15 November 1998

Branson calls for end to air wars

By Hilary Clarke

Richard Branson has called for an end to the air war between the UK and the US and appealed for an immediate resumption of talks between Washington and Westminster to liberalise air traffic.

Celebrating the scaled-down alliance between British Airways and American Airlines, to which he was bitterly opposed in its original form, the Virgin chief said: "Now the BA/AA war has been won, we are trying to persuade both governments to treat aviation like any other industry. Any carrier should be able to fly to Heathrow and any UK carrier should be able to fly anywhere in the US. We feel the UK Government should negotiate that right away and not kow-tow to British Airways yet again."

BA and AA recently decided to postpone their planned alliance because the conditions imposed by EU regulators for approval were felt to be too harsh, given the current economic climate. The US, for its part, made an open skies agreement a condition for it to be able to give the alliance anti-trust immunity. Last week, six American carriers called on the US not to approve it until a free aviation trade pact is agreed.

The US broke off talks on an open skies agreement with Britain last month after it accused the UK of making too little headway in opening routes to American carriers. Britain is the only European Union country not to have an open skies agreement with America.

Mr Branson, speaking to The Independent on Sunday following a trip to America last week, also launched an attack on US market restrictions to foreign carriers, including the Fly America policy under which US civil servants are obliged to fly transatlantic with an American carrier.

"The Fly America policy should be immediately stopped," he said. "It is ridiculous that British civil servants [can] fly on US carriers. The Government should stop it until the US policy is reversed."

More importantly, Mr Branson wants Congress to relax US foreign ownership rules for airlines operating on domestic routes in America. Currently, foreigners can only own 49 per cent of an American domestic carrier or control 25 per cent of the voting shares.

Mr Branson, who has plans to set up a new Virgin airline in the US, said he was encouraged by a meeting with Senator John McCain, the Republican chairman of the Commerce, Science and Transportation Committee. "He said he 100 per cent agreed and will campaign against what he called a ridiculous anachronism," said Mr Branson.

Mr McCain pledged to bring the issue up at the senate transportation committee early next year. Mr Branson also plans to meet UK government officials on the issue later this month.

Meanwhile, despite the current restrictions, Mr Branson said he is steaming ahead with plans to set up Virgin America.

"We have staff in mind to run it; we have plans as to the quality and a lot of the routes; and we have been in discussions with Boeing and Airbus over what planes we'd use."

The idea is for a quality short-haul domestic US airline plus a luxury airline between New York and Los Angeles.

"The quality of US airlines is pretty dismal. They just use might and strength to get people on board," said Mr Branson.

One rival airlines source, however, accused Mr Branson of playing a political game to scupper the open skies talks.

"The last thing he would want is more competition at Heathrow," said the source.

Apart from BA, Virgin is the only other British airline to fly to America out of Heathrow. The source said it was unlikely Mr Branson would have deep enough pockets to take on US airlines on their home turf. The US domestic aviation market accounts for 40 per cent of the world's total airline business.