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OpenSkies could face the chopping block by this fall

Jul 01, 2009

Transatlantic airline OpenSkies was launched a year ago this month to tap the booming market of premium-class business travel. But then came the recession and steep losses at its parent company British Airways, and the young carrier could face the chopping block by as early as this fall.

"I think there are a variety of options" for OpenSkies, said its managing director, Dale Moss, in an interview, though he declined to provide details.

"I'm going to keep holding my fire on which one is my favorite or which is the one I think it's going to go to because I am just a part of the process, and I have to be very respectful of my shareholders," he said.

The company is under review, with British Airways expected to hand down a verdict in about two months, he said.

OpenSkies is a small part of British Airways, with just four jets and two routes, flying to New York from Paris and Amsterdam. It operates on the cheap, using a low-cost model of point-to-point routes and operating just a single model aircraft, putting its costs about 20% below that of its parent company's legacy base, including fuel.

The carrier currently operates at a loss, though it expects to be profitable by the end of its third year in 2011. To that end the recession has put up some stumbling blocks, with low passenger numbers and ticket prices.

"Yields," or the average price a person pays to fly one mile, are "not where we would like them to be," Moss said. "They are probably comparable to last year when we were a startup."

But things seem to be improving, with the percentage of seats forecast to climb to 75% in July and August from 70% in June. Yields are likely to improve as the bigger carriers pull more of their transatlantic seat capacity out of the systems this fall.

Then there is the possibility of economic growth late in the year.

"There is a feeling among many customers I speak to that the deterioration in business [travel] has subsided quite dramatically," Moss said. "I don't know if it's safe to say it's not getting worse, but it's not getting worse as badly as it was, and so that's an improvement of sorts."

Moss added he still thinks OpenSkies will reach its target of being profitable by the end of its third year, which would be in June 2011.

"The first year was economically traumatic, but I like to think we're still not far off from that" target, he said, adding OpenSkies will review its strategy and goals in another six months.

British Airways weighs its options
British Airways launched OpenSkies last June to tap new transatlantic markets made available through E.U. deregulation and to reduce the carrier's dependency of London's Heathrow Airport.

Less than a month later, British Airways and OpenSkies bought all-business airline L'Avion for $107 million, essentially doubling its fleet to four Boeing Co.

OpenSkies could face the chopping block by this fall
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