Heathrow Opens Way for Lucrative Delta Expansion Overseas

LONDON — Record fuel prices. An economic slowdown. Low-cost rivals. These are dismal times for U.S. airlines.

But nearly a month after Delta Air Lines gained long-sought access to Heathrow Airport, the carrier says its operations here are burnishing the industry's silver lining: lucrative international routes.

"Airlines already had been growing their international capacity, and Open Skies is fueling the trend even more," said Patrick Murphy, a principal of aviation consulting firm Gerchick Murphy Associates in Washington. The treaty, which took effect March 30, allows European Union and U.S. airlines to serve any trans-Atlantic route.

International routes tend to be more profitable because they attract higher-paying business consumers and because they allow for better fuel efficiency.

"It's no secret that international yields and demand are much stronger than domestic, and so international is definitely important," said Bob Cortelyou, Delta's senior vice president for network planning.

International traffic makes up roughly one-third of Delta's operations.

"We have been at the forefront of adding trans-Atlantic services," Cortelyou said.

"If there's any slack in demand from the U.S. side, it is being made up for with increased demand from Europe," Cortelyou said. "There's strong demand with Europeans and especially Brits coming over to the United States in great numbers."

Delta and its partner Air France have launched new routes out of Heathrow, including flights to Atlanta, Los Angeles, and New York's John F. Kennedy Airport.

Delta also plans to launch a variety of new routes this summer, including flights from Atlanta to Stockholm and from New York to Lyon, France, and Malaga, Spain.

The airline's hub in Salt Lake City also will begin service to Paris.

So far, Cortelyou said, Delta has been pleased with its new routes, especially the Heathrow-to-Atlanta route, "which passengers have responded to very well."

In a sign of its increasing emphasis on international flights, Delta this week introduced international online flight and baggage check-in at www.delta.com.

For decades, access to Heathrow, the world's busiest international airport, had been restricted to two U.S. carriers, American Airlines and United Airlines, and two British carriers, British Airways and Virgin Atlantic Airways.

The long-awaited opening of Heathrow under Open Skies, though, was clouded after the opening of the much-trumpeted Terminal 5 last month resulted in flights being canceled and luggage being misplaced.

"The Terminal 5 fiasco — which closely resembled the fall of Saigon only with less shooting — didn't do much to polish Heathrow's image as a global gateway," said Mike Boyd, an aviation consultant with the Boyd Group in Evergreen, Colo.

"I don't think Heathrow is as big a draw for U.S. consumers," he said.

Despite the negative publicity about the terminal, Delta executives say their operations in Terminal 4 have suffered no major problems despite work under way at Terminal 4..

"There are some renovations but we want to have a nice quality product for our international customers," Cortelyou said.

"We have no concerns and we're pleased, and so far operations at Heathrow are running along fine," he said.

While Open Skies has made trans-Atlantic travel easier for consumers, it has yet to fulfill predictions that it would also make flying cheaper.

"Passengers have more choices and greater access to Heathrow from more airlines, but fares are not lower because the airlines need higher fares to offset the oil price spike," said Michael Derchin, an analyst at FTN Midwest Research Securities Corp. in New York.

He said record oil prices, along with the weak dollar, have made this the worst possible year for Open Skies to begin.

Betty Stark, a travel consultant in Madison, Wis., agreed that new opportunities on lucrative trans-Atlantic routes could ultimately be a boon for both the U.S. airline industry and U.S. travelers seeking greater choice.

"But there are many other factors at work right now, including the weak U.S. economy, the weak U.S. dollar, and the escalating fuel costs that could slow a full-blown market shift," she said.

The Open Skies agreement was signed last year to do away with U.S. rules preventing carriers in the 27-member EU from offering nonstop service to the United States from another European country.

Talks aimed at further deregulation are scheduled to begin May 15. The main issues are expected to be allowing EU-based airlines to operate between U.S. cities and eliminating restrictions on foreign ownership of U.S. airlines.

Currently U.S. airlines can't be more than 25 percent foreign-owned.