The UK and Hong Kong government's have agreed a bilateral that would provide Cathay Pacific with fifth-freedom rights from London to New York, in return for Virgin Atlantic getting similar rights on the Hong Kong-Sydney route.

However, the new accord raises a legal question that has far broader implications - how much authority does a European Union (EU) member state have to negotiate air service agreements with third countries?

Hong Kong posed this question to UK negotiators because of last year's decision by the European Court of Justice (ECJ) involving bilaterals with the USA. Since then, EU member states have given the European Commission (EC) a mandate to open negotiations with third countries for the designation of "community carriers" rather than national carriers.

In addition, transport ministers agreed to abide by a draft regulation covering power sharing between the states and the EC on bilateral negotiations. Under the ECJ ruling, traffic rights fall under the auspices of member states rather than the EC, meaning that states can continue to negotiate, but must follow a "notification procedure" with the EC and other member states to ensure they abide by EU law.

Brussels lawyers warn that the proposed UK-Hong Kong deal flies in the face of the draft regulation. "They shouldn't be negotiating on behalf of UK carriers, they should be negotiating on behalf of all EU carriers," says one lawyer. "They should have notified all interested carriers. Obviously none of that took place."

However, the notification procedure says that when a member state concludes arrangements that do not allow for the designation of EU airlines, an advisory committee (of the EC and member states) will consider whether the agreement would harm Europe's common transport policy. Brussels lawyers say that this may well provide a loophole for the UK, as well as for France, which is carrying out bilateral negotiations with China.

British Airways says it has no complaints about the UK-Hong Kong proposal, although it would like to see more provision for collaboration with its oneworld partner Cathay Pacific beyond Hong Kong. However, bmi has made its objections plain. The proposed deal was delayed due to objections from the carrier, which is barred from operating to the USA from Heathrow.

Singapore Airlines (SIA) has also been thwarted in its bid to fly beyond Heathrow to the USA. Previous requests from SIA were denied by the UK on the grounds that this would require a new US-UK bilateral agreement.


Source: Airline Business