Icelandair is dumping BWI, leaving the airport even more bereft of international routes. But I believe things will turn around. BWI is in a sweet spot to benefit from European airline deregulation, starting with the opening of London's Heathrow Airport next year. Up until now, only British Airways, Virgin, United Airlines and American Airlines were allowed to fly to the United States from Heathrow. Everybody else had to use Gatwick or other 2nd-grade airports. With European deregulation, BWI and its huge, barely-used international wing should look attractive. With luck discount European carriers will schedule BWI service and then code share with JetBlue, AirTran etc. for domestic connections. From a recent Barron's story:

Other European carriers, including leaders like Lufthansa and Air France, were barred from flying to the U.S. from anywhere except their own nation's airports. That was a huge disadvantage, and clearing away the prohibitions -- slated for this coming March -- could give a real lift to the global airlines industry.

A study prepared for the European Union by the consulting firm Booz Allen Hamilton suggests that the initiative will generate at least 26 million additional trans-Atlantic passengers annually within five years, a 50% increase over the current 50 million. That could help the global aviation industry continue increasing its earnings, after a long slump following the terrorist attacks of Sept. 11, 2001.

The spoils, however, won't be divided evenly. Air travelers certainly will win, with trans-Atlantic fares falling by 10% or more. And depending on exactly how it plays out, the deregulation could help the stocks of U.S. carriers like Continental (ticker: CAL), Delta (DLA) and US Airways (LCC), previously barred from Heathrow.

IT MAY TAKE SOME TIME FOR THE changes to become evident. Though Heathrow will be opened legally to all airlines, in practical terms it will be hard for newcomers to break into, at least in the short term. The airport operates at nearly 99% capacity, with its two parallel runways handling about 1,300 takeoffs and landings, or "slots," every day. The airlines now using the airport control no less than 97% of these slots, and the new Open Skies accord contains no provisions to force the "Heathrow Four" (BA, Virgin, American and United) to give or sell these rights to other airlines.

But eventually Heathrow will expand; traffic through the airport could increase 50% by 2020. A new runway would add more capacity and more slots but, given public opposition, isn't likely before 2015 at the earliest.