Airlines look to 'open skies' parachute

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The Independent Online

Senior US officials are in the UK tomorrow to try to thrash out a deal over "open skies" in an attempt to ease the pain of troubled airlines.

Many experts believe an open skies policy is essential to the future of the aviation industry, because it would increase competition and the flexibility of transatlantic routes. At present, only BA, Virgin Atlantic, American Airlines and United Airlines are allowed to fly between the UK and the US, and even if they have empty landing and take-off slots at the airports, no other airline can use them.

The US and France are expected to sign the dotted line on an agreement imminently, but discussions with the UK are at an earlier stage. Tomorrow negotiators from the US Department of Transportation will meet senior Department of Transport civil servants for talks. The urgency of the negotiations has increased substantially after the 11 September attacks.

Although many airlines announced a significant drop in passenger traffic last month, worse is likely to come. Sir Michael Bishop, the chairman of BMI British Midland, told The Independent on Sunday there would not be a quick end to the problem. The company is cutting 600 jobs.

"I said when I announced the job cuts I expected the full impact of the attacks to become apparent in the final quarter of this year, which is now proving to be correct," Sir Michael said. "I don't see a full recovery until the summer of 2003. We are planning resources to withstand a long siege, and we have a strong cash position."

BMI is in a more stable situation than some carriers. In January, it sold its baggage-handling business to Go-Ahead group for £72m cash. Sir Michael said he expected traffic at his airline to be down 12 to 15 per cent from last year in the last quarter. He also confirmed expectations that alliances between the airlines are likely, as consolidation activity increases worldwide.

"The Star Alliance is the foundation of what will become a more cohesive business," he said. The members of the Star Alliance include British Midland, Lufthansa, Singapore Airlines, Air Canada and Scandinavian Airlines.