competitor, L'Avion. Perhaps
the sudden appearance of OpenSkies as a well funded competitor terrified L'Avion
and encouraged its owners to urgently sell the airline to its
competitor while it still had any value, but who knows what
caused the sale. Perhaps even L'Avion's owners were not
displeased with their exit strategy - the sale, with a price tag
of £54 million (US$88 million) seemed to place a measurable
value on the airline, although included in the purchase was some
£26 million in cash that was on L'Avion's books. The two planes L'Avion operate are leased,
so the remaining £28 million of the £54 million represents miscellaneous equipment and
assets, and largely a goodwill figure.
Just under a month later, at
the end of July, OpenSkies announced plans to add flights
between JFK and Amsterdam (AMS), with the first flight taking
place barely ten weeks later, on 15 October 2008.
The OpenSkies Business Model
OpenSkies (airline code EC) differentiates
itself from its parent company, British Airways, in a number of
respects, while also enjoying the synergy of its association
with BA when it suits as well. Managing Director Dale Moss told
me that there was no point in copying BA, because if they
did that, they'd simply end up as BA, and there is of course no
sense in doing that. He indicated that, among other
objectives for OpenSkies is its ability to be a 'test bed' for
BA to try out new services and new features. He said that
EC seeks to be a business rather than a luxury brand, it 'can't
be all things for all people' and 'wants to be a chic brand'.
Not being all things to all
people is certainly starkly different to BA with its four
different classes of service, and seeking to be a chic brand
(whatever that really implies) suggests perhaps an attempt to
copy the successful 'chic-ness' of arch-BA competitor, Virgin
OpenSkies and Open Skies
Ostensibly OpenSkies has as
its main raison d'être the ability to respond to the new Open
Skies agreement between the EU and the US which basically allows
any airline from either the EU or the US to fly between any EU
country and the US (or vice versa). Prior to this
agreement, it would have been very difficult for BA to, for
example, get permission from both the French and US governments
to operate service between Paris and New York, but now it is an
almost guaranteed outcome that any bona fide application to
commence air service will be approved.
This new paradigm allows
established airlines from one country to easily start operations
in another country, 'poaching' from the other country's
pre-existing national carriers. BA actually stands
potentially to lose as much as it gains from this new regime -
part of the Open Skies agreement opens BA's valuable fortress hub at
Heathrow (considered to be the most desirable London airport to
fly in/out of) to competition from other airlines (but
constrained by the shortage of available takeoff and landing
'slots' at LHR), and perhaps that is part of the reason that
motivated BA to try and get benefits where it could as well as
prepare itself for increased competition on its home ground.
BA and EC compared and
Some things are the same
between the two airlines, while other things are deliberately
different. OpenSkies has taken sensible advantage, where
appropriate, of resources and services available to it from its
parent company, BA, but at the same time, Dale Moss says they
don't plan to follow exactly in BA's footsteps, because if they
did that, they'd end up indistinguishable from BA.
that mean that EC will do things differently purely for the sake
of being different? Probably not, but it does mean that
one of the secondary purposes of EC is to be a 'test bed' for
new services, new products, and new ways of running an airline
in general - if it comes up with a winning new formula, BA will
probably copy; but if it makes a mistake, then the negative
impacts of the mistake will be small and won't intrude on BA's
Examples of shared
commonalities include allowing passengers flying on OpenSkies to
earn miles into a BA Executive Club frequent flier program,
sharing BA's lounges, and operating their reservations call
center out of a BA call center in Bremen, Germany.
Note that although EC gives
mileage credit to BA frequent fliers, it does not have mileage
credit agreements with any other airlines, and both is not and
has no plans to join the oneWorld airline alliance (of which BA
is a key founding member).
Point to Point Service
The most prominent
difference between OpenSkies and BA is that EC
is strictly a 'point to point' airline. You have to make
your own way to an airport served by EC, and then your own way
on from the single sector EC flight you take to any
further/final destination. This mightn't sound like a very
big deal, but the devil is in the details, and in this case, the
two devils are the inability of other airlines to check you in
for an EC flight or for them to receive and/or pass on baggage
So if you're flying another
airline before an EC flight, and/or another airline after your
EC flight, you'll have to, at the end of each flight, go out of
the secure area of the terminal and to baggage claim, wait for
your bag, then check in your bag and yourself, then go back in
through security and to the gate for your next flight.
This can massively add to the time (and hassle) you need to
allow for in scheduling connecting flights - for example, when
flying on Delta to JFK prior to flying on to Amsterdam on EC, I
had to wait 40 minutes for my bag to appear at Delta's baggage
claim, then schlep it over to the EC checkin, rather than just
simply walk from terminal to terminal. It was even more
inconvenient when transiting through Amsterdam - I had to
collect my bag, then exit through Customs and Immigration, check
in for the next flight, and then re-enter through Immigration
again (two passport stamps for less than an hour outside the
transit area in the airport).
Not participating in
interline baggage agreements also makes things slightly more
difficult if your bag gets lost or delayed on one or the other
flight. The liability of the two airlines and their
willingness to join together and help get your bag to you
reduces when you're traveling on two totally different tickets
and there's no interline agreement between the airlines.
Even if you only have carry
on luggage, and even if you have pre-printed out a boarding
pass, you still will have to go out of the airport's secure
area, to the EC check-in desks so they can do a 'final passport
check'. This is an asinine and brain dead policy of the
highest order - especially when you consider that it required a
27 minute wait, standing in line at the checkin counter.
And it isn't a final
passport check at all. It is the first rather than last
time the passport is sighted at the airport (I am quoting Chris
Vukelich from EC who chooses to describe it as a final passport
check) - plenty more people, including EC staff at the gate -
will be looking at it again.
But being sensible and
running an airline are all too often oxymoronic.
Under the Hood Differences
One sensitive issue is the
potential for OpenSkies to give BA a way to circumvent some of
its expensive union contracts with existing staff who work for
the main BA airline. When asked about these issues, Chris
Vukelich, EC's VP of Distribution and eCommerce obliquely
answered 'EC is a
high value premium product with a low cost base. EC staff
are not unionized. One of the key operating principles of our
business is a high productivity level.'
As an example of EC's high
productivity at all levels of the company, their headquarters
operation comprises a total of approximately 35 staff, which
compares very favorably with the now defunct Eos Airline which
is believed to have had about 200 people in its headquarters.
It is, of course, very difficult for a very small airline with
only two or three planes to support a headquarters staff of 200,
but much more practical to support a headquarters staff of 35.
I also asked Chris if he'd
care to comment on the statement that 'some people have
considered EC as BA's stealth way of breaking the grip of some
of its established unions and less productive work practices'.
He chose not to reply.
The airline is about to
announce where it will establish its corporate headquarters for
the future (until now it has been based in London). My
guess is they will choose Paris as a way to further distance
themselves from BA's UK based unions and more costly work
practices. (Update - I guessed correctly.)
A careful analysis of the
published fares offered by EC and its competitors show that it
and the other airlines (other than L'Avion) all have the same
level advanced purchase Biz fare between New York and Paris,
with minor differences in final price being due to how many
surcharges each airline piles onto the underlying published
fare. Apparently EC is slightly greedier when it comes to
slugging its passengers with surcharges than its competitors.
Beyond that initial, most
restricted, most advance purchase fare, there are another eleven
business class fares offered on EC, and between four and six
extra levels of fare on AA, AF, CO and DL.
The other airlines have a
more restrictive lowest level fare - requiring 50 day advance
purchase, compared to 21 days on EC.
If you're buying a ticket 50+
days out, all airlines are the same.
Between 49 - 21 days, EC is
Between 20 - 14 days, EC is
$200 - $400 cheaper.
Between 13 - 7 days, EC is
very much better ($2000 or more).
For travel less than 7 days
ahead, EC's lowest fare is $4500 (plus surcharges and taxes,
etc), compared to $8258 on AA and $9033 on the other
But note that the EC $4500
fare is capacity controlled. Their highest fare, with no
restrictions at all, is $7700 - a lot of money, but still less
than the highest unrestricted fares on the other carriers (about
So what does this all mean?
Few business travelers can book their travel 50 days or more in
advance, which means that most of the time, there'll be an
appreciable saving by choosing EC's Biz class over other
airlines' business class, and the closer to departure you get,
the bigger the saving.
It is harder to analyze the
Prem+ fare levels, because there are fewer comparable fares on
other carriers to put them alongside.
EC's most discounted Prem+
fare requires a 14 day advance payment, and lists for $1137 plus
taxes/surcharges/etc. The next level requires a 7 day
advance and lists for $1457, and a no advance purchase fare can
be as low as $1777.
In all three cases, these
fares are capacity controlled, so depending on loading levels,
you may find yourself having to pay more than this.
The Prem+ fares are clearly
massively less than the Biz fares - less than half the price.
You'll be saving at least $1800 and probably more if you fly in
the Prem+ rather than Biz cabin.
The Future of OpenSkies
OpenSkies says the demise of
the discount premium carriers who operated between London and
the US in no way impacts on their own future plans, and -
inasmuch as EC has not operated on a London-US route, that is
Managing Director Dale Moss
predicts that within the next year and a half, 'aviation will
dramatically change' and that 'lines of demarcation [airline
ownership and operating restrictions] will disappear'.
This vision of major change is probably one of the factors that
encouraged BA to create EC, giving it a small nimble operation
that can quickly respond to changing marketplace conditions and
niche opportunities that may appear unexpectedly.
So, from this perspective,
the future of OpenSkies could perhaps be considered as being
currently largely up in the air - open and ready to respond to
future opportunities quickly as and when they arise.
On the other hand, Dale also
stressed, repeatedly, that BA was not giving his airline an open
check and endless supply of capital. He said that BA have
given EC a finite amount of capital to get established, and there
is no promise of further funding if/when EC might exhaust its
initial funding. He is very focused on making his airline
profitable and viable, and doesn't feel he has the luxury of
moving slowly, but rather needs to get there as soon as
possible, and he expects all his staff to be similarly focused.
Integrating L'Avion into
Now that OpenSkies
owns the formerly competing airline, L'Avion, we can
expect to see the L'Avion brand name gradually disappear.
L'Avion flew from Paris/Orly to Newark Airport, whereas
OpenSkies flies from Orly to JFK - at this stage EC says it
plans to continue operating the Orly-Newark service as well as
its own Orly-JFK service.
The two L'Avion 757s will be
reconfigured with EC style seating. Formerly they had
single class seating similar to Prem+ seats, but with a 48"
pitch rather than 52". These two planes will now be given
a mix of Biz and Prem+ seats, although interestingly, it seems
likely the number of Biz seats will halve, from 24 down to 12,
while the number of Prem+ seats will increase from 40 to either
60 or 64. This would increase the total seats from 64 up
to 72 or 76, and shows an interesting lack of commitment to the
Biz class on their planes.
It is interesting to compare
the seating configurations of different BA and EC planes.
60 or 64
52 or 70
30 or 36
Quite apart from the omission of coach (and first class) it is
interesting to see that the OpenSkies planes have vastly more
premium economy seats than business class seats, quite the
opposite of the regular BA planes.
This is not necessarily a
bad thing at all, indeed, in my reviews of both classes of
service, I clearly conclude that the Prem+ service is both very
good and very good value, whereas the Biz service is at best
average (by general airline business class standards) and much
poorer value for money. Emphasizing their Prem+ service
makes a great deal of sense, and one wonders if EC might not, in
time, evolve to an all Prem+ operation.
New Routes and Expansion in
OpenSkies started off with
one plane flying between Paris and New York in June 2008.
It quickly grew to two planes, has now added service between
Amsterdam and New York, and, having purchased L'Avion
and acquired its two planes, is adding extra flights on the New
York (ie Newark) and Paris route that were formerly under the
What is next? Managing
Director Dale Moss sees the next some months as being a period
of consolidation with no new routes or planes expected, and he is probably glad to have a chance to
wait and see what the future will hold for the global economy,
the demand for any type of premium airline service, and the
ongoing cost of jetfuel. With jetfuel costs having both
doubled and now halved in the last year, it is anyone's guess
(in mid October 2008) where fuel prices will move to next, and
with the massive economic uncertainties, all airlines must have
very cloudy crystal balls and find themselves unable to see a
clear vision for their respective futures.
However, when the time comes
to grow some more, Dale indicated that EC might not only
consider more routes across the Atlantic, but might also grow
into other markets too, east and/or south of Paris. He
specifically mentioned Dubai, Abu Dhabi, Delhi and Mumbai as
routes of interest, although it is unclear which cities these
flights might originate from, and is further unclear if the
airline would then create some type of hub and have through
flights and through fares (and through baggage) so that,
perhaps, a person could fly from New York to Delhi with a stop
and change of plane in Paris.
Dale very much likes his
current 757s, believing them to be an excellent airplane for the
use and routes EC is applying them on, but also indicated that
he likes the new 787 too and that might be a plane he considers
adding to the fleet in the future.
Update Nov 08 : A week
after this was written, a leaked internal BA memo advised that
OpenSkies was not meeting its revenue targets due to both fewer
passengers than hoped for, and lower average fares received per
passenger, and the airline delayed its plans to acquire a fifth
plane and add new routes.
The strategic value to BA of
its EC subsidiary remains, however. It is a great
bargaining lever to use against its UK unions, and a great
testbed to try out new products and services. Will EC be
closed down any time soon? With plans stretching years
into the future, clearly Dale Moss rates this as unlikely - but
I see it as far from impossible.
Update July 09 :
After choosing not to expand OpenSkies, British Airways has now
announced that it is ending the route between New York and
Amsterdam, and is putting the remains of OpenSkies up for sale.
Update Feb 10 :
OpenSkies has announced new service between Dulles and Paris,
starting with 5 roundtrips a week in May and planning to extend
to 7. The airline remains for sale.
Reviews of OpenSkies Service
review OpenSkies' Biz class
service and OpenSkies
Prem+ class service based on two flights in mid October.
The quick summary - Biz class is no better than other airlines
(but perhaps at a better price point), and Prem+ is greatly better than
competitors, offering a wonderful value point for travelers
willing to pay a moderate amount more than coach class.
Part 1 of a three part
series on OpenSkies - please
OpenSkies Biz review
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24 Oct 2008, last update
28 Nov 2012
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