Sunday, September 14, 2008

Branson runs to the government again

Self styled entrepreneurial gadabout, Sir Richard Branson, is running to nanny state wanting to seek protection for part of his multi million pound business empire. This time it is Virgin Atlantic Airways he wants to protect.

You see, British Airways, American Airlines and Spanish carrier Iberia are seeking anti-trust immunity in order to co-ordinate and operate as one across the Atlantic and within Europe and the USA. This would enable them to co-ordinate, schedules, fares and routes. The absurdity that frequent flyers belonging to BA and American (both members of the OneWorld alliance) can't earn frequent flyer points on the other airlines services across the Atlantic would be removed.

The three carriers (along with Finnair and a couple of other small OneWorld alliance carriers in the northern) want to integrate so that BA can sell a ticket including a domestic connection using AA in the US, and AA can do the same with a BA connection.

The Atlantic is one of the most competitive air corridors in the world, with 42 airlines flying between the EU and the USA, and it being an open market on international routes for airlines from either market. AA/BA and Iberia have 21% of the market share at the moment, although between the UK and the US it is around 44%, and London-New York 52%.

Other airline alliances already have this anti-trust immunity. Star Alliance, which Trans Atlantic means United, Lufthansa, US Airways, BMI, SAS, TAP, Austrian and Swiss, has 35% of the traffic Trans Atlantic. Skyteam, comprising Air France/KLM and Delta/Northwest, has 28% of the market.

However, Branson cries foul. He claims it will create a "monopoly" which of course it wont. He's making it up, playing his favourite role of the hard done by little guy, who only wants what's best for himself consumers. You see Virgin Atlantic isn't in any of the alliances. It does do codesharing and co-ordinates closely with BMI and Continental Airlines. However, out of the nine airlines flying between Heathrow and the US, Virgin Atlantic has the second largest operation.

He complains that it would put 51% of landing slots at Heathrow in the hands of one conglomeration. Hardly a monopoly, especially since Skyteam holds 73% of the slots at Paris Charles de Gaulle and 85% at Amsterdam Schiphol, while Star Alliance carriers hold 80% of Frankfurt. All BA, AA and Iberia want is the same as its competitors - Branson is moaning because his airline is independent and he doesn't like competing. You see, unlike BA, Virgin has no flights within Europe - so no wonder BA is bigger, Virgin doesn't even operate in competition with it on many of its routes.

However, the best response to Branson is the one I saw from Willie Walsh -BA's CEO - in the Daily Telegraph on Friday.

"He knows a good deal about monopolies. With help from taxpayers, he has run a real one on fast trains between London and Manchester since 1997. And now he is talking about establishing another one by taking over Gatwick airport."

Yes, Virgin Trains has a monopoly on passenger rail services between London and Manchester, it has done this with millions of pounds of subsidies - that's real entrepreneurship isn't it? Branson says he wants to buy Gatwick airport, from which BA and AA both operate very few Trans Atlantic services.

So go on "beardie", compete. You did well earlier this year when BA's troubles at Terminal 5 coincided with the opening of a major upgrade to your part of Terminal 3 at Heathrow. You could tie up closer with BMI. In other words, you could compete your way to success, not moan to the government.

For all that, I'm giving your airline another shot in a couple of months time - Heathrow to New York. I hope it's better than last time!

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