Although US officials insist that the fracas between Washington and Brussels over aircraft subsidies is not affecting open skies negotiations, there is no doubt that talks are on the back-burner

The two sides are essentially back where they were last June when the European Commission (EC) rejected a US proposal that would have allowed European airlines to fly across the Atlantic from any European airport, not just from the airline's country of origin. The so-called "European carrier" concept stopped short of granting European airlines cabotage rights to fly point-to-point within the USA, which angered some European airlines. The main sticking point, however, was US reluctance to tear down ownership barriers.

The break down in talks last year was followed by the US presidential election, which effectively left the discussions in limbo, and negotiators are only just starting to pick up the pieces. Paul Gretch, who is the senior career civil servant in the US Transportation Department's office of international aviation, told investors and analysts at an airline conference in New York, organised by Dublin-based Davy Stockbrokers, that the enmity and increasingly heated rhetoric that surround US/EC negotiations over aircraft subsidies have not coloured the open skies discussions.

Gretch told the meeting: "Perhaps we had unrealistic expectations or were not aware of internal issues within the European Union. We were perhaps naive or offered the European carrier concept too early in the process. It is a great concept I think," he said of the US proposal. Some believe that the USA is still smarting from the rejection of its offer. "The ball is very much in the Brussels court," says one seasoned European observer. There is a strong desire within the EC to get things moving again.

However, the USA wants a much more sharply defined view of European expectations before going to the table. While signing an open skies pact with India, Transport Secretary Norm Mineta said: "I don't want to go down the road we went last time, of completing an agreement and then having it turned down. I have asked EC transport commissioner Jacques Barrot to check first."

Chances of progress look slim, but some believe the perilous state of the US industry may provide new momentum, particularly if a major goes bust. United Airlines chief executive Glen Tilton called in April for the ownership restrictions to be lifted, albeit only to 49%, allowing much needed consolidation and access to fresh capital. "As the global aviation industry is revolutionised around us, the USA and its major air carriers run the risk of being marginalised and left behind," he said. There is strong union opposition to the idea however, and US airline bosses are in no mood to upset the unions.

Gretch said a "big bang" total package was out of the question, but believes a first-stage agreement is possible. The USA will continue to discuss open skies with European states, even if that angers some in the EC and has been talking to Hong Kong about liberalisation too.


Source: Airline Business