No appetite for the carve-up

A furious row is still raging between British Airways and the Government. Last Tuesday BA chief executive Robert Ayling had a testy meeting with Gus Macdonald, the transport minister. At issue is the possibility of opening up the trans-Atlantic routes in a manner that terrifies British Airways.

British Midland wants to start four daily services to the US in exchange for which Delta Airlines and Continental would be granted new "slots" to take off and land at UK airports.

This is a far bigger argument than the right of less than a dozen new fights. What is at issue is the cobwebbed regime by which the Atlantic routes are carved up by the regulators.

In a liberalised market any airline that thinks it can fill its seats should be free to try its luck. The airspace between nations is never that simple. The USA operates a highly restrictive system. It is reciprocated by the UK and its superior authority, the EU.

Most of us would think the value of an airline lays in its fleet of expensive aircraft and the mix of talents of its staff. This is false. The physical equipment of an airline is pure expense. Most try to lease or rent their fleets to cut risk and expense. The most valuable assets are these unseen "slots".

Gus Macdonald is said to want to create an auction of these rights. Nobody can attribute a price as no market has ever operated in an open and clean manner.

British Airways inherited the vast prize of most of the slots in and out of Heathrow when it was privatised. If it starts to forfeit them it may quickly evaporate itself. Lord Macdonald had the romantic views of a socialist in the past but he is known to have become a convert to the liberal capitalist cause. Like most conversions he proves to be more an evangelist than former aviation ministers such as Malcolm Rifkind or Nicholas Ridley.

Tuesday's meeting was between businessmen demanding that ancient favours be preserved and a New Labour minister out of sympathy with the old game of State connivance.

Heathrow is the world's busiest airport but it is still locked in to the slots granted to Imperial Airways and BOAC and British European Airways generations ago.

Any new entrant to the hidden market in "slots" rapidly changes their posture once they are on the inside. Virgin Airlines which has made a virtue out of being a small outfit struggling against the giants is now on BA's side lobbying against new entrants. The case for liberalising all aviation routes is the same whatever the destination.

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