BA loses $2.3 million a day as OpenSkies cuts back

Dow Jones is reporting that British Airways is burning through £1.4 million, or $2.3 million, a day, according to the airline's CFO, Keith Williams. Williams said in February that the airline was losing £2.7 million of cash a day, which is almost $4.5 million, so I guess that's an improvement. But William is also warning that the "cash burn isn't sustainable," and that rate is likely to increase during the winter. So BA is by no means out of the woods yet.

And in related news, BA subsidiary OpenSkies has announced that it will drop its New York - Amsterdam route next month, leaving the premium BA offshoot flying just one route (New York - Paris). OpenSkies CEO Dale Moss has said that "while OpenSkies developed more than 16% market share during only nine months, it was not enough to sustain a profitable service at this time." "We tried very hard to make it, but the current market forces were just a bit too difficult," he said on the company's blog. "My most sincere wish is that someday OpenSkies will return to Amsterdam and make it another signature route." But despite Moss' optimistic outlook, parent British Airways has hired an investment bank to find a buyer for the airline.

photo by bribriTO from Flickr, licensed under the Creative Commons

OpenSkies to become ClosedSkies?

If you're not familiar with OpenSkies, it's the premium transatlantic brand that British Airways launched a year ago with some BA 757s, which fly in an all-business class configuration. It merged with French competitor L'Avion last July, and the process was completed in April. The subsidiary took advantage of the identically-named Open Skies treaty, which allows European Union airlines to fly from any EU country to the US.

But The Guardian is now reporting that BA, faced with deepening financial troubles, is looking at shutting down or selling off OpenSkies. BA, which itself developed much of its product around catering to business travelers, has been adversely affected by the drop-off in business travel over the last year, and it's not unreasonable to think that OpenSkies, an all-business class airline, must be affected in the same way. "Every part of our business is under review in these difficult and challenging times," said a British Airways spokesperson. "Closing [OpenSkies] would have no material effect on our financial performance," said CEO Willie Walsh. "But the team there knows that it will close if it does not deliver on its business plan."

The report conflicts with recent statements by Dale Moss, OpenSkies' managing director. "We are not on the business plan that we set out, but we are not far off - we are probably nine months off where we wanted to be at this particular time," he said. Moss stressed that despite the downturn in business travel, the airline will continue flying. More importantly, Moss said that OpenSkies will try to use its lower cost base to compete more effectively against its transatlantic competitors. But BA's operating in crisis mode, and if the operation isn't making money, then its future looks bleak. The fact that Walsh is publicly talking about giving OpenSkies the axe can't be a good sign.

BA's OpenSkies to merge with L'Avion

British Airways has announced that it will purchase Paris-based premium carrier L'Avion to add to its OpenSkies premium transatlantic subsidiary. The deal, which only set back BA $52 million in cash, will be completed this month, and OpenSkies will formally combine with L'Avion shortly thereafter.

In a statement, British Airways head Willie Walsh noted that "L'Avion is a successful airline that has built up a premium business in a relatively short period. It has many synergies with OpenSkies and buying it provides a larger schedule and an established customer base."

L'Avion flies Boeing 757-200 aircraft from Paris Orly to Newark, and is the last of the independent premium transatlantic airlines surviving - MAXjet, Silverjet, and EOS have all become victims of higher oil prices.

British Airways launches OpenSkies

Although it’s no secret that British Airways has been looking to expand in the transatlantic market, the airline made an announcement yesterday that it is starting an “airline within an airline”. OpenSkies, as the new entity is called, will start flying in June with a single Boeing 757-200 from New York to either Paris or Brussels. Another 757 is planned to join the fleet later this year, with six aircraft in all by 2009. In a statement, Willie Walsh, BA CEO, said that "by naming the airline OpenSkies, we're celebrating the first major step in 60 years towards a liberalized US/EU aviation market which means we can fly between any US and EU destination”. Future cities will probably include Milan, Frankfurt, Amsterdam, and Madrid.

This is a smart move on BA’s part – the Open Skies agreement signed between the US and the EU would add a lot of pressure at BA’s London Heathrow hub. Currently, only United Airlines, American Airlines, BA, and Virgin Atlantic can fly from the US into Heathrow, but this is expected to change soon as more US carriers add the airport. It’s also a smart idea that British Airways decided to buck the “premium transatlantic” trend that pushed MaxJet into bankruptcy last month – OpenSkies will have business class, premium economy, and economy class (each with 24, 28 and 30 seats, respectively). But BA isn’t alone in this area – British carrier bmi, Delta Air Lines, and Air France/KLM are all expected to follow suit with Heathrow-US routes.