On March 27, London's Heathrow Airport opened its new, state-of-the-art Terminal 5 — an upgrade long overdue for what has been considered one of the world's least favorite airports. But opening day did nothing to improve the travel hub's image, as computer and baggage foul-ups caused countless delays and cancellations. And even when flights finally began running normally, more than a week later, British Airways announced it would not move its long-haul services to Terminal 5 until June — a delay of more than a month.

Enjoying a smoother debut, the long-gestating Open Skies Agreement went into effect on March 29. And while British Airways was moving some flights into the Terminal 5, a number of other carriers were moving into the space BA left behind, eager to grab some transatlantic business.

The rush for Heathrow slots is just one of the consequences of the aviation agreement between the European Union and the United States called Open Skies. The deal permits EU and American airlines to operate to and from all of each other's airports for transatlantic flights, replacing a regimen of bilateral deals between countries and carriers.

According to Jacques Barrot, vice president of the European Commission in charge of transport, the agreement encompasses about 60 percent of the world's air traffic and could create some 80,000 jobs, split between the EU and the U.S.; a reduction in airline ticket costs for both individual and business travelers that “could be worth up to 12 billion euros in economic benefits” over five years; and the possibility that transatlantic passenger numbers will increase by 26 million within five years.

But challenges remain. The price of jet fuel in mid-April was up 70 percent from the same time in 2006, so the hoped-for savings in airfare will not come in the near future. And the agreement that took effect in March is part of a broader deal. Phase 2, which would expand rights and routes for European carriers in the U.S., is proving far tougher to negotiate, and could wipe out the whole accord.

Wait and See

With so much promised by Open Skies advocates, when will travel managers, meeting planners, and individual consumers see the benefits?

A poll of members of the Association of Corporate Travel Executives, taken by ACTE exclusively for Beyond Borders, shows that most are in a wait-and-see mode. Sixty-two percent of respondents said they want to see how Open Skies works before making changes to their corporate travel programs. Twenty-one percent believe it will provide great benefits to business travelers, while 12 percent think it will provide more travel options but will have no effect on airfares. Only 8 percent were ready to start negotiating with other carriers.

The lukewarm response doesn't surprise ACTE President Richard Crum, who in his professional life is president of AirPlus International North America. “The discussion about Open Skies goes back a long way, so there's a little fatigue about the issue — and a question about what it really means. And with the economic slowdown, people are more concerned with controlling their programs as things stand now.”

But Kevin McGuire, president of the National Business Travel Association, is optimistic. “We're talking about additional routes and competing airlines, with the possibility of a reduction in price in business and economy class, and improved service levels,” says McGuire, travel manager, intercollegiate athletics, for the University of Texas at Austin.

The Heathrow Grab

“It's the most important business airport in Europe,” says Patrick Murphy, a partner with airline industry consultants Gerchick-Murphy Associates, Washington, D.C. “So the most obvious impact on business travel is the opening up of service in and out of Heathrow.” Those flights previously were governed by the Bermuda 2 agreement, which allowed only British Airways, Virgin Atlantic, American, and United to fly between Heathrow and the U.S.

But even with Open Skies in place, getting in to Heathrow remains a challenge. Slots are scarce and incumbent carriers have grandfathered rights to their places. Carriers like Aer Lingus and Alitalia, in fact, have begun selling some of their Heathrow slots at a premium. while airlines like Delta, Continental, and Northwest gain access through slot exchanges with alliance partners. (At press time in late April, Delta and Northwest were awaiting regulatory approval of a merger deal they had announced on April 14.)

Northwest, through its partnership with KLM, now flies into Heathrow from Minneapolis-St. Paul and will add flights from Detroit and Seattle. Delta, partnering with Air France, is flying into Heathrow from New York and Atlanta (while Air France is operating daily between Los Angeles and Heathrow). Continental plans flights from Newark and Houston.

“In terms of corporate customers, Heathrow is key,” says Dale Eastlund, director, Carlson-Wagonlit Travel Air Solutions. “Many corporations have offices near Heathrow. Now you're seeing a more competitive landscape. Airlines may become more aggressive with pricing when negotiating contracts with these customers,” McGuire notes.