Bermuda II - Description of The Agreement

Description of The Agreement

• Broadly speaking, only a combined four airlines from the UK and US were allowed to operate flights between London Heathrow and the United States. The two British carriers were British Airways (BA) and Virgin Atlantic. The American carriers were American Airlines and United Airlines. The US also approved Continental Airlines to fly to London Heathrow. British refusal to endorse the US position prevented Continental from exercising this route authority. However, Continental succeeded in obtaining UK permission to enter into a codeshare agreement with Virgin Atlantic, which placed Continental's flight numbers in addition to Virgin's on some of the latter's Heathrow and Gatwick flights. Air India, El Al, Iran Air and Kuwait Airways were permitted to continue exercising their so-called "fifth freedom" traffic rights from Heathrow to John F. Kennedy Airport (JFK), which they had already enjoyed under the original Bermuda agreement. (Both El Al and Iran Air stopped exercising these rights. The former decided that it made better economic sense to fly non-stop between Tel Aviv and New York. The latter's US traffic rights were withdrawn in the aftermath of the 1979 Iranian hostage crisis.) Similarly, Air New Zealand was allowed to continue using its fifth freedom rights between London and Los Angeles.
• Bermuda II continued and expanded the principle of "dual designation", i.e. the right to designate two UK airlines as well as two US carriers as "flag carriers" on the same routes, which already existed on the London–New York and London–Los Angeles routes under the original Bermuda treaty.
• The extensive fifth freedom rights US carriers used to enjoy from the UK to other European countries were restricted to a few routes from London Heathrow to what used to be West Germany (including West Berlin) in the days prior to German reunification. In the early '90s, United Airlines used to fly between Heathrow, Berlin, Hamburg and Munich (United had acquired these traffic rights along with Pan Am's transatlantic rights to/from Heathrow for US$1billion in 1990). A few years earlier, TWA flew between London and Brussels but, unlike United, did not have traffic rights to carry local traffic between the two cities.
• American and British regulatory authorities needed to approve every airline's capacity and pricing ahead of each operating season.
• Each country could refuse traffic rights to a carrier it was not satisfied with, particularly with regard to ownership and/or control.
• Only a specified number of US "gateway cities" could be served by both UK and US carriers from London Heathrow as well as London Gatwick.
• Only the following US gateway cities could be served non-stop from Heathrow: Baltimore, Boston, Chicago O'Hare, Detroit, Los Angeles, Miami, New York JFK, Newark, Anchorage, Minneapolis/St. Paul, Philadelphia, San Francisco, Seattle, and Washington-Dulles.
• Anchorage and Minneapolis/St. Paul, held dormant authorities to use Heathrow as their London terminal, grandfathered from use during the original Bermuda Agreement; but could only be operated non-stop by a British carrier. As such, Anchorage remained dormant during the latter years of Bermuda II, and Minneapolis featured service only to London Gatwick, as its operating carrier (Northwest Airlines) did not have the authority to operate into Heathrow.
• A provision existed that allowed any Heathrow-authorised British carrier operating as the sole carrier between London Gatwick and any US city to switch that service to Heathrow as long as the incumbent airline had demonstrated its ability to carry a minimum of 300,000 non-stop passengers (both transfer and point-to-point) between that city and London, and vice versa, over a period of two consecutive calendar years. Using this method, BA was able to transfer Denver, San Diego and Phoenix from Gatwick to Heathrow.
• All non-stop flights between London and Atlanta, Cincinnati, Cleveland, Pittsburgh, Dallas/Fort Worth, Houston, Las Vegas, Orlando, Tampa, Raleigh/Durham, St. Louis, and Charlotte needed to use Gatwick as their UK departure/entry point rather than Heathrow.
• In a 1995 annex to Bermuda II capacity, fare and route restrictions governing all scheduled air services serving airports other than London Heathrow or London Gatwick were lifted. (This partial liberalisation came about as a UK concession to the US to help BA gain approval for its code-share alliance with US Air. As a result, access restrictions that originally covered all London airports were lifted at Luton and Stansted. This, in turn, enabled the now defunct "new generation", all-business class carriers such as Eos, Maxjet and Silverjet to enter the lucrative London–New York business travel market by choosing Stansted and Luton rather than Heathrow or Gatwick as their UK departure/arrival airports). Continental Airlines also took advantage of this liberalisation by starting service to a number of important regional UK airports, including Bristol, Birmingham, Manchester, Edinburgh, Glasgow and Belfast. Continental furthermore introduced non-stop service to Stansted from Newark in 2001, but this was withdrawn in the industry downturn after the September 11 terrorist attacks.