FLIGHT International, 13 August 1977 465

Air Iransp rt North Atlantic fares in turmoil SCHEDULED airline reactions to

Laker Airways' Skytrain service, authorised under the Bermuda 2

US-UK air agreement, seem certain to bring chaos to the North Atlantic low-fare market. Although the now-recessed International Air Transport Association's North Atlantic confer­ence can be recalled at two days' notice in an effort to reach agreement, it is now expected that the North Atlantic will be "open-rate" from September 9.

Most of tha movement in scheduled fares under the open market will take place at the lower end of the scale, and the likely result is the emergence of a variety of new fares cheaper or more easily available than the current Apex (advance-purchase excursion). Although Pan Am's decision to break from the lata structure—automatically throwing rates open in the North Atlantic area—was sparked off by the need to compete with Skytrain on London-New York, the new low fares will spread to other destinations in Europe and the USA to prevent cheap London-New York flights from drain­ing other gateways.

Pan Am formally filed a standby New York-London fare with the US Civil Aeronautics Board last week, at the same rate as its "we'11-tell-you-when" budget fare (see World News last week). Trans World Airlines has filed to match both Pan Am proposals. British Airways filings with the CAB follow a different course. The British carrier is not interested in offering a single fare, and is concentrating on a reduced Apex. It has also filed a Group 40 part-charter proposal under which blocks of 40 seats could be sold via middlemen.

It remains to be seen whether the CAB will abandon its opposition to part charters, although British Air­ways is sugaring the pill by using the term "scheduled seat contract". The proposal is completely new in that it does not quote a specific rate: the seat blocks will be sold wholesale to licensed tour operators or ABC operators at whatever price the market can take. It will be up to the middleman to ensure that the seats are filled, and the only terms are likely to be a 50-day advance booking period.

All the scheduled airlines now in­

volved in the low-fare battle insist that their profits will not he affected, and that they will not allow their yields to be diluted. Without knowing how many budget seats or charter blocks the airlines are going to sell, it is hard to say whether the new price war will push the North Atlantic market into the red yet again. It also remains to be seen whether Pan Am and TWA standby fares will attract far more hopeful travellers to the airports than the terminals can handle.

Some North Atlantic carriers, alarmed at the possibility of yet another fall in yield, are understood to be studying the installation of 11-abreast economy-class seating on Boeing 747s. Most of the 747s entered service with nine-abreast seating, but nearly all operators have moved to ten-abreast to reduce seat-mile costs. Seats would be arranged 3-5-3 across the cabin, replacing 3-4-3. The present arrangement of emergency exits on the 747 caters for well over 500 pas­sengers.

London-New York applications are likely to be followed by new fares from other points in Europe to the USA. The lata conference could probably have reached agreement on a simple reply—probably a reduced peak Apex—to Skytrain in isolation, but low scheduled fares out of Heath­row, with its convenient connections to the rest of Europe, will inevitably have a greater impact on the whole transatlantic scene. The effects of Skytrain and anti-Skytrain fares will be felt most strongly in the European destinations closest to London—what lata calls the "second line" of Amsterdam, Brussels and Paris. The airlines based in the third line— Copenhagen, Frankfurt and Zurich— will be less affected. It was the impossibility of agreeing second-line and third-line low fares which caused the North Atlantic conference to adjourn without reaching agreement.

Third-line carrier Lufthansa is wait­ing to see the effect of the new London fares before committing itself

Bermuda 2 capacity mechanism BRITAIN intends to make the first US applications on Miami-London and Boston-London the test case of the capacity-control mechanism set out in Annex 2 of the new Bermuda Agreement. Outlined below is the normal schedule for the procedure as defined in Annex 2.

180 days before the season starts, the airlines file with both Governments—the con­tracting parties—their proposed schedules, specifying frequency, aircraft type and points to be served. 165 days before the season starts is the deadline for any amendments the airlines may want to make to their applications, having seen their competitors' proposals. If either contracting party considers that the other nation's schedules offer excessive capacity, it must say so 150 days before the season starts, and muft propose what it believes to be an appropriate level of capacity. With 120 days to go the other party replies with its justification for the capacity increase. At 105 days, if the complaining government is not satisfied, it notifies the other party and consultations begin no more than 90 days before the start of the season. The parties exchange traffic forecasts and the final schedules are agreed at least 75 days before the first services. If no agree­ment is reached the parties operate the fall-back traffic level. This is set by increasing the previous year's frequency by the average of the two percentage forecasts of traffic growth, though any increase of not more than 15 flights in winter or 25 in summer must be permitted.

A new airline inaugurating services on an established route (B.CAL will be in that position on London-Atlanta from 1980) has two restriction-free years in which to match the established airline on frequency. After that time its capacity increases will be subject to control. Concorde is not subject to control; as a partial quid pro quo the US airline on Washington-London is assured a minimum of seven round-trips a week, though there is no similar provision for New York.

Annex 2 will remain in force for five years. If not then revised or renewed it will lapse after a further two years.