British Airways CEO Pessimistic On Open US Market

November 11, 2008

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British Airways' chief executive Willie Walsh holds out little hope that the United States will open up its air travel market under US President-elect Barack Obama and a Democrat-controlled Congress.

European airlines had hoped the second stage of the US/EU Open Skies agreement, now under discussion, would force the United States to lift foreign ownership restrictions on its airlines by 2010, and open up domestic routes to overseas carriers.

President George W. Bush supported that goal, but US labor groups and Democrats have opposed the idea, fearing it would mean job losses for financially weak US airlines.

"I wouldn't be very optimistic about making significant progress," said British Airways CEO Willie Walsh, after a presentation to analysts and media in New York, when asked about Open Skies.

"I think it's very clear Obama has taken a strong line in relation to any change in the ownership and control regulations," said Walsh. "So at this point I would not be expecting any major progress to be made."

The first stage of the Open Skies accord, which took effect last year, allowed any carrier to operate from any point in Europe to any point in the United States and vice versa, and opened London's Heathrow Airport to all airlines.

Despite pressure from the Bush administration, Congress has resisted moves to lift the 25 percent cap on foreign ownership in US airlines.

Given those restrictions, British Airways has focused instead on a plan to co-operate with American Airlines on transatlantic flights, although the plan has not yet received approval from US antitrust regulators.

The upcoming change in administration was "neutral" to British Airways' antitrust immunity application, Walsh said.

Walsh was also pessimistic about the state of the global economy, saying the "eye of the storm" was still ahead.

"Economic conditions will remain poor for 18 to 24 months, and consumer confidence in key markets will probably continue to decline," said Walsh. "I don't think we've seen the full effect of job losses yet in some of the major economies."

He said the falling price of oil might mitigate some of the pain, and British Airways was protected by its strong position at Heathrow, one of the world's busiest airports.

He also expects capacity to be taken out of the air travel market as more competitors go out of business, on top of the dozen or so carriers which have exited the business this year.

"How many airlines will fail between now and next winter?" asked Walsh. "I suspect there will be quite a few. That may deal with the necessary capacity reduction that the industry needs to take."

However, he said that his airline had "limited visibility" about trends next year, given the economic turmoil and volatile fuel prices.