British Airways launches new carrier

How do you say "stiffer competition" in French? British Airways, long a staple of trans-Atlantic travel, is lending weight but not its name to a startup airline that will compete for well-heeled travelers traveling directly between New York and the European mainland.

The new airline, named "OpenSkies," will begin service to either Brussels or Paris using a single Boeing 757 in June, British Airways said Wednesday. A second aircraft will start flying to the other European city later this year.

Additional destinations on both sides of the Atlantic could be added once four more planes join the fleet as expected by the end of 2009.

The airline is largely targeting business and affluent leisure travelers. Only 30 of each plane's expected 82 seats — five rows in the back — will be economy class. The rest will be almost evenly split between business class and a new mid-priced tier known as "premium economy."

"We don't intend to be a mass-market type of vehicle," said Dale Moss, British Airways' former director of worldwide sales, who will serve as the new venture's managing director.

The new airline takes its name from the Open Skies agreement hammered out between the U.S. and the European Union last spring. That deal allows airlines to fly from anywhere in the Europe Union to the United States and vice versa — something they couldn't do in the past.

British Airways said the new carrier is a way of "celebrating the first major step" toward a more open U.S.-European aviation market. But it is also a response to increased competition that will pour into British Airways' home at London Heathrow Airport and other European markets once the agreement takes effect at the end of March.

By launching a new carrier flying directly from the Continent, British Airways will be taking on not just established U.S. carriers such as UAL Corp.'s United Airlines, but also European heavyweights such as Lufthansa and Air France-KLM. On the Paris route, it will also compete against L'Avion, a new all-business class carrier.

"This is a way for them to initiate service and make it known to their Star Alliance and SkyTeam competitors that 'we're not going to sit idly by as you grow your operations,'" said William Swelbar, a researcher at the Massachusetts Institute of Technology's International Center for Air Transportation. "I think this is just good, clean competitive fun."

British Airways helped form the oneworld alliance with American Airlines, the biggest U.S. airline, and other carriers in 1999. The alliance competes against carriers in Star Alliance and Skyteam.

OpenSkies will draw on elements of British Airways' existing business, from the Union Jack-themed logo on the planes' tails to the parent company's global sales force and frequent-flier plan. The new carrier will also be able to take advantage of its parent's fuel hedges, allowing it to lock in favorable fuel prices.

As a separate brand, OpenSkies will serve as a "research and development lab" that will be able to test new ideas and implement ones that work quickly across its small fleet, executives said. An in-flight menu of all organic food or added passenger services such as hotel booking are some ideas being considered, said Jonathan Wallden, OpenSkies' finance director.

The airline has even set up a weblog, at flyopenskies.org, to float ideas and solicit feedback from the public, while its jobs page says "innovators wanted."

"We've got to use the entrepreneurial spirit of a small company — the hungriness, and a little bit of the fear — that says 'hey listen, if we're not successful, we don't exist,'" Moss said.

Moss said the airline is working on "some great ideas for pricing, not just for promotional fares to start," but was unable to discuss ticketing options without receiving approval from U.S. and U.K. regulators.

Wallden said the airline expects to confirm details of the inaugural route by the middle of next month. The carrier hopes to operate out of New York's John F. Kennedy International airport, but may be forced to shift its operations across the Hudson River to Newark Liberty International.

Other destinations could be added later. In Europe, Moss said OpenSkies is considering flying to Amsterdam, Frankfurt, Madrid, Milan, Zurich and Geneva. Additional U.S. destinations could include Boston, Washington and Philadelphia, he said.