Love in the air

July 28, 1992

The engagement of British Airways to USAir may usher the world into the era of truly global airlines. If the union is approved by authorities on both sides of the Atlantic, it could have profound consequences on everything from pricing, national regulatory procedures and hub arrangements to aircraft leasing and purchasing.

The international airline industry has been experiencing heavy turbulence ever since last year's Persian Gulf war. If anything, the shakeout promises to accelerate.

Carriers in European Community countries face a new round of deregulation in January. And while the U.S. has its share of economically weak carriers, the giants -- United and Delta -- are now building hubs in Europe to compete better with American Airlines.

The growing, merciless U.S. competition has made many Europeans unhappy. Germany's Lufthansa has even threatened to quit the North American market altogether unless the perceived unfair advantage of U.S. airlines is curbed. France has made similar noises.

A hub-and-spoke system has not been a viable strategy in Europe because of the smaller domestic geographic and demographic bases. British Airways, by proposing to USAir, is now trying to have part of that cake and eat it, too.

If USAir's fleet of 439 planes and extensive domestic network is meshed with British Airways' global system of routes serviced by 230 jets, each segment could serve as a feeder benefiting the other. To make it all happen, British Air would invest $750 million in its ailing American partner -- and gain one-quarter of the seats on USAir's board of directors.

Because of federal restrictions, this union would fall short of a full-fledged merger. The net effect would be pretty much the same, however. Schedules would be combined and operations streamlined. USAir would become the American component within this joint operating agreement; British Air would handle the international traffic, including flights to London from Baltimore-Washington International Airport.

While British Air can be expected to continue its current service to Dulles International Airport in Northern Virginia, it would probably also increase trans-Atlantic flights to BWI -- one of the key USAir domestic hubs, in addition to Pittsburgh, Philadelphia and Charlotte, N.C.

During the past couple of years, overseas passenger and cargo service have been BWI's growth areas. Yet the Baltimore airport has won only slow acceptance among carriers as an important gateway to the lucrative Washington market. The pending USAir/British Air union presents Maryland with a splendid opportunity to change all that.

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