Break in Open Skies

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After years of trying, European and US negotiators appear to have forged a two-stage transatlantic Open Skies deal that despite heavy criticism will get the green light.

The tentative breakthrough agreement won broad backing across Europe, drawing the most vocal opposition from British Airways which said it was "one-sided" and did not address the issue of US ownership and control limits of its carriers. While most US reaction has taken a positive but "wait-and-see" stance, key US legislators, including the influential transportation committee chairman, Jim Oberstar, insisted that the US provide absolute guarantees that the agreement would not advance foreign investment in US carriers.

European Transport Commission Jacques Barrot said the plan is for the first stage of the agreement to come into effect in October, with the negotiations for stage two beginning in January 2008. If the European Commission did not achieve a positive result by mid-2010 it has the right to suspend the entire agreement, said Barrot.

The main element of the deal will give European Union (EU) carriers the right to fly from any city in the EU to any city in the USA and vice versa. US carriers will be able to pick up passengers from EU cities and fly them to other EU destinations. However, EU carriers will not be able to operate domestically in the USA

The deal did not offer "genuine liberalisation", said BA chief executive Willie Walsh. "Given that this agreement gives American carriers open access to London Heathrow airport - the prize they have sought for the last 30 years - why should the US suddenly offer concessions in a subsequent negotiation?" At present, under the current restrictive UK-US bilateral, only BA, Virgin Atlantic, American and United Airlines can operate between the two countries from Heathrow.

But for Jean-Cyril Spinetta and Leo Van Wijk of Air France-KLM it provides "a long-overdue, stable legal framework". The present Open Skies bilaterals signed by EU member states were identified - nearly five years ago - by the European Court of Justice as infringing EU law, they said. If there is no EU/US agreement, the European Commission will have to take legal action against member states. "This would result in the termination of the Open Skies agreements in place and would open a period of major uncertainty for our industry and our customers," they said.

The EU-US deal

  • The new deal, if agreed, will come into effect in October 2007
  • EU carriers will be able to fly from any city in the EU to any city in the USA and vice versa
  • EU carriers can buy non-EU airlines and retain the right of these airlines to fly to the USA
  • There is no change to US limits of ownership and control of its carriers (49% ownership, 25% voting rights)
  • The EU reserves right to limit US investment in EU carriers to 25% but stakes can be allowed up to 49% 
  • US carriers will be allowed to carry passengers from one EU city to another, and to fly on from EU cities to destinations in Africa, the Middle East, South Asia and the Far East
  • EU carriers can operate flights between a US city and a city in several non-EU countries, and fly on from the USA to Central and South America
  • Franchising of carrier brands allowed without foreign control of US carriers
  • Negotiations for stage two of the deal will start in January 2008 and be concluded by mid-2010