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Virgin Atlantic may fly to New York from continental Europe - extended

Virgin Atlantic Airways, the UK carrier controlled by billionaire Richard Branson, may start flying to the US from continental Europe under an „open skies” agreement between the US and the European Union.

The airline may begin non-stop services to New York from Paris, Frankfurt, Milan, Madrid, Zurich and Amsterdam, Paul Charles, a Virgin Atlantic Airways spokesman, said yesterday in an interview. EU ministers are scheduled to vote today on the accord regulating Trans-Atlantic air traffic. The agreement would allow EU airlines to fly from any of the bloc's airports instead of just from their home countries. The expansion would pit Virgin Atlantic against Europe's biggest carriers, Air France-KLM Group and Deutsche Lufthansa AG.

Virgin Atlantic now flies to the US only from the UK, with most flights originating at London's Heathrow airport. European national carriers „have a monopoly pretty much in their home countries. We don't think British Airways will start flying out of Paris or Lufthansa will start flying out of London after open skies,” said Mike Powell, an analyst at Dresdner Kleinwort in Madrid. „But Virgin's got lots of experience taking on that sort of competition.” The accord would also end rules that let only Virgin Atlantic, British Airways Plc., UAL Corp.'s United Airlines and AMR Corp.'s  American Airlines to fly between the US and Heathrow, Europe's busiest airport.

Virgin began operating out of Heathrow in 1991 in direct competition with British Airways, Europe's third-biggest airline. It was granted the same protected position that British Airways had enjoyed since the 1977 Bermuda II agreement limiting trans-Atlantic carriers between Heathrow and the US Heathrow „is a key corporate travel destination. If an airline doesn't serve it, we know from industry sources that it's enough for an airline to lose out on an entire corporate travel program,” Daniel McKenzie, an airline analyst at Credit Suisse in New York, wrote in a note to investors today. „If this were a game of Monopoly, Heathrow would be like Boardwalk, it's a piece that makes winning a lot easier.” In return for opening Heathrow to competition, the EU sought an easing of the laws restricting ownership and control of US airlines to American citizens. The commission has spent four years seeking greater access to the American airline market, which the US has so far refused.

Virgin America Inc., a new US airline backed by Branson, changed its ownership plan to comply with US rules that require American citizens own and control 75% of the airline. US regulators gave Virgin America initial approval March 20 after the carrier said it would drop Branson's closely held Virgin Group Ltd. from a board seat and put Virgin Group shares under a US trustee. Virgin Atlantic expects to make a decision on the proposed expansion by the end of the year, Charles said. The service would start in two years and require a £100 million ($195 million) investment. „We'd probably have to look at the options for new or leased planes,” said Charles. The carrier would keep its current planes on its New York to London routes. (Bloomberg)