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BA's Open Skies Adds Routes, See Profit


By Laurence Frost and Steve Rothwell

(Bloomberg) — British Airways Plc's business-class- only subsidiary OpenSkies will add flights to Washington and target profitability by 2013 after its parent company turned down five offers for the Paris-based carrier, Managing Director Dale Moss said in an interview.

OpenSkies will commence an all-business-class service to the U.S. capital on May 3 after its existing route to New York logged a "good January" and filled three-quarters of seats in November and December, Moss said today.

British Airways received "five decent offers" for OpenSkies as it sought outside investors following a decline in demand that caused the unit to drop a route to the U.S. from Amsterdam. Moss said that BA Chief Executive Officer Willie Walsh ultimately opted not to sell the operation, which began flights in June 2008 using Boeing Co. 757 single-aisle planes.

"I think they're happy with the current structure and we're certainly happy," Moss said after a briefing in Paris. The Washington service will offer 60 business seats and 12 flat- bed berths and should break even in its second year, he said.

British Airways rose 3.2 percent to 205.3 pence, taking gains this year to 9.8 percent and valuing the company at 2.37 billion pounds ($3.72 billion).

OpenSkies is also weighing further expansion of its network, six months after closing the Amsterdam-New York service, which Moss said was "burning too much cash" following a 45 percent contraction in the market. The carrier had won an 18 percent share of business traffic between the two cities.

Improving Market

Moss said in a phone interview that it was "fairly clear" that the market for business travel was improving, though only at a "modest" rate.

Before settling on the Washington route BA looked at 18 city pairs, evaluating them in terms of traffic volume and the level of competition. The new flight will vie with services run by Air France-KLM Group and UAL Corp.'s United Airlines.

"Paris-New York will always be our signature route, but there will be others," Moss said at the briefing. "One of the things we've learned from 2009 is ‘one step at a time.'"

A return to Amsterdam is one option and the carrier said on its Web site before the Washington announcement that possible routes included Paris to Boston and Chicago and Brussels, Madrid and Milan to New York, as well as the route finally chosen.

'Good Proposition'

"I can never envisage us being a large carrier with 30 or 40 airplanes, but I do envisage more growth," Moss said. "We know that we've got a good proposition and we want to continue to build on that."

Ticket prices for the Washington service begin at 1,200 euros ($1,645) for a seat and rise to 2,600 euros for a bed.

London-based British Airways is expanding OpenSkies amid signs that the slump in demand for air travel has bottomed out.

Executives at European airlines expect yields — a measure of average fares — to remain stable over the next 12 months, the International Air Transport Association said yesterday. That compares with expectations for lower yields three months ago.

To contact the reporters on this story: Laurence Frost in Paris at lfrost4@bloomberg.net; Steve Rothwell in London at srothwell@bloomberg.net


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