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Business Traveller

Open Skies Treaty Will Allow American Airlines More Opportunities in Europe; Heathrow's Hidden Secrets

Aired August 12, 2007 - 13:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

RICHARD QUEST, CNN ANCHOR, BUSINESS TRAVELLER: The freedom to fly the vast open airways, new routes and possibilities. This month its all about Open Skies.
An American Airlines Triple 7, starting it's take off journey to the United States. Hello, and welcome to CNN BUSINESS TRAVELLER. I'm Richard Quest this month reporting from Heathrow Airport, London.

Behind me is the world's busiest international airport that's about to undergo some pretty dramatic changes. It's all because of Open Skies, the new treaty between the European Union and the United States that will deregulate the trans-Atlantic market.

Airlines like United, American, British Airways, and Virgin, will all feel the effects.

(Voice over): Coming up in the program, the battle over the most valuable patch of aerospace and who we BUSINESS TRAVELLER's may benefit.

Plus, we take you on a tour of some of the hidden gems of LHR.

The pieces are in place. The battle lines have been drawn in one of the most ambitious aviation agreements ever undertaken. The European Union is one side, the United States of America, the other. And the prize, trans-Atlantic airspace is in between. From as far back as 1946 regulations and restrictions governed these skies. Which carrier could fly where, and how often, it fostered little competition and kept many players out. Over the past 15 years, bilateral agreements have been reached for Open Skies between the U.S. and individual countries, but an overarching agreement with the E.U. always remained out of grasp.

Now, after 11 rounds of fierce political maneuvering the two sides are in the same camp and come March 28, 2008, the skies will finally be open.

(On camera): This is Berlaymont Building, here in Brussels, the headquarters of the European Commission. It was here that many of the negotiations, between the E.U. and the U.S. actually took place. Over five years the two sides went hammer and tongs thrashing out the agreement. To find out what it was really like in that negotiating room, well, you've got to talk to one of the negotiators. Who better than the top man?

(Voice over): Daniel Calleja is the chief E.U. negotiator for Open Skies.

(On camera): So this is the room where the negotiations took place?

DANIEL CALLEJA, CHIEF NEGOTIATOR, E.U.: Yes.

QUEST: Where did you sit? Right. Have a seat. Where did your U.S. opposite number sit?

CALLEJA: Just in front. There you are. In the back we had industry and the stake holders, on both sides, the European, the airlines, the pilots, the airports the CRS. All the stakeholders, cargo. And behind the U.S., the U.S. industry.

QUEST: And it's not exactly intimate, is it?

(Voice over): Intimate, it isn't. But the aviation relationship between the E.U. and the U.S. will become much closer.

(On camera): Tell me what this will effectively mean to me?

CALLEJA: Well, it means basically that the 27 countries of the European Union sign an agreement, the European Union as a whole, for the first time in history negotiates an aviation agreement with the United States, market to market.

QUEST: So any,

CALLEJA: So 60 percent of world traffic.

QUEST: So any country airline to any country in here, and vise versa?

CALLEJA: That's correct.

QUEST (voice over): No more complicated routings, good news for the passengers.

CALLEJA: We are going to have more possibilities in terms of choice. In terms of reduction in the price of the tickets, in terms of increasing competition, increasing competition is good because it brings more possibilities for carriers.

QUEST: If business travelers believe Open Skies will bring price wars, we could be seriously disappointed.

KEVIN DONE, "FINANCIAL TIMES": You have to distinguish between the published tariffs and the prices most people end up paying in business class. The vast majority of business class seats will be sold through corporate deals, those are corporate discounts, the economy fares already there are really some outstandingly attractive deals to get across the Atlantic. If you compare it, mile for mile, it's cheaper than flying low- cost in Europe.

QUEST: In theory, Open Skies promises plenty. Practically, some argue, it won't deliver. Pie in the sky, perhaps, but at the very least almost 50 years of tight restrictions are finally lifted.

Coming up after the break, who will be the winners and losers from Open Skies?

(COMMERCIAL BREAK)

QUEST: When it comes to the trans-Atlantic, for more than 40 years the runways at Heathrow have only been open to four carriers, two from Britain and two from the United States. Open Skies destroys that rather cozy arrangement of the so-called Heathrow four, instead, other carriers will be allowed to fly from Britain's Heathrow to the U.S. It's the most dramatic change in aviation in decades.

(BEGIN VIDEOTAPE)

QUEST (voice over): There is, though, one problem. Operating at 97 percent, London Heathrow is bursting at the seams. Already 9,500 landings and take offs, or slots, are squeezed into every week. It will be hard to find a free slot anywhere in the schedule. Airlines are keen to hold onto existing rights, because their routes can be changed on request. So this opens up a valuable gray market slots.

DONE: They're relatively expensive, depending what sorts of slots they are, whether they are peak hour slots or not. The U.S. carriers coming in, Delta, Continental, they will probably get slots off their alliance partners. This would especially be from Air France and KLM, those slots could come available, at a price.

QUEST: The U.K.'s slot coordinator ACL, has seen a 15 percent increase in the requests to fly out of Heathrow. There's only room to grow capacity by half a percent. So with the race on to secure a slot who'll be the winners of Open Skies?

With 11 and a half percent of slots at Heathrow, second only to British Airways, the BMI has a flying start.

MICHAEL BISHOP, CHAIRMAN, BMI: We have a choice in our portfolio of reassigning slots to new services. We have all the slots we need, and at the right times to be able to introduce a network of services.

QUEST: With the purchase of five A-330 long-haul aircraft and over a 1,000 slots a week to play with BMI is poised to make it's mark. It's not surprising that Virgin and BA are interested in scarfing up this prized horse. But Sir Michael has made it clear, BMI is his baby.

BISHOP: We have a good relationship with our other shareholders. We have a plan to take the business forward with the application of rights of we've now -- the exercise of the rights we have not acquired to operate on the North Atlantic, we have a stable and good business in other parts of our network. There's no reason to believe the airline will not carry on as it has done in the past.

QUEST (on camera): This is Chicago O'Hare's Terminal One. The headquarters of United Airlines, one of the Heathrow Four. As an incumbent at Heathrow, there are great possibilities for the Open Skies agreement for United. But also there are huge challenges ahead. After all, at the stroke of a pen, Heathrow has suddenly been opened up to United's U.S. competitors.

MIKE WHITTAKER, UNITED AIRLINES: We will have more competition at Heathrow, we think that's the price worth paying for getting the government out of the decision making process and opening up these additional rights for us. We can now fly to any point in Europe without going through governmental negotiation. We can add services to Heathrow, which previously required a negotiation.

We can add services from cities like Denver where we were previously forbidden to add services. We can fly to any point in the rest of Europe and we can expand our co-chairing (ph) very significantly, which is quite a passenger benefit. We can now co-chair into places like Greece and Spain, that were previously restricted.

QUEST: Low-cost carriers could be another front-runner in Open Skies. There's the prospect of adding trans-Atlantic routes out of Heathrow to their networks. And some have their eye on another prize.

JONATHAN HINKLES, ZOOM AIRLINES: The American carriers who have operated from Gatwick for a long time, because they haven't had any choice, are all now clamoring to get into Heathrow. We're not planning to do that. We're planning to stay here at Gatwick and take advantage of the slots and market opportunities that the American carriers leave behind.

QUEST (on camera): If the major hub airports are feeling the heat from Open Skies, well, turning up the temperature at airports like Munich, already one of the fastest growing in Europe. It's now overtaken Rome as the seventh busiest in the continent. And with Open Skies, low-cost carriers, and more long-haul destinations, that destination board is only going to grow even further.

MICHAEL KERKLOH, CEO, MUNICH AIRPORT: We will be one of the airports in the future with the most spare capacity, we'll use (INAUDIBLE). We use our spare capacity now to grow in the Rome (ph) markets, that's long-haul, and that's also low-cost. We are in quite a lucky position because our facilities are as such as we can really serve both needs.

QUEST (voice over): As if all this wasn't enough, the day before Open Skies comes into effect, Terminal 5 will open it's doors. T-5 will become the fifth biggest airport in Europe in it's own right. And will be the headquarters hub of BA. As one of the Heathrow Four, BA must do all it can to stay in the race now that it's hub is open to more competition. Airlines have seven months to jockey for positions. Their efforts could end in a false start.

One cornerstone of the new treaty is the right of American carriers to fly internally, within Europe. It's a courtesy not being offered to European carriers in the United States. And that's a bone of contention. Cue stage two of the agreement.

CALLEJA: That second stage relies in having more access to the U.S. market, for European carriers, further liberalization in traffic rights, in ownership and control. And this second stage relies at the end of the day in having a big market, 60 percent of world traffic, and there are similar conditions of competition.

QUEST: Virgin's chief executive, Sir Richard Branson, has much to gain and to loose, if phase two fails.

RICHARD BRANSON, CHAIRMAN, VIRGIN GROUP: It is certainly a lopsided version for pro-America at the moment. And Europe acknowledged that. But it's but there's a very important clause in the Open Skies agreement that says that if in 2010 Americans don't deliver on what they promise, and that is actually, opening up America properly, then the Open Skies agreement can be torn up.

QUEST: Even if the plug is pulled on Open Skies, we as passengers can still enjoy the benefits for the next two years at least.

(On camera): Open Skies will affect all of us who cross the Atlantic. I'd like to know how you think it will affect your traveling, the usual e-mail address, Quest@cnn.com. Or go on the web site at CNN.com/businesstraveller.

(voice over): In just a moment, after the break, the hidden gems of London's Heathrow, the places and people bringing color to the world's busiest airport.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

QUEST (voice over): It's time to get away from planes, for a while at least, on BUSINESS TRAVELLER. We're always on the lookout for new and innovative technology to help the global road warrior. This month it is the Zipcar, the car sharing scheme found in cities across the United States and in London. As with everything these days, it all starts with a computer.

(On camera): It's a quarter to nine, we want a car at nine o'clock and there are two cars available. Shall I reserve it? Why not? And that's it. The car is booked. No form filling, no questions about do you want to take excess insurance. No worries about the petrol.

(Voice over): If you're over 21 and have a clean-ish driving license pretty much anyone can join and 100,000 people worldwide already have.

(on camera): It's raining in London, why am I not surprised? Use my Zipcard to unlock it, and we are in business.

(Voice over): Using Zipcar is pretty simple. They even publish their own simple set of rules. Such as check for damage. Keep it clean. Fill the tank. No smoking in the cars. And return on time. That's it. It couldn't really be any simpler. Let's see how easy it is for me to rent a Zipcar across the pond.

(On camera): So now I'm in New York and I need a car for a couple of hours. The computer thinks I'm still in London, but that's easy enough to change. I'm actually in New York, New Jersey. That is where I am. And that is showing me all the Zipcars that are that are close to where I am.

Right, the instructions said, First Avenue, Raphaela's. Here is Raphaela. Let's go see if we can find this Zipcar. There is the car. Now, the really big test. Does my London Zipcard open the New York car? Yes!

(Voice over): In less than 20 minutes, selected the car, found it and I'm driving off into New York. There are now 3,000 Zipcars in 23 cities across North America and in London. Rental start at $7.50 an hour, and are the same the same for all Zipcar drivers. You can find out more and join the scheme at Zipcar.com. And that's this months, CNN "Smart Traveler".

(END VIDEOTAPE)

(on camera): Heathrow is one of the most complicated airports in the world. With it's four, soon-to-be five terminals, to runways 10s of millions of passengers. Whether you are traveling through the airport of visiting for the day, there really is a lot to see, from sunrise to sunset.

(BEGIN VIDEOTAPE)

(Voice over): Sunrise over Heathrow, and these are the only birds in flight, but at 6 a.m. they're metal cousins are given permission to land. Heathrow's night curfew is over.

Heathrow believes it is the only airport in the world to have it's own resident press corps.

RUSSEL CLISBY, HEATHROW PHOTOGRAPHER: We're lucky here because there's few of us. We try and do things properly. And we weren't getting (INAUDIBLE). It's better for us to stay (INAUDIBLE). And we all go back together and you just the shots and we try and work with them, (INAUDIBLE) Just do a nice few pictures, say thank you very much and see you later. Because I know we're going to see them again, again and again.

QUEST: Working at Heathrow means they have rare moments with the stars.

CLISBY: I remember Kate Winslet (INAUDIBLE) in the shoulder once. I didn't know the story at the time. I didn't photograph her. She said please, not today. But I think she was going through a divorce with a guy before hand, you know? But it wasn't really common knowledge. She was just having a tough time. So, I said, no worries. And then, you know, it's no problem. Because you know when you see them again, they're going to be fine.

QUEST: Flying through Heathrow can be a hassle. So anytime passengers can escape, they welcome it. For instance, upstairs, in the departure lounge of Terminal One, is an urban retreat. For $30 you can relax for as little or as long as you want. Take a shower, or have a chair message, whilst waiting for a treatment, or just your flight.

Whether arriving or departing, it's easy to find signs to your next hidden Heathrow jet. Since 1968, the Chapel of St. George, located underneath the roundabout has provided a haven for airport staff and passengers to reflect and pray. It's an integral part of airport life. There is a service here everyday of the week at 12:30. Sister Margaret is the chaplain of St. George.

SISTER MARGARET, HEATHROW CHAPLAIN: It's a place of peace and quiet. It's a place where they find comfort when they're in distress. And joy when they have something to thank God for. For example, a married couple came here recently, it was their wedding anniversary and they just wanted a time of prayer together in a peaceful place.

QUEST: The magic of Heathrow is really all about the people who love to spend time here. For instance, Jim and Margaret, who have driven 200 miles to spend the week plane spotting. For them, it's serious business.

JIM BROADHURST, PLANESPOTTER: I'm collecting aircraft numbers now, for 27 years. And in that time I've seen plenty of (INAUDIBLE) aircraft, each with a different registration. I have a computer program which lets me read the aircraft that are flying. And the program is so designed that it will tell me whether I've seen that plane before or not. I'm obviously trying to get more planes that I haven't seen.

QUEST: Ticking those planes off one by one, all year round, will be tough. Planespotting is not for the faint-hearted.

MARGARET BROADHURST, PLANESPOTTER: (INAUDIBLE) in the wind, sitting in the car, wrapped up in a big rug, but in weather like this, why not?

QUEST: Jim and Margaret had an early start and yet they're in it for the long haul. They want to see their favorites come in.

J. BROADHURST: Ah, I'll stay until, I like the Chinese planes come in, and the Japanese, which could be as late as 9 o'clock.

QUEST: By the time those planes from China arrive it will be sunset over Heathrow.

(END VIDEOTAPE)

QUEST: And that's CNN BUSINESS TRAVELLER for this month. I'm Richard Quest at Heathrow Airport. Wherever your travels may take you I hope it's profitable. Oh, I've got some planes to go watch!

END

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