The failure of US and UK aeropolitical negotiators to reach agreement on a proposed 'mini deal' in mid-April was just another chapter in years of fractious negotiations between the two countries. But the tripping point was so small that even veteran negotiators turned away in disgust at their inability to decide even terms for discussion.

The focus of frustration for both sides is the US's Fly America programme, which requires all US government employees to fly on US carriers when travelling abroad. As the two sides gathered in Washington, they realised - deliberately or otherwise - that the UK expected access to the programme for BA to be a negotiating point and the US had no idea it was a topic for discussion.

In total, it is estimated that Fly America generates $600 million of business worldwide annually, but to bid for contracts (awarded market by market) an airline must be a member of Craf. Though this means the programme only exists for US airlines, non-US carriers such as KLM, Lufthansa and Alitalia to name a few, carry Fly America traffic (and split the fares pro rata) by virtue of their codesharing alliances with Northwest, United and Continental, respectively.

Herein lies the rub for BA. Though it is allied with USAir, it cannot serve Fly America passengers because in the alliance BA's codes are on USAir's flights and not vice versa. Ignoring this, BA insists that as a fair trade for the mini deal, which among other things would give United access to London/Heathrow from Chicago, it wants full rights to bid for Fly America traffic. In arguing this, it points to Brazil and Saudi Arabia, both of which have received waivers to bid for US government business. 'In order to bring a semblance of balance to the proposed deal, access to Fly America is an important part,' says a BA executive. 'It is small but not inconsequential.'

So small, in fact, that both sides believe that Fly America now represents something much more than its commercial value. Says the BA official: 'Does anyone really think that BA is going to get hundreds of millions of dollars out of this? Our estimate is that this means less than a single daily Heathrow service in a major market. It is not a large figure, but it is an important principle.' Says a US negotiator: 'Fly America: there is symbolism in that. Even if it is only $1 million a year, there is a symbol there.'

Whatever the symbol or principle really is, US officials are convinced that the UK brought the Fly America controversy to the negotiating table unannounced to flummox the negotiating round. The UK denies this, and points out that this request has been forwarded before. Besides, says the BA official, the UK has no equivalent to Fly America. 'We're only looking for reciprocity of benefits,' he says.


Source: Airline Business