Monday, March 24, 2008

Open Skies

Air travel between the U.S. and Europe is about to change, which will mean more flights and, hopefully, cheaper tickets. Starting March 30, the Open Skies Treaty between the U.S. and the European Union goes into effect, allowing airlines to fly from any U.S. airport to any E.U. airport and vice versa.

The result will be a lot of new service options, especially to London's Heathrow, which is expected to increase its U.S. business by 31 percent. Until now, only two U.S. carriers, American and United, have had flights to Heathrow, but soon they’ll be joined by Delta, Continental and Northwest Airlines. European carriers will have greater freedom in flights to the U.S. as well. British Airways is launching a new subsidiary airline with routes outside the United Kingdom.

The new competition should put pressure on airlines to reduce fares. A 2002 study by the Brattle Group, a consulting firm, estimated that an open-skies agreement between the United States and the European Union would generate a 10 percent increase in passenger traffic in formerly restricted markets, which could reduce fares 4 to 10 percent.

But none of this will happen immediately. Demand continues to be incredibly strong on transatlantic routes and it will take a while for supply to catch up. That, and record prices for oil, will keep fares up through 2008. But added capacity should help to lower fares in early 2009. Here’s to hoping.

No comments: