Bucking Trend, British Airways
Starts a New Carrier
[FONT=times new roman,times,serif][FONT=times new roman,times,serif]By DANIEL MICHAELS
June 19, 2008[/FONT]
[/FONT]
British Airways PLC is launching a new airline Thursday linking New York to continental Europe, making one of the most significant moves yet to capitalize on the recent deregulation of trans-Atlantic air travel.
It is a difficult time to start a new venture in the airline business. Most carriers, including BA, are shelving expansion plans and slashing services to cut costs amid soaring fuel prices and dropping demand. BA sees the carrier, called OpenSkies, as a low-risk way to tap a potentially lucrative new market of U.S. business travelers who want connections with both London and the European continent.
BA got started on the idea more than year ago, when the airline industry was booming and the U.S. and the European Union agreed to an "open skies" aviation treaty that deregulates airline marketing and some flight operations across the Atlantic.
Until the U.S.-EU treaty took effect March 30, BA could only fly its planes -- and market its brand -- in and out of the United Kingdom. A U.S. passenger wanting to reach Paris on BA faced the hassle of changing planes at London's congested Heathrow airport.
Air France-KLM SA's unit Air France, meanwhile, could only fly between France and the U.S. Under the new agreement, airlines from either market may fly to any airport in the other, regardless of nationality. Air France now is offering a few flights between Los Angeles and London. And U.S. carriers have added new destinations across Europe, most notably to BA's hub at Heathrow. OpenSkies is partly an effort to show that BA isn't sitting idly as rivals invade its rich home airport.
OpenSkies An ad for British Airways' new carrier, OpenSkies, try to differentiate it from other airlines. Carriers are still restricted from flying inside each other's markets, so U.S. carriers won't be flying between Frankfurt and Amsterdam, and no European carrier will fly from Dallas to Chicago. But having a French carrier fly to the U.S. from Britain and a British carrier start operations from France is a major departure from past practice.
BA's experiment is starting small. OpenSkies at first will fly just one plane between Paris and New York. The U.K. airline isn't adding extra capacity for now. During the next 18 months, BA's new carrier aims to add more planes and destinations from New York to Brussels, Amsterdam and Milan, but OpenSkies' Boeing 757 jetliners will all come from BA's existing fleet. Executives wouldn't disclose how much they are spending on the project.
Limiting the Risks
When BA Chief Executive Willie Walsh began thinking of the new airline last year, he tapped Dale Moss, a 60-year-old American who had retired as a top BA executive in 2004.
Mr. Moss says he and his team spent months debating what the new airline should be. "We didn't want to become a 'little BA'," he says. Instead, Mr. Moss says, BA tried to create a sub-brand that would let BA test new ideas and position itself differently in the market. He compares the new airline to Toyota Motor Corp.'s move into a more upscale market through the creation of the Lexus brand.
OpenSkies Ad for OpenSkies To limit costs -- and risks -- at the new airline, BA decided to incorporate OpenSkies as a new company with new staff. The idea was to start with a lower cost base than BA, which employs longtime pilots and unionized staff.
In many ways, however, the new airline is linked to the BA brand. BA already has a strong reputation among business travelers in the U.S., thanks partly to innovations like the world's first business-class seats that spread fully flat into beds.
Advertising materials say "from British Airways" below the OpenSkies logo. OpenSkies is also linking to BA's frequent-flier plan, and buying fuel on the same advantageous terms as its huge parent company.
Backed by a Giant
As a result, OpenSkies has a mix of start-up and familiar BA elements. The airplane's exterior sports BA's familiar tail design of a waving British flag. But splashed across the plane's front section is the subsidiary's logo, "OpenSkies" written in silver cursive lettering.
Unlike recently closed premium carriers MAXjet Airways Inc., Silverjet Aviation Ltd. and Eos Airlines Inc., which didn't aim to capitalize on deregulation, OpenSkies is offering economy-class seating -- and has the backing of a giant parent.
OpenSkies is also unlike the no-frills subsidiaries that many big carriers recently tried, like Delta Air Lines Inc.'s ill-fated Song experiment, or Ted, the low-fare division of UAL Corp.'s United Airlines that the carrier just announced it will shut.
Mr. Moss, who lived through all those airline flops, wants to try something different. He hopes to attract business-class passengers with fares that are around 20% less than current market rates. He is also offering roomier planes. While BA's 757s normally hold 180 seats, OpenSkies' planes will carry only 82 seats in business class, premium economy and economy class. Onboard, the food has more French, Spanish and Italian influences than BA, Mr. Moss says. Inflight entertainment offerings are different from BA's, and so are its seats.
To launch the new brand, Mr. Moss tapped the New York office of Canadian ad agency Taxi Inc., which worked up a series of print ads that try to set OpenSkies apart from other airlines. "This is not a passenger" reads one ad, showing a trendy thirty-something man or woman. "This is a person," says the text below. Another ad reads, "This is not an airplane," showing the nose of a jetliner.
Mr. Moss says he is trying to "mix the agility of a start-up with the gravitas of BA."
Write to Daniel Michaels at [email protected]
Starts a New Carrier
[FONT=times new roman,times,serif][FONT=times new roman,times,serif]By DANIEL MICHAELS
June 19, 2008[/FONT]
[/FONT]
British Airways PLC is launching a new airline Thursday linking New York to continental Europe, making one of the most significant moves yet to capitalize on the recent deregulation of trans-Atlantic air travel.
BA got started on the idea more than year ago, when the airline industry was booming and the U.S. and the European Union agreed to an "open skies" aviation treaty that deregulates airline marketing and some flight operations across the Atlantic.
Until the U.S.-EU treaty took effect March 30, BA could only fly its planes -- and market its brand -- in and out of the United Kingdom. A U.S. passenger wanting to reach Paris on BA faced the hassle of changing planes at London's congested Heathrow airport.
Air France-KLM SA's unit Air France, meanwhile, could only fly between France and the U.S. Under the new agreement, airlines from either market may fly to any airport in the other, regardless of nationality. Air France now is offering a few flights between Los Angeles and London. And U.S. carriers have added new destinations across Europe, most notably to BA's hub at Heathrow. OpenSkies is partly an effort to show that BA isn't sitting idly as rivals invade its rich home airport.
BA's experiment is starting small. OpenSkies at first will fly just one plane between Paris and New York. The U.K. airline isn't adding extra capacity for now. During the next 18 months, BA's new carrier aims to add more planes and destinations from New York to Brussels, Amsterdam and Milan, but OpenSkies' Boeing 757 jetliners will all come from BA's existing fleet. Executives wouldn't disclose how much they are spending on the project.
Limiting the Risks
When BA Chief Executive Willie Walsh began thinking of the new airline last year, he tapped Dale Moss, a 60-year-old American who had retired as a top BA executive in 2004.
Mr. Moss says he and his team spent months debating what the new airline should be. "We didn't want to become a 'little BA'," he says. Instead, Mr. Moss says, BA tried to create a sub-brand that would let BA test new ideas and position itself differently in the market. He compares the new airline to Toyota Motor Corp.'s move into a more upscale market through the creation of the Lexus brand.
In many ways, however, the new airline is linked to the BA brand. BA already has a strong reputation among business travelers in the U.S., thanks partly to innovations like the world's first business-class seats that spread fully flat into beds.
Advertising materials say "from British Airways" below the OpenSkies logo. OpenSkies is also linking to BA's frequent-flier plan, and buying fuel on the same advantageous terms as its huge parent company.
Backed by a Giant
As a result, OpenSkies has a mix of start-up and familiar BA elements. The airplane's exterior sports BA's familiar tail design of a waving British flag. But splashed across the plane's front section is the subsidiary's logo, "OpenSkies" written in silver cursive lettering.
Unlike recently closed premium carriers MAXjet Airways Inc., Silverjet Aviation Ltd. and Eos Airlines Inc., which didn't aim to capitalize on deregulation, OpenSkies is offering economy-class seating -- and has the backing of a giant parent.
OpenSkies is also unlike the no-frills subsidiaries that many big carriers recently tried, like Delta Air Lines Inc.'s ill-fated Song experiment, or Ted, the low-fare division of UAL Corp.'s United Airlines that the carrier just announced it will shut.
Mr. Moss, who lived through all those airline flops, wants to try something different. He hopes to attract business-class passengers with fares that are around 20% less than current market rates. He is also offering roomier planes. While BA's 757s normally hold 180 seats, OpenSkies' planes will carry only 82 seats in business class, premium economy and economy class. Onboard, the food has more French, Spanish and Italian influences than BA, Mr. Moss says. Inflight entertainment offerings are different from BA's, and so are its seats.
To launch the new brand, Mr. Moss tapped the New York office of Canadian ad agency Taxi Inc., which worked up a series of print ads that try to set OpenSkies apart from other airlines. "This is not a passenger" reads one ad, showing a trendy thirty-something man or woman. "This is a person," says the text below. Another ad reads, "This is not an airplane," showing the nose of a jetliner.
Mr. Moss says he is trying to "mix the agility of a start-up with the gravitas of BA."
Write to Daniel Michaels at [email protected]
