COLIN BAKER LONDON The collapse of the US-UK open skies talks in mid-October was hardly a surprise given the complications of the proposed British Airways takeover of KLM and the divergent positions of the two camps. The question now is what happens next.

The UK seems to have moved away from the idea of a "mini deal", which would allow British Midland access to the USA from London Heathrow, with a US carrier given similar rights in return. London fears it might be giving Washington so much that its appetite for more substantive liberalisation will diminish. As a result, it is moving towards an all-or-nothing approach.

Speaking in London at a forum on open skies, David Batchelor, head of international aviation policy at the UK's civil aviation authority, (CAA) asked: "Why compromise the ability to get a long term solution?"

Some analysts are asking whether it is worth the two sides continuing their discussions, given that the transatlantic common aviation area (TCAA), a wide ranging European Union (EU) bilateral, is moving up the agenda. Dr Andrew Sentance, chief economist at British Airways, describes TCAA as "the next major step forward". A UK-US open skies agreement could, however, be a "stepping stone" towards an EU-US common aviation area, but "the regulatory price remains key". British Airways is still seeking anti-trust immunity for its relationship with American Airlines.

Lack of space at Heathrow is a major problem. As aviation consultant Rigas Doganis puts it: "The issue is how can you open up [Heathrow] and get slots." David Bishko, general manager finance and planning for the Atlantic region at Delta Air Lines, says that open skies and slots "had to be combined", adding that allocation should be "efficient and transparent" and there should be more competition in the process. The CAA supports slot trading, but BA's Sentance warns that slot allocation should be kept as a technical issue.

The failure of the UK to reach agreement on a mini-deal has angered British Midland chairman Sir Michael Bishop. British Midland ordered four Airbus A330-200s after being advised by UK Deputy Prime Minister John Prescott that this would be a necessary precursor if the UK was going to push for a mini-deal.

On the US side too, there is a reluctance to give much away, particularly on the issues of cabotage, foreign ownership and wet leasing.

However, Delta's Bishko sounds a note of encouragement. While emphasising the labour resistance to these issues, he said, "there was no need to keep things off the table. Let true competition exist." Bishko says that he does not see, "foreign carriers flocking to take advantage of cabotage rights," given the fact that the USA is a very mature market.

Source: Airline Business