Canada's intent to liberalise its bilateral with the US will give transportation secretary Federico Peña his first major foreign policy success. And moves in Brussels over the US open skies proposal to nine European nations may add impetus to resolve the dispute over how to address codesharing in the offer.

By mid-January, a series of formal negotiations between US and Canadian negotiators had been held in Washington and Ottawa, resulting in a new bilateral framework that resolved most overriding issues. Sticking points such as an appropriate dispute resolution process still remain, but US officials are confident the new agreement will be signed during a summit in late February between US president Bill Clinton and Canadian prime minister Jean Chrétien.

The agreement calls for unlimited service between the US and all points in Canada except for Montreal and Vancouver, where a two-year phase-in period will occur, and Toronto, where a phase-in will lead to open skies in three years. The only restrictions for Canadian carriers will be those already in place for any airline at the four slot-controlled US airports. However, additional frequencies at Chicago/O'Hare and New York/La Guardia have been granted to Canada's carriers.

In addition to masterminding the swift negotiating schedule along with Canada's Geoffrey Elliot, department general counsel Steve Kaplan has made it clear he wants US carriers to begin services as soon as the agreement is finalised. This will result in the DOT giving temporary authorities based on how quickly an airline can begin service. Permanent awards will be established within a year. By mid-January, 15 airlines had applied for over 50 frequencies between 18 US cities and the three main Canadian ports.

The new selection process has had two significant effects. First, it has cleverly created a market-based momentum pushing the two sides to finalise the bilateral. Second, it provides the basis for doing away with the DOT's long-established carrier selection process which awards routes only after they have been established in a bilateral negotiation. 'In the past the US has always lagged behind because we negotiate a route authority and then not use it for a year,' says Patrick Murphy, acting assistant secretary for international policy at the DOT.

Meanwhile, a problem over the language on codesharing in the open skies model that the US is proposing to offer to nine European countries means that more than two months after broaching the idea, the US has yet to make a formal offer to enter into discussions.

Despite the lack of a formal approach, European Union transport ministers have already met twice to discuss the proposal and its impact on the internal market. The nine countries named in the US offer include six members of the EU. The Commission source admits the US offer could prove a 'divisive issue' but stresses it could also 'help bring member states together.'

The second round of talks was at a informal meeting in Paris at the end of January, but the Commission source stresses all discussions are still in the 'definition stages'. However, the opposition among the EU member states to pursuing open skies with the US through an external mandate to the Commission may not be as strong as first suspected. A Brussels source stresses that of 15 EU member states, only the UK and Italy are opposed to the principle of open skies with the US. However, on the issue of awarding external competence to the Commission across the board, the source says most EU states remain sceptical.

The US inaction, however, is beginning to cause doubts in the nine targeted countries. 'They are becoming increasingly confused as to the seriousness of the US proposal, and the credibility of the US transportation secretary,' says a source close to the Swiss government. Murphy acknowledges that 'this process has taken longer than we would have liked.' But Kaplan says that the disagreements were on the way to being resolved.

* In March, the Commission is likely to receive a mandate from the European Council to start negotiating Swiss access to the third package. Swissair's isolation from the internal market is a major concern to the carrier.

* In March, the Commission is likely to receive a mandate from the European Council to start negotiating Swiss access to the third package. Swissair's isolation from the internal market is a major concern to the carrier.

Source: Airline Business