Annex 2
Why does British Midland not refer in its submission
to the destinations in the United States which can be reached
from Gatwick? Taking routes from Gatwick and Heathrow, is it not
the case that approximately 24 destinations in the US can be reached
non-stop from London?
It is true that when Heathrow and Gatwick are
taken together over 20 US destinations can be served non-stop
from the UK. However, the conditions contained in Bermuda II also
limit the ability of airlines to enter the transatlantic market
from Gatwick. These restrictions prevent airlines, such as British
Midland, entering markets on the basis of customer demand and
economic viability. Such restrictions recently led to a potential
trade war with the United States following the unilateral decision
of British Airways to withdraw from the Gatwick-Pittsburgh route.
Bermuda II prevented any US airline from operating this route
and, therefore, without the specific extra-bilateral authority
granted by the Deputy Prime Minister in March 2000, would have
permanently denied Pittsburgh from its direct air link with London.
In addition, given the opportunity in the early
1990s when the flight distribution rules for London were abolished,
Virgin Atlantic took the decision to move as many of its services
as possible to Heathrow (and ideally would like to move all of
its services to Heathrow as soon as suitable slots can be obtained).
Furthermore, in its arguments against the proposed
merger of Air Canada and Canadian Airlines, British Airways has
made it clear that they do not view Heathrow and Gatwick as interchangeable
for transatlantic services and, we understand, has requested that
Air Canada/Canadian Airlines should give up some slots at Heathrow
to allow British Airways to operate additional Heathrow-Canada
services in competition with the merged carrier rather than Gatwick-Canada
services.
British Midland has, over the last 18 years,
developed a hub at Heathrow in order to become the only pan-European
competitor to British Airways. It is our intention to use this
hub to provide feed for our proposed transatlantic services—this
feed will be essential if we are to compete effectively with the
current incumbents. Furthermore, by virtue of our membership of
the Star Alliance and by developing transatlantic services from
Heathrow, we will be creating the only airport in Europe where
the world's two leading alliance groupings will have competing
hubs. Operating from Gatwick would deny us this opportunity.
Does the lack of capacity at Heathrow not pose
a serious practical threat to any bilateral deal? How will new
entrants to the Heathrow-US market gain new slots?
Heathrow has been seriously congested for a
number of years now and indeed the difficulty of obtaining suitable
slots for new services is something that has been raised during
air services negotiations between the UK and several of its bilateral
partners. It is not a new problem therefore, and we would expect
the UK Government to adopt its normal line of insisting that airlines
obtain slots using the existing procedures when this is raised
during the negotiations.
The EC Regulation on slots, in line with which
all slots at Heathrow Airport are allocated, makes it clear that
of the slots placed in the slot pool (these include newly created
slots, unused slots and slots which have been given up by a carrier
during, or by the end of, the traffic season) 50 per cent should
be allocated to new entrant carriers. For the purposes of the
Regulation new entrant carriers are defined as an air carrier
requesting slots at an airport on any day and holding, or having
been allocated, fewer than four slots at that airport on that
day. Under this provision any new US carriers would qualify as
new entrant carriers and would therefore find it easier to obtain
slots than the incumbent Heathrow carriers.
Furthermore, it is also possible that some potential
new US carriers could obtain some slots which are currently being
used at Heathrow by their European partner airlines for what would
appear to be commercially marginal services (eg KLM's operations
to Rotterdam and Eindhoven could be dropped to allow Northwest
Airlines to use the slots for transatlantic services).
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