01 April 2009

Did Open Skies Lower Air Fares?

Some regulators seem to be congratulating themselves for the reduction in Air Fares across the Atlantic after the implementation of Open Skies last year.


However I would caution anyone who thinks that the benefits were immediate.

Yes air fares have been reduced across the Atlantic. But so has capacity - that normally should not happen. Capacity was supposed to increase so was choice.

In fact the reverse happened. Delta has reduced traffic and competition on at least 2 key routes - LAX-LHR (AF-DL) and SEA-LHR (NW) came and went bye-bye pretty quickly.

What we have seen is a significant reduction of Transatlantic service from London Gatwick. AA has pulled all of its services from LGW with significant reductions from DL, NW, and CO to mention just a few. Capacity across the Atlantic has been reduced by most airlines and BA is in a world of hurt with its traffic falling quite precipitously in the key premium markets.

Long term - I remain optimistic - but as negotiations for the next round of Open Skies between the EU open up - don't expect big expansive true Open Skies agreements to occur any time soon. And Air fares - well they are down all round. That means there are some significant bargains around. Too bad about the taxes though!


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