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British Air Upbeat on Open Skies

The U.K. carrier also says quarterly revenue advances almost 9%.
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British Airways

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said Friday that the approval of a new Open Skies agreement between the U.S. and Europe would enable it to move some flights from London's Gatwick to Heathrow Airport.

"We will respond very quickly," said CEO Willie Walsh on a conference call with analysts. He said the current agreement restricts British Airways' access to Heathrow, but didn't specify how many flights would move from Gatwick.

Walsh said European regulators are awaiting the results of next week's meeting of the House Aviation Subcommittee in Washington, which is slated to consider changes in U.S. foreign ownership rules that have been proposed by the Transportation Department.

The change would enable minority-stake foreign owners to exercise control over U.S. airlines in some cases. The EU has indicated that approval of the Open Skies deal hinges on the U.S. relaxing its ownership laws. The arrangement would eliminate some restrictions on E.U. and U.S. airline flights between the two continents.

"We still believe Open Skies will happen," Walsh said. "The timescale is open to question, but it's likely to happen in the next 18 months."

Walsh spoke after British Airways reported that net income rose 1.7% to $208 million in the quarter ended Dec. 31, while revenue advanced 8.7% to $3.8 billion, despite higher fuel costs.

The largest trans-Atlantic carrier attributed the rise in net income largely to an increase in traffic, particularly premium-class traffic, and said that yields will likely improve for the year. Walsh said the traffic increase had been stimulated by significant promotional activity, particularly for the Shanghai-Bangalore route, but that future promotional costs will likely decline.

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Operating costs were up 7.3% in the quarter, but the airline said it's working to reduce the trend through management reductions, changes to working practices, reduced absenteeism and restructuring unprofitable areas. Fuel costs rose 28.2% for the quarter.

Walsh said he doesn't foresee that Open Skies would lead to antitrust immunity for the alliance British Airways has with

American Airlines

. "We still believe there would be a regulatory price attached to that, and that's a price that we are not prepared to pay," he said. American is a unit of




He said British Airways doesn't expect to be hurt by the Open Skies agreement, discounting recent speculation that the airline -- which operates about 100 daily flights between the U.K. and the Americas -- would lose market share as a result.

"Trans-Atlantic out of Heathrow is already a competitive market with four carriers, and we are very confident our product is superior to our competition," Walsh said.

Shares of British Airways were falling $3.18, or 5.4%, to $55.47.