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My Report On Bermuda II

Thu Mar 30, 2006 3:29 am

Included is my senior English Research paper. I chose to argue about getting rid of the Bermuda II treaty.... otherwise I would have had to write about sexual harrassment.... something i would get in trouble for.

Just a note in advance. I love United Airlines, and the only reason I wouldn't want BII to happen is that it would hurt UAL.

And Please, give me your opinions and thoughts

It Is Time to Bring down this Barrier
My flight into London Gatwick arrived late. Back in Houston, the aircraft had a maintenance issue causing its delay. The worst part is still to come. My flight to Hong Kong has already departed and London Gatwick only has one flight a day to Hong Kong. My business meeting begins in Hong Kong in 19 hours and my time is running out. The only flights left to Hong Kong from London are at London Heathrow. The only way to get to Heathrow is to pay for a taxi or ride the train while hauling my luggage around, what a hassle. Situations like this happen on a daily basis for passengers in the United States flying into London because of the illegal aviation treaty between the United States and United Kingdom prohibiting more carriers from flying in between the United States and London’s busiest airport: London Heathrow.
The Bermuda II treaty was signed at a time when British Airways was government owned by the British government. At the same time, the US airline industry was still regulated and the US government controlled what routes each airline could fly and what fare could be charged. Two airlines, Pan Am and TWA were the two dominant US airlines, and the only ones capable flying internationally and more importantly flying into London Heathrow. The UK and British Airways felt the original Bermuda agreement was too favorable to the US airlines and was too restrictive to British Airways. The Bermuda II treaty was signed in 1977 and stated only two airlines from each respective country (UK and US) may fly between London Heathrow and the United States. The treaty also limited the number of US destinations that could have London Heathrow access.
In this day and age of liberalized air travel, the United States has negotiated Open Skies agreements with numerous European countries. The one country unwilling to negotiate an Open Skies agreement is the United Kingdom. Roger W. Fones helps describe the situation in regards to travel between the US and London: “Capacity and pricing in the U.S.-London markets have for decades been severely restricted and distorted by the United States’ bilateral aviation treaties with the United Kingdom ( Bermuda II and its predecessors), especially for service to and from London’s Heathrow Airport (“LHR”)” (2.1). The Bermuda II treaty favors British Airways especially, allowing them to have a commanding presence on LHR-United States flights. The Bermuda II not only harms the other U.S. airlines by preventing them LHR access, but it also puts on cap on the number of cities London Gatwick may serve from the United States. “No LHR service to the U.S. may be provided by British Midland, Continental, Delta, Northwest, US Airways or any other North American or European airline. The bilateral further limits the total number of U.S. cities that may be served from London’s Gatwick Airport, (“LGW”), and Bermuda II also permits either government to place certain restrictions on capacity expansion in any U.S.-U.K. city pair, or to restrict carrier pricing in certain respects” (2.2). The UK government has imposed these rights by limiting connecting carriers’ rights to undercut fares on nonstop flights within the U.S. or U.K.
UK carriers are able to fly to US destinations that United and American airlines do not have service from. Philadelphia gets Heathrow service, but not from its home carrier US Airways. The Bermuda II treaty is protecting British carriers from the other major US airlines and preventing competition. Competition lowers prices and raises the service quality. Using Continental as an example, one can fly on British Airways into Newark, pay a premium, but if the passenger wants to continue on to Columbus Ohio, the passenger must grab his bags from Customs, go through security again, and change terminals. It is a huge and unnecessary hassle to go through.
Using Continental as an example, one can fly on British Airways into Newark, pay a premium, but if the passenger wants to continue on to Columbus Ohio, the passenger must grab his bags from Customs, go through security again, and change terminals along with airlines. It is a huge and unnecessary hassle to the passenger. The Bermuda II treaty also limits the US destinations with available Heathrow access. Passenger T in Houston can fly to Gatwick on Continental or British Airways nonstop, but passenger T’s only option to get to Heathrow directly from Houston without a plane change is on British Airways on their Houston-Chicago-London flight. Passenger T can also fly to another airport that has Heathrow access but only with added hassle and inconvenience. The Bermuda II treaty is simply a monopoly of the airways into London from the US. The EU sued Microsoft for having a monopoly and made them pay a hefty sum of money, so how is the EU itself holding a monopoly any more legal than what Microsoft had?
Britain’s Department of Transport states “The Government’s priority should be to benefit the economy as a whole, rather than individual airlines (paragraph 71)” (1.7). This shows how groups from countries other than the United States find the Bermuda II wrong. The Bermuda II treaty is unfairly protecting British Airways by preventing other airlines from getting equal flying rights. London, the city as a whole, is the largest international gateway in Europe handling more traffic from the United States than any other major European hub. “Under Bermuda II there are already far more air services between the United Kingdom and the United States than between any other European nation and the US, almost forty percent of passengers to the US fly from or via the United Kingdom, and from London, if not Heathrow, it is possible to fly to more points in the United States than from any other European city” (2.1). The Bermuda II treaty has allowed the two British based airlines to flourish at the expense of the two airlines operating from the United States “More over, British airlines have been extremely successful under Bermuda II, not only outperforming their US rivals on most routes to the United States, but also attracting more passengers from ‘behind’ London than US carriers attract from ‘behind’ gateway airports in the United States” (2.1). Statistics like this prove that the government from the UK is afraid to open up its skies in fear of the home carriers losing prestige and money. Last time I checked, the airline industry was a free market. The British government is afraid that British Airways and Virgin Atlantic will not be able to compete against the likes of Continental and Delta on top of the current operations from United and American.
The British government wants British Airways to have access to US domestic routes in return for opening up London Heathrow. That is like saying United Airlines wants to be able to fly from London to Manchester and then on to Belfast and continuing even further to Birmingham followed by a short hop to Newcastle. The US domestic routes should be flown by US airlines. The United States does not care about the ability to fly within England and the UK, all it wants is for its airlines to have equal London Heathrow – US access. Here is a short excerpt from the Department of Transport “The United States has proved to be intransigent about its domestic legislation relating to cabotage, airline ownership and Fly America. The Government agrees that US protection of its domestic market is inimical to full liberalization and will continue to impress upon the US the benefits of competition in a free market, in the interim, some agreement short of liberalization is reached” (2.4). All the US carriers want is appropriate rights in to London Heathrow. If the United States allows British carriers domestic service rights, what is to prevent Germany and France from tearing up their current agreements with the United States and forcing the US to allow their country’s airline equal domestic rights. “The Government see it as central to any agreement that access for US carriers to Heathrow should be matched by effective access for UK carriers to the US domestic market” (3.2). One other point to add is the United States military uses US airlines periodically to help in the movement of troops overseas and doing so on an airline based out of a foreign country is simply a conflict of interest.
In the article Towards Truly Open Skies, Kenneth J. Button states “The United States began pursuing Open Skies agreements in 1979, agreeing to very liberal terms if other countries accepted them” (4.1). Following that up, Burton later goes on to state “By 1982, the United States had signed 23 liberal bilateral air service agreements worldwide, mainly with smaller nations. That was followed in the 1990’s by a burst of agreements with European states including those with Switzerland, Luxembourg, Iceland, Sweden, Norway, Belgium, Denmark, Finland, and the Czech Republic” (4.1). Germany and the Netherlands followed suit shortly after, which has allowed for a strong alliance between member airlines from the participating states with airlines based within the United States (United and Lufthansa, Northwest and KLM). While the markets between the United States and the rest of Europe continue to liberalize and become freer, the Bermuda II looks even more controlling and unfair. The markets between the US and Europe continue to grow but with London Heathrow restrictions in place, London-US routes can only continue at a much slower pace. The only real way for capacity to increase from London Heathrow is to fly only very large jets such as Airbus’ new double deck A380 which holds 500+ people in a standard configuration.
Rodney Slater shows key concerns on unfortunate restriction of traffic between Heathrow and the United States “The significant restrictions constraining the free flow of aviation commerce no doubt contributed to the stagnation and red ink that plagued the industry at that time” (2.7). Airlines such as Continental, Delta, and US Airways are not the only ones suffering due to the Heathrow restrictions “Consumers of air services –passenger and shippers – paid the price of poor service, high fares and cargo rates, and the waste of a potentially invaluable capital resource” (2.8). Because of the current Heathrow restrictions, airfares into Heathrow are far greater than corresponding flights into other London area airports. British Airways gets the greatest gain from the price fixing and the UK is reluctant to pass or sign anything that could compromise British Airways dominance “Around the world, large and small economies are freeing air services from regulatory second-guessing and government market management, while the United Kingdom remains paralyzed by a policy of protectionism” (3.6). The UK’s reluctance to end Bermuda II on reasonable conditions shows they cannot and should not be leaders in aviation.
US Airways have a strong presence on the east coast of the United States with Hubs in Philadelphia and Charlotte just to name a few. As pointed out earlier, the east coast is a huge market to and from London. US Airways issued a statement in December of 2001 discussing the benefits of access to Heathrow: "Because it operates an extensive network in the eastern United States, where a majority of U.S.-U.K. passengers originate or terminate their journeys, US Airways will be a strong, growing competitive force in the Heathrow market. But the consumer benefits of US Airways’ presence in this market can only be fully realized if US Airways can serve Heathrow from its three gateway hubs" – Charlotte, Philadelphia and Pittsburgh”(US Airways 1.2). US Airways may only fly into London Gatwick from Philadelphia and Pittsburg, both airports have or had London Heathrow service at some point or another courtesy of British Airways. US Airways cannot compete head to head with British Airways if US Airways cannot offer similar service to London Heathrow.
Continental Airlines has made public statements regarding its lack of ability to service Heathrow airport. However, they are not alone, Delta and Northwest have joined Continental in lobbying against the Bermuda II treaty and want the opportunity to be able to fly to Heathrow and prevent British Airways and American Airlines from creating one large US/LHR airline. Members from Continental, Northwest, and Delta all state: “Together, American Airlines and British Airways have market shares exceeding 50 percent on seven U.S.-Heathrow routes that account for two-thirds of all U.S.-Heathrow traffic, and they operate monopoly service on at least nine U.S.-London and 16 U.S.-U.K. routes” (1.3).
London Heathrow has some very unfortunate restrictions in regards to travel to the United States. These restrictions allow for extremely high prices (borderline price gauging in my opinion) sent off to the consumer just for the convenience of being able to fly almost anywhere else in the world. Why does the consumer have to pay so British Airways can continue to make money off of their monopoly in London? All US based Airlines should be granted access to London Heathrow to at least attempt to level the playing field. Even after Bermuda II, Continental and other airlines alike would still face serious hurdles. London Heathrow is maxed out of slots during the key times in which flights to and from the United States takeoff and land. Landing slots are periods of time in which an airline is allowed to operate a flight into and out of an airport. The airlines lacking Heathrow service should be allowed to purchase peak hour landing slots. Many airlines are under using their Heathrow slots but since they are not US or UK based, they don’t have to worry too much about where the aircraft is located. US Airways and Northwest along with Delta and Continental are willing to pay a premium for at least one or two landing rights t London Heathrow. These airlines are able to see the benefits and profits that would come from the ability to operate in and out of London’s Heathrow airport.
The European Union sanctioned and sued Microsoft for antitrust with its Windows operating system because it included a media player preinstalled with the main software. Now, when a European is at fault against the United States, the EU is hesitant to react and make final judgments. If the European Union cared so much about victim’s rights and fairness to the consumers they would deem the Bermuda II treaty invalid and highly illegal. The Bermuda II limits competition and capacity along with preventing any new competition arising in the future. It is hard to believe anyone could allow such an atrocity to continue in today’s free market capitalist world.

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RE: My Report On Bermuda II

Thu Mar 30, 2006 8:43 am

Thanks for posting that, I found it very informative. Particularly resonant is the fact that BA can fly from LHR to DTW, PHL and EWR, yet the respective 'home' airlines of these hubs cannot fly to LHR. That's clearly wrong. (Add HOU to that list, even if BA operate via ORD)

I've often thought that there are some secondary European, African and Middle/Near East cities that don't really need access to LHR, yet slots are used up for LHR services - some of BMed's destinations might be included in this list.

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