The Atlantic Update – Wednesday 25 July 2018

The Atlantic Update is published every Wednesday morning at 06:00 BST, providing a weekly bulletin on developments on transatlantic travel between Europe and North America.

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Virgin Atlantic, Air France KLM and Delta
Virgin Atlantic, Air France KLM and Delta

Hello and welcome to the The Atlantic Update for Wednesday 25 July 2018, providing a weekly bulletin on developments on transatlantic travel between Europe and North America. The Atlantic Update is published every Wednesday morning at 06:00 BST.

Air France, Delta, KLM and Virgin Atlantic at London Heathrow

As we reported on Sunday, Air France-KLM, Delta and Virgin Atlantic have sought regulatory approval to combine their two transatlantic joint-ventures.

At present, Delta has a joint-venture with Virgin Atlantic covering flights between the UK and the US. It also has an entirely separate joint-venture with Air France-KLM covering flights between Europe and the US.

What’s the rationale behind combining them?

Put simply, American Airlines and BA.

Delta and Virgin Atlantic serve all major US gateways from London Heathrow, bar some exceptions such as Chicago. They serve cities such as Los Angeles and New York with a competitive level of frequency. They also have a growing presence in Manchester.

However, it is clear from their submission that this is not enough to win corporate contracts and the loyalty of European frequent flyers from American and BA. Following the merger of bmi British Midland into BA in 2012, Virgin has very little by way of short-haul connections at Heathrow. It also has a shrinking non-US network.

A key principle behind these joint-ventures is the concept of “metal neutrality”. All participating must treat each others flights equally for marketing purposes.

By combining their joint-ventures, the four airlines will be able to offer a vast number of connections from the UK, mainland Europe and the rest of the world to North America via Heathrow, Amsterdam and Paris Charles de Gaulle. Air France and KLM have a much stronger non-US network than BA, notably in Africa and Asia.

Passengers in the UK will have the option of connecting via Paris Charles de Gaulle, albeit with an element of backtracking, to flights not served at London Heathrow such as Cincinnati, Indianapolis and Pittsburgh.

Virgin Atlantic will also be able to draw feed from Amsterdam and Paris to routes not served by either airport such as Las Vegas, which moves to London Heathrow in March 2019.

The combined joint-venture will also have a much stronger presence at UK regional airports. Indeed, KLM operates from a number of UK airports not served by BA such as Cardiff, Durham Tees Valley, Humberside and Norwich.

The possibility of all four airlines consolidating in the same terminal at Heathrow has also been mooted. This is of course subject to the agreement of the airport.

How will American Airlines and BA respond?

Whilst AA and BA will still be significantly bigger than all four airlines at London Heathrow, they will face a stronger competitor.

When International Airlines Group acquired Aer Lingus in 2015, much was made of how its presence in UK regional airports would improve IAG’s coverage. However, if anything, Aer Lingus has gone backwards. Aer Lingus and Aer Lingus Regional (operated by Stobart Air) have suspended routes between Dublin and East Midlands Airport and Liverpool. There has also been no rush for Aer Lingus to join the AA & BA joint-venture, or join the Oneworld alliance. Given its geographic position in Dublin (and US Customs & Immigration Pre-Clearance), it should be better positioned to attract traffic from the UK regions.

One area where AA and BA are at a disadvantage is they do not operate at the same terminal at London Heathrow. It would not be possible for AA to move into Terminal 5. This means that many routes such as Chicago, Dallas Fort Worth, Los Angeles, Miami and New York JFK are served from different terminals. BA has made vague statements about plans for Terminal 3 in conjunction with AA. Some commentators have also speculated there could be a significant reorganisation of the route network with some routes being exclusively operated by either AA or BA.

It may also prompt a rethink in Manchester. BA removed its last remaining long-haul flight from Manchester to New York JFK over ten years ago. American has also withdrawn from the route and serves Chicago on a summer seasonal basis only. BA CEO Alex Cruz has hinted that BA may use the Airbus A321 Long Range to restart transatlantic flights from UK regional airports.

US East Coast Weather Disruption

There’s been considerable disruption to flights in the New York airport area due to thunderstorms over the past couple of days.

All three main New York airports have been subject to delays and cancellations, particularly to domestic flights. There’s broad New York airport advice from the Port Authority of New York & New Jersey.

JetBlue Second Quarter Results

JetBlue has published its Second Quarter results.

The airline has reported a pre-tax loss of $160 million after taking a $319 million impairment charge in respect of its Embraer E190 fleet. Like its major US competitors, a key theme is absorbing higher fuel prices over the coming year. (JetBlue)

Also Of Note This Week

The exterior of The Hoxton’s first North American hotel is unveiled in Los Angeles. (Urbanize.LA)

Late Post Publication Updates:

British Airways has announced a new four times weekly service from London Heathrow to Pittsburgh, launching on Tuesday 2 April 2019. (London Air Travel)

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