BA's Paris Unit Says Business Travel, Beyonce to Spur Fleet Plan

British Airways Plc’s OpenSkies luxury-travel unit may boost its four-plane fleet to 20 aircraft in coming years as business travel rebounds and it rents jets to VIP clients such as singer Beyonce and soccer club Real Madrid.

Paris-based OpenSkies is filling 80 percent of seats on its main New York route and will boost occupancy in 2011 by selling tickets through BA’s American Airlines ally and Iberia Lineas Aereas de Espana SA of Spain, with which the U.K. company is merging, Chief Executive Officer Dale Moss said in an interview.

“I don’t want to scare any competition when I say 15 or 20 aircraft, but if we got that it would be great,” Moss said. “The market will snap back to its former state at some point, though it has yet to do that, so we’re not in a hurry. What’s most interesting now are the opportunities with American and Iberia.”

OpenSkies, which began flying in June 2008, three months before the collapse of Lehman Brothers Holdings Inc., offers business berths and flat beds in 84-seat Boeing Co. 757s served by four cabin attendants. Moss says the carrier has a 29 percent share of the Paris-New York premium-travel market and a load factor in the “high 50s to mid 60s” on its second route to Washington, with a third service likely to begin in 2011.

‘Limited Damage’

“I’m quite well disposed to the model, it has potential,” said Doug McNeill, an analyst at Charles Stanley Securities in London. “It makes sense for British Airways to place small bets on this. If it goes wrong, the damage will be limited.”

British Airways was trading up 1.6 percent at 259.7 pence as of 11:03 a.m. in London, snapping three days of declines.

Moss said any additional planes will also be 757s, the world’s longest single-aisle model, of which Boeing sold more than 1,000 examples, the last in 2005. 757s recently retired by British Airways and sold for freighter conversion had a different layout and weren’t suited to OpenSkies, he said.

“We like another version of this aircraft, with a different door configuration and a different galley configuration that enables us to get more seats on this airplane,” he said.

Collaboration with American Airlines, the No. 3 U.S. carrier, and Madrid-based Iberia is likely to be in the form of code-sharing, which would allow OpenSkies to sell seats via the larger companies’ sales networks as if they were its own.

“Codeshares will enable us to raise awareness in the marketplace and engage in more segments,” Moss said on Nov. 29 after addressing the Future of Air Transport debate in London.

Geneva, Dubai

OpenSkies, which operates out of Paris’s Orly airport, has carried 200,000 people since it began flying, 80,000 of them in the past 12 months. Numbers will grow once the market returns to “normalized” levels, which is unlikely before 2012, he said.

The carrier said in June it was looking at adding a third route and studying the feasibility of flights serving Geneva, Milan, Dubai, Montreal and Boston. That’s “more likely now to be next year,” with another north Atlantic service favored, though Dubai hasn’t been ruled out, Moss said in the interview.

The premium-only layout used by OpenSkies has also prompted top-end customers to block book aircraft, with the charter market accounting for 10 percent of sales, the executive said.

VIP Passengers

Clients have included Grammy-award winning singer Beyonce Knowles, Spanish soccer team Real Madrid and AC Milan of Italy, and French Finance Minister Christine Lagarde, who hired a plane to take a trade delegation to China.

Moss said OpenSkies has settled on a double-daily service to New York as the optimum given current levels of demand and is cautious about flooding the route after scrapping flights from the U.S. city to Amsterdam last year as global travel slumped.

“We did have three services a day to New York but the market had softened and we found the sweet spot was two,” he said. “Do I envisage a greater frequency there? Sure, when the market is right.”

McNeill of Charles Stanley said OpenSkies and a business- only British Airways service from London City airport to New York have benefited from the examples of premium-class trans- Atlantic trailblazers MAXJet Airlines Inc., Eos Airlines and Silverjet Plc, which failed between December 2007 and May 2008.

“It’s not unusual for the pioneers of a concept to struggle to make money only for the second generation to commercialize it successfully,” said the analyst, who rates British Airways stock “hold” following its 37 percent gain so far this year. “That is what BA is doing with OpenSkies and its London City operation.”

Regular seats on OpenSkies flights are as much as 50 percent less costly than business seats on a regular airline, with flat-bed berths 20 percent cheaper, according to Moss.

The chief competitor to OpenSkies is Air France, which said yesterday it will introduce Airbus SAS’s A380 on its Washington route next June. It already flies the superjumbo to New York.

Air France-KLM Group spokesman Nicolas Petteau in Paris declined to comment on the BA unit’s expansion plans yesterday.

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