British Midland to shut down Warsaw-London
Tensions between the Polish government and British Midland over its cut-rate promotions has caused the U.K. airline to suspend flights between London and Warsaw at the beginning of May.
"Decisions were taken because we felt that there were competitive difficulties in working in regulated markets," said a spokesman for British Midland, who asked not to be identified.
The spokesman also noted that the airline was not pulling out of the market altogether but merely ceasing flights in the mid-term.
British Midland started operating flights between Warsaw and London in summer 1998. Later, in April 1999, the airline added an additional flight between the two cities. The airline has tried to compete against LOT Polish Airlines and British Airways by offering cut-rate promotions. However, those promotions have caused conflict between the government and British Midland.
"There were certainly issues relating to the fares that we were allowed to charge," the spokesman said. "I think that raised problems with other competitors on the route."
Jacek Klaudzinski, deputy director of the civil aviation department within the Transportation Ministry, said the airline has been a source of problems. "If they want to cease their operation to Poland, they are more than welcome," Klaudzinski said.
In recent months, British Midland has offered specials on Warsaw-London flights for as low as $89 return, a rate introduced in late 1999. The airline also kicked off a $139 promotion in February. Currently, the average return fare in economy class between Warsaw and London on both British Airways and LOT is approximately $281.
"British Midland does not follow the rules," Klaudzinski said.
He said that the airline has not been beholden to a civil aviation agreement between Poland and the U.K. that stipulates an airline must first propose its fare to the authorities for approval 30 days in advance. British Midland was not doing this before making its offers public, Klaudzinski said.
"It is very low, it is not fair," Klaudzinski said of the British Midland airfares.
Last week, the civil aviation department sent a letter to British aviation authorities complaining about British Midland's promotions and warning that further incidents could lead to Polish authorities denying British Midland access.
While those issues are not likely to abate any time soon, the British Midland spokesman said the airline would consider returning to Poland if the market was "right."
A liberalization of the market could be in the works, however. Klaudzinski said that talks with the European Commission, due to take place toward the end of March, could lead to Poland beginning to liberalize its airline market within the year. Although this would not be the "open skies" policy, it would be a step forward, meaning that EU airlines would not have to get fares approved by Polish authorities.
Stephen Pettyfer, an analyst with Merrill Lynch in London, said that at London's Heathrow airport, among the busiest in Europe, competition for slots is fierce and airlines are under extreme pressure to fly profitable routes. He said he doubted that the Warsaw-London connection was money-making, or that it attracted enough business travelers to eventually become profitable. "You have to question why they are flying that route," Pettyfer said.
Spokespersons for British Midland in both London and Warsaw declined to comment on their flight loads. However, the situation was likely worsened by the fact that British Airways and LOT have a code-share agreement on the London-Warsaw route that allows for several flights a day.
Instead of the three cities, from which the airline is currently operating Warsaw, Prague and Frankfurt British Midland plans to focus on routes to Madrid, Spain, and Milan and Rome in Italy, which have higher volumes, the spokesman said. In November 1999, German carrier Lufthansa acquired a 20% stake in British Midland for £90 million. That should lead to the airline joining the Star Alliance, which includes Lufthansa, SAS Scandinavian Airlines and Air Canada, this summer, Pettyfer said. Joining that alliance, will also enable British Midland to pick up passengers connecting from other airlines in the alliance, allowing the carrier to provide direct service only on its most profitable routes.
The British Midland spokesman refused to say whether the Warsaw-London route was profitable, but he did not attribute the decision to pull the flights to financial reasons. "It was not a strictly financial situation, it was regulation," the spokesman said.
British Midland's departure from Poland's airline scene is the second within approximately a year. In April 1999, U.S. carrier Delta Airlines ceased its direct transatlantic flights between Warsaw and New York City. Delta said its decision was based on the fact that it had attracted a relatively low market share and that it lacked the more profitable business class passengers.
Other airline executives said they doubted that British Midland's and Delta's pullout would spark other exits. "This is not unique for Poland," said Ole Johansson, country manager for SAS.
He said it is common for carriers to abandon some routes, pointing out that SAS has also done so in the past. "You do these things because competition is so tough that you have to concentrate on where the business is," he said.
Competition is not dead, either. Poland is likely to get a second carrier, an alternative to LOT, Klaudzinski said. A new charter airline, White Eagle Aviation, is expected to start operating flights to tourist destinations in the near future. The six-year-old, airline previously focused on cargo transport and some aerotaxi services.
