commavia
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Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 2:45 am

Continental has issued a press release calling on the U.S. to negotiate for access to Heathrow by U.S. carriers in turn for Europe so badly wanting the U.S. Congress to relax foreign ownership rules.

Continental contends that, "While an open skies agreement theoretically permits flights to Heathrow, there are no commercially viable slots and facilities available at Heathrow that would allow an airline like Continental to begin service there." In my opinion, Continental's premise is somewhat misleading, as the new agreement would, indeed, theoretically allow any U.S. airline (including Continental) to have free and unlimited access to Heathrow assuming they want to pay for it by buying the slots on the open market, and Continental would likely have to buy existing slots from existing slot holding airlines, thus giving them access to those respective airlines' slot and facility capacity.

In addition, I recently read with interest an excellent Times article regarding the new government policy of transitioning Heathrow's airfield utilization plan to a "mixed mode" system soon, which the government estimates would result in a 15-20% increase in the capacity of Heathrow's runways, without even accounting for the proposed third runway the government wants to add in 2015, nor Terminal 5 (slated to open in March 2008) which is going to open up ample facility capacity. These two changes collectively would provide ample airfield and terminal capacity for Continental or any other U.S. carrier who wanted access to Heathrow, but, alas, they would have to pay for it.

Why should they get for free what American and United collectively spent more than $735M on (in 1990-1991 dollars)?
 
ikramerica
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 2:50 am

Where in that release does it say Continental is expecting anything for free?

The only statement talks of having "commercially viable" access. Not the same thing.
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commavia
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 2:56 am

Quoting Ikramerica (Reply 1):
Where in that release does it say Continental is expecting anything for free?

Correct, it doesn't, and that was the presumption on my part, based on the history of Continental's lobbying regarding Heathrow, which basically amounts to them wanting access to the airport as part of a bilateral (i.e., between governments), not as part of a financial transaction (i.e., a deal with another airline, like what AA and UA did).
 
777gk
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 4:17 am

Continental is willing to pay for Heathrow, and it will very well have to, but in return we want guarantees that we will have slots available for competitive operations with established carriers in the market. It is not likely BA/AA/VS/UA will concede anything to a new entrant (even with CO/VS codeshares), so an EU injunction may be the only option.

Should the deal go through, look for IAH-LGW to be replaced by at least two IAH-LHR frequencies, EWR-LGW service dropped to 757s, CLE-LGW switched to CLE-LHR, and EWR-LHR getting 4-6 dailies with a mix of 757/767/777 equipment.

If only a limited number of slots become available, and are distributed evenly, EWR holds priority over other markets.

This is purely speculative, but such a plan has always been in the works, pending necessary approvals and obviously the scrapping of Bermuda II.

[Edited 2005-12-07 20:18:35]
 
commavia
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 4:28 am

Quoting 777gk (Reply 3):
we want guarantees that we will have slots available for competitive operations with established carriers in the market

And why, exactly, should Continental (or any other airline) get "guarantees?" It's called a free market, and, if this deal goes through, the Heathrow slot situation will for the first time -- to my knowledge -- in history be a truly free and open environment. Surely, some airlines will have more slots than others -- BA, BD, etc., -- but anyone will be able to buy slots if they can find a seller and a mutually agreed upon price. So, I repeat, why should Continental get "guarantees" of open slots?

Quoting 777gk (Reply 3):
It is not likely BA/AA/VS/UA will concede anything to a new entrant (even with CO/VS codeshares)

And who says they should have to? I would be willing to guess that this new agreement, if signed, will probably double the value of slots at Heathrow between 0600-1000 overnight, and, in that pricing environment, I highly doubt that Continental would have a hard time finding slot holders willing to sell. I definitely think that a few European airlines will be more than happy to sell peak slots, at a peak profit, and just upgrade aircraft size to compensate for lost frequency.

Quoting 777gk (Reply 3):
EWR-LHR getting 4-6 dailies with a mix of 757/767/777 equipment.

4-6 daily CO flights EWR-LHR? That's overdoing it a bit, no?
 
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mariner
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 4:32 am

I'm confused.  Smile

Why does Continental want LHR so much when it has all those provincial cities in the UK?

cheers

mariner
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commavia
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 4:36 am

Quoting Mariner (Reply 5):
Why does Continental want LHR so much when it has all those provincial cities in the UK?

Because Heathrow is so profitable on its own. It has nothing to do with British provincial markets.
 
ARGinLON
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 4:41 am

Quoting 777gk (Reply 3):
Should the deal go through, look for IAH-LGW to be replaced by at least two IAH-LHR frequencies, EWR-LGW service dropped to 757s, CLE-LGW switched to CLE-LHR, and EWR-LHR getting 4-6 dailies with a mix of 757/767/777 equipment.

I agree with you on CO having more dailies LHR-EWR but this will be on 777/764 (having a 752 here will be a joke compared to the competition) and IAH will depend on BA's decision (naturally, this will go to LHR considering BA's LGW policy)

LHR slots cost a fortune and CO would make sure it only uses such slots with high yield traffic. CLE will never go to LHR (only seasonal, poor yields...)

As for the money to buy the premium 9AM slots, CO will go to Wall Street to get it - not doubt about it. Should this happen, it will mean the end of LGW operations for CO
 
acelanzarote
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 4:45 am

Hi
If Continental did get into LHR are they then not going to need more wide bodies? Seems they are using their fleet with little stack already. A few more 777's to order then??

cheers

KRH
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mariner
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 4:46 am

Quoting Commavia (Reply 6):
It has nothing to do with British provincial markets.

How not?

If Continental can make as much - or more - money from the provincial cities strategy, why stake an entire open skies agreement on LHR?

If they can't make as much - or more - money from the provincial cities strategy, that raises some quesions about ineternational point to point flying.

cheers

mariner
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Mir
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 4:47 am

Quoting Commavia (Reply 4):
4-6 daily CO flights EWR-LHR? That's overdoing it a bit, no?

Why not? BA flies plenty of 744s daily from JFK-LHR. If CO can provide more frequency with smaller planes, why shouldn't they?

-Mir
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whitehatter
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 4:49 am

Quoting Commavia (Thread starter):
Continental contends that, "While an open skies agreement theoretically permits flights to Heathrow, there are no commercially viable slots and facilities available at Heathrow that would allow an airline like Continental to begin service there."

Can't have one without the other, and slots are slots. They are not covered by bilaterals, but are valuable assets in their own right which nobody can demand be stripped from one carrier and given to another. Recent accounting changes mean airlines can now show slots as assets on balance sheets.

However purchasing slots (if available to buy) would not need a Wall street trip as they are not that expensive in relative terms. However it's obvious from QF's behaviour how valuable 8am to 10am slots are, with their 146 flights to MAN and back. They do change hands but are rare, and some can be traded for millions of pounds.

Another problem for a new entrant will be check-in and administration space. There just isn't that much free space about, not until BA make the T5 move.
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commavia
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 4:52 am

Quoting Mariner (Reply 9):
If Continental can make as much - or more - money from the provincial cities strategy, why stake an entire open skies agreement on LHR?

The "entire open skies strategy" is not staked on Heathrow, as if no agreement is signed, both parties just go back to the status quo, which essentially gives Continental unlimited access to the U.K. outside Heathrow.

Quoting Mariner (Reply 9):
If they can't make as much - or more - money from the provincial cities strategy, that raises some quesions about ineternational point to point flying.

I don't understand your point at all -- what does Heathrow have to do with smaller regional U.K. markets? Continental wants to fly to Heathrow to serve the London market from Heathrow. It has absolutely nothing to do with regional markets.

Quoting Mir (Reply 10):
Why not? BA flies plenty of 744s daily from JFK-LHR. If CO can provide more frequency with smaller planes, why shouldn't they?

Um, because it would be suicide. There is nowhere near a large enough market, in my opinion, for 10 daily BA flights New York-London, 6 daily AA flights New York-London, 5 daily VS flights New York-London, plus 4-6 daily CO flights New York-London and then another probably 3-4 daily DL flights New York-London if this deal goes through. That's around 30 daily flights in this market.

As to your comparison of CO to BA, that is like comparing apples to lawn furniture. BA has so much larger of a presence in the New York-London market than CO, and so much larger of a presence in the New York-London premium market.
 
ARGinLON
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 4:53 am

Quoting Mariner (Reply 9):
If Continental can make as much - or more - money from the provincial cities strategy, why stake an entire open skies agreement on LHR?

If they can't make as much - or more - money from the provincial cities strategy, that raises some quesions about ineternational point to point flying.

The reason for CO going to LHR is a matter of the huge business traffic that right now is unable to get due to the LHR issue. There is a LOT of high yield traffic that won't to LGW. As simply as that.
 
ORDagent
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 4:59 am

Quoting Ikramerica (Reply 1):
"commercially viable" access

Commercially viable means that they can arrive eastbound mid morning and depart mid afternoon for best connections in both directions.
 
ANother
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 5:04 am

Quoting Commavia (Reply 6):
Because Heathrow is so profitable on its own.

USA-Heathrow is profitable now, but will it be when the floodgates open? I wonder. As Commarvia says

Quoting Commavia (Reply 12):
for 10 daily BA flights New York-London, 6 daily AA flights New York-London, 5 daily VS flights New York-London, plus 4-6 daily CO flights New York-London and then another probably 3-4 daily DL flights New York-London if this deal goes through. That's around 30 daily flights in this market.

Can anybody make money with this type of capacity around?

Quoting Commavia (Reply 12):
and so much larger of a presence in the New York-London premium market.

And extensive feed both into JFK (AA) and into Europe - something that CO will not have (and VS doesn't have)
 
BigOrange
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 5:11 am

Quoting Mariner (Reply 9):
If Continental can make as much - or more - money from the provincial cities strategy, why stake an entire open skies agreement on LHR?

Provincial cities are not part of the open skies agreement. CO can fly to any provincial city it wants in the UK already.

I think pretty soon LHR will just be a long haul airport, with no domestic connections and very few intra-European connections. A rapid transfer rail link will be set up between LHR, LGW, STN and LTN to serve connecting passengers, or the RAF will close Northolt and this will become the airport for domestic connections.

Either that or the government will give BAA carte blanche to expand at will and they will just flatten all the neighbouring houses!
 
commavia
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 5:12 am

Quoting ANother (Reply 15):
USA-Heathrow is profitable now, but will it be when the floodgates open?

Yields will no doubt drop, and prices will definitely take a significant hit. However, it is also going to stimulate demand for U.S.-LHR traffic big time.

Quoting ANother (Reply 15):
Can anybody make money with this type of capacity around?

Today's capacity is a perfect fit for today's market, and AA, BA and VS all make money. In the long-run, the market would adjust to any capacity reallignment with lower fares and higher volume.

Quoting ANother (Reply 15):
And extensive feed both into JFK (AA) and into Europe - something that CO will not have (and VS doesn't have)

CO has more feed at its EWR hub than AA has at JFK, which is why I don't doubt that they could easily fill up multiple daily EWR-LHR flights. However, I don't think they could fill up 6. I could definitely see 3, maybe 4, but not 6, especially if they use 777s on some of the flights.

I could envision a CO schedule EWR-LHR looking like this:

EWR 0900 - LHR 2100 (762)
EWR 1830 - LHR 0625 (777)
EWR 2000 - LHR 0755 (762) *Maybe*
EWR 2130 - LHR 0925 (762/777)

LHR 0830 - EWR 1105 (762)
LHR 1100 - EWR 1325 (762) *Maybe*
LHR 1230 - EWR 1505 (777)
LHR 1700 - EWR 1930 (762/777)
 
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mariner
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 5:26 am

Quoting Commavia (Reply 12):
The "entire open skies strategy" is not staked on Heathrow

Sorry - but then the headline of your thread is misleading: No EU Deal Without Heathrow.

Quoting Commavia (Reply 12):
I don't understand your point at all -- what does Heathrow have to do with smaller regional U.K. markets?

The Continental "provincial cities" strategy is often used as validation of future point to point (or hub to point) flying and, the decreasing importance of hubs.

The ramification of Continental's position here is that point to point, or hub to point, is fine and dandy, but we'll go to the wall for the big hub. As in:

Quoting ARGinLON (Reply 13):
There is a LOT of high yield traffic that won't to LGW.

I agree.

cheers

mariner
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ANother
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 5:26 am

Quoting Commavia (Reply 17):
Yields will no doubt drop, and prices will definitely take a significant hit. However, it is also going to stimulate demand for U.S.-LHR traffic big time.

I'm not so certain. New York - London is a pretty mature market and well accustomed to $199++ pricing. Dropping another 6-9 flights into Heathrow is going to have an effect. With fuel still at $60 bbl (and the crack-spread still over $20) all of these guys are going to have to push 85-90% loads just to cover costs.

Agree that CO has great feed into EWR, but they will have little feed to/from LHR. And with a schedule such as you see, the inbound flight arriving at 2100 will not be for connecting pax. The same goes for the 0830 departure ex London.

If I were CO, I'd let DL go for LHR - pay a few million per slot pair - wait six months and buy them from DL's Chapter 7 receiver for a dime on the dollar ...

I agree with other posters that CO should stick to their strategy of serving the provincial airports. People will pay a premium to avoid Heathrow (I love clearing customs at Bristol - just me, and two other guys in the 'other passport' queues. Not like Terminal 3 at 0700 - 45m to 1 hour!)((or at least it was last time I went through T3)
 
commavia
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 5:30 am

Quoting Mariner (Reply 18):
but then the headline of your thread is misleading: No EU Deal Without Heathrow.

Respectfully, It's not misleading at all.

The thread is about exactly what I said. Continental says they don't want any new U.S.-E.U. deal without Heathrow access. The reason why many believe they want this is because they know that even if they don't get Heathrow access and no new deal is signed, the status quo is maintained and they still get unlimited flying to the U.K. outside Heathrow. Again -- the two things have nothing at all to do with each other.

Quoting Mariner (Reply 18):
The Continental "provincial cities" strategy is often used as validation of future point to point (or hub to point) flying and, the decreasing importance of hubs.

Agreed. Exactly right. But that, I think, is where your thinking is flawed -- Continental does not view Heathrow as a hub, and never has, and has absolutely no intention of enjoying market access to Heathrow in that way. They see Heathrow as just a spoke, not a hub, but a very high-yielding spoke at that.
 
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mariner
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 5:56 am

Quoting Commavia (Reply 20):
Respectfully, It's not misleading at all.

Sorry, but it misled me. And I have a reasonable IQ.  Smile

Quoting Commavia (Reply 20):
Continental does not view Heathrow as a hub

I don't see that it matters what Continental thinks it is.

LHR is a hub. You can connect at LHR to almost anywhere. It is one of the reasons it is a high yielding airport.

So - Continental, sensibly, wants in. They want in for its high yields which are, at least in part, due it's connections, even if those connections are with other airlines.

cheers

mariner
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777gk
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 5:56 am

Heathrow is a massive market, make no mistake.

4-6 daily Continental flights from Newark to Heathrow is realistic and undoubtedly will become a reality should the deal be approved. Existing LHR operations from EWR are token at best, the other carriers see no need to fragment their core competency at JFK by growing EWR service to match demand, but rest assured the market is viable, and there should be no question once the dominant carrier (CO) enters, considering how effectively we presently compete with our Gatwick service. Continental has more online feed at EWR than anyone else in the metropolitan area, but this is more or less irrelevant. The O/D is what makes NYC-LON tick. Everything else is just gravy.

LHR would become the crown jewel of our transatlantic network, but we make a lot of money elsewhere and need widebody capacity to several markets to sustain them. That's why the 757/767/777 will be seen at LHR if we get access, think of it as "giving it all we've got".

It has been reported that Gatwick should remain a CO station with EWR 757 service. However, the bulk of the assets and staff (i.e. Presidents Club) will be transferred to LHR.

If anything, LHR would make a CLE-London service work. It is tough to make a secondary market to secondary airport service profitable under any conditions, access to one of the foremost markets in the world would at least give it a fighting chance, especially if most transatlantic operators desert LGW.

Continental wants guarantees on slots to allow for fair access to an anticompetitive environment, especially if the EU is demanding revision to US foreign ownership statutes, which would increase competition in an environment not nearly so restricted.

Commavia, I think your problem is that, with a deal like this going through, established carriers like AA, BA, UA, VS may (perhaps unfairly) have nothing to gain and everything to lose.
 
commavia
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 5:58 am

Quoting Mariner (Reply 21):
So - Continental, sensibly, wants in. They want in for its high yields which are, at least in part, due it's connections, even if those connections are with other airlines.

Again, though, Mariner -- for the third time -- that has nothing to do with Continental's U.K. regional market strategy, and still -- even now -- I have absolutely no idea why you continue to link the two.

Continental wants to fly to Heathrow as a stand-alone market, not for connections, not for codeshares, not as a hub, but as a stand-alone market that they can serve from their U.S. hubs. It would have no impact whatsoever on their regional market strategy.
 
commavia
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:03 am

Quoting 777gk (Reply 22):
Continental wants guarantees on slots to allow for fair access to an anticompetitive environment, especially if the EU is demanding revision to US foreign ownership statutes, which would increase competition in an environment not nearly so restricted.

In a free market, there are no such things as "guarantees." And, furthermore, Continental's (and/or your) characterization of Heathrow as an "anticompetitive environment," in the context of global air transport hubs, is highly mistaken, IMO. The single largest airline at Heathrow, BA, has less than 50% of the slots there -- I believe it is now at about 42%.

In a free market, if Continental want slots at "commercially viable" times, then they are going to have to pay "commercially viable" prices. They don't like it, then live without Heathrow.

Quoting 777gk (Reply 22):
Commavia, I think your problem is that, with a deal like this going through, established carriers like AA, BA, UA, VS may (perhaps unfairly) have nothing to gain and everything to lose.

First, it's not my problem, its these airlines'. Secondly, AA and BA have a great deal to gain from this deal going through, as they would get ATI and unlimited commercial cooperation. The primarily losers in this E.U.-U.S. deal, in the context of the Heathrow debate, will be UA and VS. UA continues to lose more and more of its presence at Heathrow to competition from AA and BA, and VS -- left without strong feed at either end of its Heathrow-U.S. network, is going to have a challenge making these flights work with more competition and lower yields.
 
ScottB
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:08 am

Quoting Commavia (Reply 4):
And why, exactly, should Continental (or any other airline) get "guarantees?" It's called a free market, and, if this deal goes through, the Heathrow slot situation will for the first time -- to my knowledge -- in history be a truly free and open environment.

Well, except that it still won't be a "truly free and open environment." How much exactly did BA or BD or VS pay for the vast majority of their slot portfolio? How about the various European, African, and Asian carriers who have been operating at Heathrow for years? How much have recent new entrants to LHR paid for their slots?

Without commercially viable slots being available to new entrants from the United States, the U.S. gains almost nothing from this agreement. BA would gain a tremendous commercial advantage due to its grandfathered slot portfolio; AA would just reallocate a couple of slot pairs to DFW-LHR service. BD would also have a golden opportunity to become a serious competitor in the U.S.-U.K. market.

Quoting Commavia (Thread starter):
Why should they get for free what American and United collectively spent more than $735M on (in 1990-1991 dollars)?

United paid a large sum for Pan Am's Pacific rights; these have become progressively less valuable as bilateral agreements have been loosened with Pacific Rim nations. Delta paid for much of Pan Am's European rights portfolio which also would have little value as the result of Open Skies with the E.U.

United and American didn't just pay for slots, they also paid for the rights to operate to LHR under Bermuda II. There was no guarantee that the treaty would last forever.
 
atmx2000
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:10 am

Quoting Commavia (Reply 4):
And why, exactly, should Continental (or any other airline) get "guarantees?" It's called a free market, and, if this deal goes through, the Heathrow slot situation will for the first time -- to my knowledge -- in history be a truly free and open environment. Surely, some airlines will have more slots than others -- BA, BD, etc., -- but anyone will be able to buy slots if they can find a seller and a mutually agreed upon price. So, I repeat, why should Continental get "guarantees" of open slots?

It would be a free market, but on the other hand the current privileged position that the incumbents are in the LHR market is a creation of government interference and is going to have long lasting effects once restrictions are eliminated.

Anyway aren't new entrants to LHR awarded slots when they become available?

Quoting Commavia (Reply 12):
Um, because it would be suicide. There is nowhere near a large enough market, in my opinion, for 10 daily BA flights New York-London, 6 daily AA flights New York-London, 5 daily VS flights New York-London, plus 4-6 daily CO flights New York-London and then another probably 3-4 daily DL flights New York-London if this deal goes through. That's around 30 daily flights in this market.

Don't forget Air India and whoever else has rights for the LHR-NYC.

Quoting Mariner (Reply 9):
If they can't make as much - or more - money from the provincial cities strategy, that raises some quesions about ineternational point to point flying.



Quoting Mariner (Reply 18):
The ramification of Continental's position here is that point to point, or hub to point, is fine and dandy, but we'll go to the wall for the big hub. As in:

No, what CO wants is access to the O&D traffic at LHR. I'm sure there will be some other folks coming into LHR who might connect there onto a CO flight, but there is a incredibly large amount of O&D traffic between LHR and NYC that they would like to bring close to NYC downtown via their EWR hub. That isn't a difficult concept to understand. Those folks might go to LGW to catch a CO flight, but they certainly aren't going to go to MAN or whatever other cities CO serves in the UK.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
ANother
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:16 am

Quoting Commavia (Reply 23):
Continental wants to fly to Heathrow as a stand-alone market, not for connections,

If that was true, they would stick with LGW, which has much better connections (and much cheaper too) into the city.I cannot understand why any pax, destined to London, would choose LHR over Gatwick. Maybe CO should try a ERJ-200EEEEEELR and drop into LCY - now that would be serving the London market.

However, the agreement has yet to be signed, let alone agreed by the EU25. As I mentioned in another post, the jury is still out of whether the Eurocrats will be able to overrule vetos from, at least, Ireland (who will lose the SNN rule) or the UK (who get NOTHING in exchange).

I propose a variation on a theme. A new ASA between the USA (or North America if Canada, Mexico and Bermuda want to join in) and the EU (plus EEA and CH). No flight, frequency, airport, tariff or ownership & control regulation. Any EU or N.American airline can serve any markets (domestic or international) that they think they can make a buck at. i.e AC could operate TLL-HEL and AY YTO-DTT. Now that would be a refreshing change ...  duck 
 
jacobin777
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:20 am

Quoting ScottB (Reply 25):

Well, except that it still won't be a "truly free and open environment." How much exactly did BA or BD or VS pay for the vast majority of their slot portfolio? How about the various European, African, and Asian carriers who have been operating at Heathrow for years? How much have recent new entrants to LHR paid for their slots?

BA, BD, and VS got there first, so they will probably get the best prices/rates..etc.

By your reasoning, someone who emigrated to the United States in 2004 should be able to purchase a house in San Francisco Marina district at 1975 prices....

Quoting ScottB (Reply 25):

United and American didn't just pay for slots, they also paid for the rights to operate to LHR under Bermuda II. There was no guarantee that the treaty would last forever.

Correct, they will no longer have the treaty to fall back on, but why should they (or anyone else for that matter) give up/sell their slots to CO if they don't want to..

If CO had purchased Pan Am, etc., they would have gotten UA's slots to LHR......its called "good business decisions"....which CO didn't do at the time..

while CO should have the right to fly to LHR, they don't have the right to get slots at their wish....it's called "open market"..
"Up the Irons!"
 
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:21 am

Quoting Commavia (Reply 23):
for the third time -- that has nothing to do with Continental's U.K. regional market strategy, and still -- even now -- I have absolutely no idea why you continue to link the two.

But I did not even mention the provincial cities in the post to which you reply - #21. So I don't know what "the third time" has to do with it.

Quoting Commavia (Reply 23):
Continental wants to fly to Heathrow as a stand-alone market, not for connections,

The point is that LHR is a rich market in part because of its hub status, whether Continental wants to use it as such or not.

Quoting Atmx2000 (Reply 26):
what CO wants is access to the O&D traffic at LHR.

Yes, thast is exactly the point I am trying to make. And why is there all that O&D at LHR and not at, say, LGW?

Quoting Atmx2000 (Reply 26):
That isn't a difficult concept to understand.

I agree.

cheers

mariner

[Edited 2005-12-07 22:22:18]
aeternum nauta
 
RichardPrice
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:23 am

Quoting ANother (Reply 27):
However, the agreement has yet to be signed, let alone agreed by the EU25. As I mentioned in another post, the jury is still out of whether the Eurocrats will be able to overrule vetos from, at least, Ireland (who will lose the SNN rule) or the UK (who get NOTHING in exchange).

Im pretty sure that the veto powers held by certain countries in the EU are absolute and cannot be overruled, as otherwise they wouldnt be worth anything!
 
Indy
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:23 am

I have never been to the UK so I have no idea how LHR and LGW compare. How close are they and how different are the facilities? Is LHR really that much better? Or is it a case where someone wants it just because someone else has it even if there is really no additional value?
Indy = Indianapolis and not Independence Air
 
commavia
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:25 am

Quoting ANother (Reply 27):
If that was true, they would stick with LGW, which has much better connections (and much cheaper too) into the city.

Well, obviously millions of travellers disagree with you, as they prefer flying to Heathrow over Gatwick.

Quoting Mariner (Reply 29):
The point is that LHR is a rich market in part because of its hub status, whether Continental wants to use it as such or not.

No disputes here, but then -- again -- what does that have to do with your earlier statement that, "the ramification of Continental's position here is that point to point, or hub to point, is fine and dandy, but we'll go to the wall for the big hub" ??? They are not connected at all. Continental is not saying, "we'll start flying to Heathrow on Monday, and we'll drop MAN, BHX, EDI, GLA, BFS and BRS on Tuesday. They are not connected in any way and one does not reflect one way or another on the other.

Quoting Mariner (Reply 29):
And why is there all that O&D at LHR and not at, say, LGW?

Because what is just is. The market has determined that Heathrow is a more attractive, more desirable market than Gatwick. Continental doesn't have a sya in that, which is why they want to move to Heathrow.
 
RichardPrice
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:28 am

Doesnt LHR have more international connections than LGW? Ive only ever flown into LGW, but it seems more orientated at the leisure traveller rather than the business traveller, who would go to LHR.
 
whitehatter
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:28 am

Quoting 777gk (Reply 22):
Continental wants guarantees on slots to allow for fair access to an anticompetitive environment, especially if the EU is demanding revision to US foreign ownership statutes, which would increase competition in an environment not nearly so restricted.

won't happen. Nobody has the right to take an asset away from a third party.

Quoting ScottB (Reply 25):

Without commercially viable slots being available to new entrants from the United States, the U.S. gains almost nothing from this agreement.

Too bad. Slots at LHR are not an asset to be allocated by anyone in Government. If anyone wants them then they have to buy or trade for them.

Quoting 777gk (Reply 22):

It has been reported that Gatwick should remain a CO station with EWR 757 service. However, the bulk of the assets and staff (i.e. Presidents Club) will be transferred to LHR.

and precisely where is this great expanse of open space within LHR where CO could transfer its baggage into? Heathrow is not a hotel. Most of the buildings are solidly let and until T5 opens there will be no available space for anything major like a clubhouse in a convenient location.

Quoting Commavia (Reply 24):
In a free market, if Continental want slots at "commercially viable" times, then they are going to have to pay "commercially viable" prices. They don't like it, then live without Heathrow.

It's a seller's market. Prices reflect availability and at peak hours nobody will be offering to sell or rent slots out.

Quoting ANother (Reply 19):
If I were CO, I'd let DL go for LHR - pay a few million per slot pair - wait six months and buy them from DL's Chapter 7 receiver for a dime on the dollar ...

which probably won't happen, if they went bust those slots could revert to the slot allocation agent and go back into the pool.
Lead me not into temptation, I can find my own way there...
 
commavia
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:31 am

Quoting WhiteHatter (Reply 34):
It's a seller's market. Prices reflect availability and at peak hours nobody will be offering to sell or rent slots out.

I'm not so sure of that. I definitely think that some of the European carriers with many daily flights to Heathrow from their respective home countries and hubs will be tempted to sell slots in the 0600-1000 timeframe given that the relative prices of these slots on the open market may well reach the stratosphere with all the new U.S. carriers, plus other new entrants, competiting to buy.

Furthermore, with the next mixed mode runway usage plan apparently coming into effect soon, that should increase runway capacity by 15-20%, freeing up a great deal more slots for new entrants. Terminal capacity, while packed, is -- IINM -- not 100% full. And, even if it is almost completely full, an enormous amount of facility space should be opening up in less than three years time.
 
ANother
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:35 am

Quoting RichardPrice (Reply 30):
Im pretty sure that the veto powers held by certain countries in the EU are absolute and cannot be overruled, as otherwise they wouldnt be worth anything!

You are correct, but my comment was related to whether the Brits can withstand the pressure from Brussels, particularly in a UK Presidency. Not everything, with Brussels, is as easy as it seems - the UK could (for example - not for flaming) be willing to sell their airlines down the drain, in exchange for support getting their proposed EU budget agreed (not that that is very likely).
 
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mariner
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 6:58 am

Quoting Commavia (Reply 32):
They are not connected at all.

I suggest the issues raised are deeply intertwined in the debate about hubs and hub to point and/or point to point flying.

cheers

mariner
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AeroWesty
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 7:01 am

Quoting Commavia (Thread starter):
Why should they get for free what American and United collectively spent more than $735M on (in 1990-1991 dollars)?

No one forced AA or UA to buy their way in to Heathrow. They both could have waited until a new agreement was signed.

Quoting WhiteHatter (Reply 34):
It's a seller's market. Prices reflect availability and at peak hours nobody will be offering to sell or rent slots out.

A couple of months ago an interesting post was made by VV701 on the subject of where slots might have to come from if Heathrow was opened up to more U.S. carriers:
RE: Chapter 11 Got Me Annoyed! (by VV701 Oct 7 2005 in Civil Aviation)

Reply #36:

But for a moment let us assume that an open skies agreement is signed but the current US protectionist regulations remain in force. The only significant change would he more than two US airlines being allowed to fly into LHR and more than two British airlines being allowed to fly out of LHR to the US. What would this mean in practical terms?

Well BM, partly owned by SK and LH, already have 12 or 13 per cent of LHR slots. So BM could start a service to any US city where slots are available almost immediately if that was their priority. But where would CO, DL and NW get their slots from? Certainly we could expect a small number of new slots to be made available to them free of charge through the LHR slot committee. And some slots might become available from airlines withdrawing a service from LHR much as Swiss International discontinued many of their flights and sold the slots to BA. But would the number available be even enough for one let alone three airlines to offer a half decent service in terms of frequency to their customers. And would such slots be at times that the three airlines and their customers wanted? Probably not.

So then what. No doubt on current form the cry would be that BA must provide the slots. Clearly this is not natural justice. However a 'satisfactory' practical solution would require this. So now we come to the Eddington argument although he never put it in these words. If BA has to give up lucrative slots at its home base where it has a lower proportion of slots than any other major international airline at its home base, what do they (BA) get in return? US cabotage rights? US government personnel allowed to fly BA? The right to take a majority shareholding in one or more US carriers? Or perhaps there is something else you can sudggest?
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ScottB
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 7:04 am

Quoting Jacobin777 (Reply 28):
By your reasoning, someone who emigrated to the United States in 2004 should be able to purchase a house in San Francisco Marina district at 1975 prices....

Actually...No. The current situation is more like saying that the current occupant of a rent-controlled house in the San Francisco Marina District is entitled to a rent-controlled apartment in New York City simply by virtue of renting the apartment in SF -- and that anyone who wants to move to the SF Marina District might be allowed to if a house becomes available; otherwise they have to live in Fresno.

Airport slots, like rent control, are a government-imposed distortion of a market. The slots are scarce because the government restricts their availability and/or the expansion of their production (i.e. adding runways).

Quoting Jacobin777 (Reply 28):
BA, BD, and VS got there first, so they will probably get the best prices/rates..etc.

Yes, they were given most of their slot portfolios. That's a pretty significant subsidy on the part of their government.

Quoting Jacobin777 (Reply 28):
Correct, they will no longer have the treaty to fall back on, but why should they (or anyone else for that matter) give up/sell their slots to CO if they don't want to..

By the same token, why should the U.S. agree to a change to the status quo when there really is little, if any, benefit to U.S. carriers (aside from AA)? In fact, the change might well further disadvantage the majority of U.S. carriers.

Quoting Mariner (Reply 29):
The point is that LHR is a rich market in part because of its hub status, whether Continental wants to use it as such or not.

The point which you continue to ignore is that LHR's hub status may be largely irrelevant to Continental. LHR, rightly or not, is seen as the premier gateway to London, and this is why flying to LHR matters for CO. This is not to say that no one would connect from CO to another airline at LHR; however, there are few places reachable from LHR which are not already accessible via the SkyTeam alliance hubs in Europe already; CO gains little or nothing from the fact that LHR is a hub. It's like the reason why CO flies to ORD. They don't fly there because ORD is a hub for UA and AA; they fly to ORD because it is the preferred airport for most people (though, of course, not all) to get to Chicago.
 
ScottB
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 7:09 am

Quoting WhiteHatter (Reply 34):
Too bad. Slots at LHR are not an asset to be allocated by anyone in Government. If anyone wants them then they have to buy or trade for them.

The existence of slots at LHR is a situation that was created by the U.K. Government. If they don't want to address the ramifications of this policy, then certainly there's no need to change the status quo vis a vis service between the U.K. and the U.S., and certainly no need whatsoever to allow greater foreign ownership of U.S. airlines.
 
commavia
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 7:12 am

Quoting ScottB (Reply 39):
By the same token, why should the U.S. agree to a change to the status quo when there really is little, if any, benefit to U.S. carriers (aside from AA)?

Because it will benefit consumers and the industry, which brings us back to my original post and Continental's press release. Continental is doing what is in Continental's best interests, which is to oppose anything that would help their competitors more than it would help them. And, as they are a profit-seeking business, that is exactly what I would expect them to do -- if I was a Continental shareholder (which I am not) I would expect the company to be yelling about this too.

This is exactly what Northwest did with the U.S.-Japan bilateral in the 1990s: essentially said, "don't make a deal unless you get Open Skies," essentially saying, "don't make a deal," as they knew that they benefited more from the status quo. In this case, Continental is basically saying, "don't make a deal without Heathrow slot guarantees," because they know that the deal as written right now would basically give all their competitors open access to all markets between the U.S. and Heathrow, and force them to pay for slots, which they understandably would rather not do if they could alternatively get them for free.

[Edited 2005-12-07 23:15:07]
 
atmx2000
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 7:16 am

Quoting Mariner (Reply 29):

Yes, thast is exactly the point I am trying to make. And why is there all that O&D at LHR and not at, say, LGW?

I'm no London expert so I don't know why people going to and leaving London prefer LHR over LGW. I'm sure the network effects arising from the number of carriers that fly out of London via LHR has something to do with it. But those network effects arise for a reason. I am sure that has a lot to do with the British government making it the premier airport for getting to London, a popular destination for business travellers and tourists. And being in Greater London and closer to the City certainly should make it more attractive.
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Elagabal
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 7:17 am

Quoting Mariner (Reply 9):
If Continental can make as much - or more - money from the provincial cities strategy, why stake an entire open skies agreement on LHR?

[quote=Commavia,reply=20] Continental says they don't want any new U.S.-E.U. deal without Heathrow access.

The agreement is not "staked" on anything the private company named Continental Airlines says or does. Continental can lobby Washington all they want, via press release or otherwise, but in the end they do not sign the treaty, the US government does. It's just CO threatening to stamp their feet and hold their breath until they turn blue. Gee, what do the other US airlines say about it?

Quoting WhiteHatter (Reply 11):
Continental contends that, "While an open skies agreement theoretically permits flights to Heathrow, there are no commercially viable slots and facilities available at Heathrow

Translation: "they're available but they're too expensive."   

Quoting Indy (Reply 31):
I have never been to the UK so I have no idea how LHR and LGW compare. How close are they and how different are the facilities? Is LHR really that much better? Or is it a case where someone wants it just because someone else has it even if there is really no additional value?

Heathrow is anywhere from 45 minutes to 1 1/2 hours to central London, depending on mode of transport and traffic, and is just west of "downtown" (London is like LA, *HUGE*). Gatwick is about 1-2 hours south of the city. Both are crazy busy and clearing customs rarely takes less than 20 minutes, usually 45.

Neither airport is particularly close to the City of London (the financial district), although a). Heathrow has better club facilities, and b). is also closer to Kensignton, Belgravia and other highly desirable areas for property and mixed business. These are the wealthiest parts of town, too, where people who buy pricey tickets actually live.

In terms of aviation, Gatwick has connections to mostly leisure destinations, although some business; and also tends to have lots of flights to Africa and Eastern Europe. Heathrow has many, many more connections to business destinations in Western Europe and Asia. Heathrow might have better GA facilities also - I'm not that kind of traveller so I wouldn't know.  Smile

Quoting ANother (Reply 36):
Im pretty sure that the veto powers held by certain countries in the EU are absolute and cannot be overruled, as otherwise they wouldnt be worth anything!

Yes - but in certain situations countries delegate negotiation powers a priori to the commission(er)s involved, in effect resigning their veto ahead of time. I do not know whether or not that applies in this case.

I also wonder how much pressure Ireland will come under to put up and shut up - and / or what price they might extract in return. 'Twas ever a question of horse trading, the EU.

[Edited 2005-12-07 23:21:12]
 
sllevin
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 7:18 am

Quoting Commavia (Reply 4):
And why, exactly, should Continental (or any other airline) get "guarantees?" It's called a free market, and, if this deal goes through, the Heathrow slot situation will for the first time -- to my knowledge -- in history be a truly free and open environment.

A free market would be one without bias. Clearly, a market in which pre-existing conditions exist is not free.

Compare it to civil liberties and minorities (especially in the South) in the United States. The work of the Civil Rights Movement, while critical in equality, would not have been considered 'complete' if all that happened was simply making everything 'free.' Broadly speaking, look at education. Most minority families were still poor at the time. Simply saying "if they can pay the money, their children can now go to the same colleges as the white (wealthier) students" because, while in theory there was now a free market for education, virtually no minorities could take advantage of it.

To correct that injustice, the government had to step in and provide financial mechanisms that would allow minorities to attend the schools, become educated, and have a chance for advancement.

I certainly hope that no agreement is signed that allows carriers to operate unlimited and unfettered from Heathrow without providing a reasonable (note: not free, that's why they used the term 'commercially viable') mechanism for US carriers that have been denied Heathrow access to acquire such rights.

Otherwise, this agreement brings nothing -- absolutely nothing -- to the American sie of the equation; it merely becomes a monster giveaway to European airlines.

btw, Larry Kellner, CEO of Continental, stated that Heathrow access would improve yields 35% over Gatwick yields. So I assure you he's willing to pay, just not through the nose.

Steve
 
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mariner
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 7:21 am

Quoting ScottB (Reply 39):
The point which you continue to ignore is that LHR's hub status may be largely irrelevant to Continental.

I am not ignoring it, that is exactly my point. There are many airlines from other parts of the world which do not have connections at LHR.

For all sorts of reasons, but which include location, O&D and connective ability, LHR is a highly desirable airport.

It is, and has been for decades, both a destination in its own right - and also a crossroads.

If Continental wishes to ignore the crossroads part, that's fine. The point is that LHR is, for many people, both, whether they use both aspects of it or not. LHR is, in part, famous because they can.

cheers

mariner
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bobnwa
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 7:27 am

Quoting Mariner (Reply 29):
The point is that LHR is a rich market in part because of its hub status, whether Continental wants to use it as such or not.

Yes LHR is a hub for BA but not for any other carrier. Are BOS,MIA,ATL,DTW,ORD etc hubs for BA just because they are hubs for another carrier? I think you will agree they are not.

LHR will not be a hub for CO, NW, DL, UA or US. It could be a hub for AA if it starts code sharing with BA.
 
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mariner
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 7:36 am

Quoting Bobnwa (Reply 46):
Yes LHR is a hub for BA but not for any other carrier.

Um - Virgin?

Quoting Bobnwa (Reply 46):
Are BOS,MIA,ATL,DTW,ORD etc hubs for BA just because they are hubs for another carrier? I think you will agree they are not.

They may not be hubs for BA, but at least some of them are hub cities.

Quoting Bobnwa (Reply 46):
LHR will not be a hub for CO, NW, DL, UA or US

I have not claimed that it will.

mariner
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commavia
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 7:44 am

Quoting Sllevin (Reply 44):
Compare it to civil liberties and minorities (especially in the South) in the United States.

I never thought I'd live to see the day that Continental Airlines getting landing rights at London's Heathrow Airport would be compared to the civil rights movement in the 1960s. This is why I love A.net!  Smile

Quoting Sllevin (Reply 44):
Otherwise, this agreement brings nothing -- absolutely nothing -- to the American sie of the equation; it merely becomes a monster giveaway to European airlines.

Isn't it funny how Continental, and presumably many others, see the deal -- as written now, without "guaranteed" Heathrow access -- as a "monster giveaway" to Europe, while the Europeans see the deal -- as written now, without E.U. carriers getting cabotage -- as a "monster giveaway" to the U.S.? Perhaps this is a measure of how successful the negotiators were at working out a deal -- neither side is satisfied completely, and everyone is pissed off!  Smile

Quoting Sllevin (Reply 44):
btw, Larry Kellner, CEO of Continental, stated that Heathrow access would improve yields 35% over Gatwick yields. So I assure you he's willing to pay, just not through the nose.

"Just not through the nose."

That's the beauty of the open market, now isn't it? Larry Kellner and Continental don't get to decide what "through the nose" means -- the supply and demand does. Continental is not a price maker, but rather a price taker. The only decision Continental will have to make is if the going rate for peak Heathrow slots is too high for them.
 
ARGinLON
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RE: Continental: No EU Deal Without Heathrow

Thu Dec 08, 2005 8:02 am

Quoting Mariner (Reply 47):
Um - Virgin?

Well... VS is a big operator at LHR but this doesn't make it a hub for them if we agree that an airline hub is an airport that an airline uses as a transfer point for connecting passengers.

HAving said that, you may want to call this a hub-and-spoke instead of hub ...but I guess we can discuss this all night..  Smile