Heathrow Changes are Top of Mind for Attendees at NBTA’s UK Forum
By Caleb Tiller
Four out of five participants in the NBTA UK Corporate Travel Think Tank agreed that the liberalization of the EU-U.S. aviation market will affect their businesses. Exactly what those changes would look like was up for debate. In the London market, and especially at Heathrow, participants and panelists pointed to a variety of current and future market factors impacting business travel use of the airport.
Fare Competition, Connectivity
Panelists and participants alike indicated an expectation that EU-U.S. “open skies,” which opens U.S.-Heathrow flights to greater competition, would create downward pressure on transatlantic airfares to and from the airport, particularly in premium economy classes. Mike Platt, HRG group industry affairs director, said new entrants into Heathrow would have to compete with entrenched players on price. Because coach fares are already low in the market, he said, the primary fare competition would be in premium economy. An attendee who is a travel buyer for a global telecom company agreed, noting that corporations are moving away from business class fares, so buyers will be negotiating move vigorously on premium economy.
 |
| Continental’s Schumacher asks a question from the audience |
The casual observer may assume that opening Heathrow to great transatlantic competition would boost the airport’s status as a major connecting hub for travelers to and from other European cities. Not so, said Continental Airlines Senior Director, UK & Ireland, Bob Schumacher: “The irony is that we will reduce connectivity as we move into Heathrow.” As larger carriers take advantage of Heathrow opening to greater transatlantic competition, they will take slots that previously belonged to smaller carriers. In many cases, those smaller carriers used those slots to serve smaller markets, which the new entrants are less likely to serve – thus reducing connectivity through Heathrow. It remains to be seen if that reduction in connectivity will impact business travel demand.
Congestion, Alternative Airports
Other factors impacting air travel at Heathrow include low cost carriers, security challenges, congestion and proposed expansion.
David Brown, senior executive, Accenture, said legacy carriers are being challenged on transatlantic routes by “low, or lower cost carriers” and new entrants with different business models, such as single-class of service airlines. As these airlines generally use second- or third-tier airports, their increased use will draw travelers away from Heathrow. Only fifty-four percent of buyer attendees indicate their companies currently use low cost carriers. However, EU-U.S. open skies could lead to the addition of low cost carrier service on transatlantic routes, which might boost that number.
Heathrow is notorious for congestion -- in the air, on the tarmac and in security lines. One buyer attendee at the UK Corporate Travel Think Tank remarked on airline clubs at the airport, saying “It doesn’t matter how wonderful your lounge is -- if it takes an hour to get there, I’ll never see it.” HRG’s Platt said security screening could be sped up by the addition of state-of-the-art security equipment, or with simpler fixes such as using all security lanes.
Speaker Stewart Verdery, president of Monument Policy Group, said that BAA, operator of Heathrow and seven other British airports is in the process of procuring a registered traveler program that would allow regular travelers to enroll for expedited screening.
Addressing the issue of congestion more broadly, Brad Til, Boeing regional director, product marketing, said “liberalization [of air travel] helps congestion by pulling traffic out of heavily used airports.” He went on to say that modernization of air traffic control systems would significantly reduce inefficiencies by taking advantage of the technologies already available on today’s aircraft.
Accenture’s Brown said such upgrades may be some time coming at Heathrow. “We haven’t built a new runway in the UK since World War II,” he said. Systematic challenges mean that major investment decisions take many, many years, he added. However, “The industry would welcome speedier decisions.”
Continental’s Schumacher indicated that a proposal for major changes at Heathrow will soon be up for public consultation. The proposal will include using runways in “mixed mode,” or using the same runway for takeoffs and landings. Christine Ourmieres, Air France KLM general manager, UK and Ireland, said mixed mode could increase Heathrow capacity by 12-15 percent. In addition to mixed mode, Schumacher said the proposal would recommend the addition of a third runway and a sixth terminal at Heathrow. While they could increase capacity in the long run, both projects would also create challenges.
GDS Deregulation
Aviation topics covered at the event did not focus solely on Heathrow. When asked about European deregulation of the Global Distribution Systems (GDS), also known as Computer Reservation Systems (CRS), attendee response was low key. Only 55 percent of attendees said deregulation would make a difference to their businesses.
KDS CEO, Yves Weisselberger, said U.S. GDS deregulation did not have nearly the impact many had expected. “The biggest impact was segment fees,” he said. Geoffrey Breeze, vice president, marketing EMEA, Sabre Travel Network, leaned toward European deregulation as a preferred option, but his statement was fairly modest: “If at all possible, we should deregulate the CRS.”
Tom DePasquale, Concur vice president of business development, said there was little change in the United States market due to GDS deregulation. Drawing a parallel to Europe, he said, “The marketplace is strong, so it overcomes regulation.”
DePasquale put much greater emphasis on another potential change in how airline tickets are purchased – the rise of alternative methods of payment. “The big battleground of ’08 will be payment strategies,” he said. “I think you’re going to see a major change in the way corporations use corporate cards.”