The UK government is making a final attempt to resurrect an open skies mini-deal with the US ahead of a key European Court of Justice (ECJ) ruling that is likely to pass the mandate for negotiating such deals to Brussels.
The proposals centre on an old plan that would see bmi british midland obtaining four daily frequencies at London Heathrow for US services in exchange for a similar number of flights for US carriers into the airport. One other US carrier would gain access to Heathrow in 2003, followed by another in 2004. US express operator Federal Express would also get traffic rights to fly between London Stansted and Paris.
Under the terms of the Bermuda II bilateral between the two countries, transatlantic services out of Heathrow are restricted to British Airways, Virgin Atlantic, United and American Airlines. Bmi has been trying to obtain transatlantic rights for a third UK carrier out of Heathrow since 1998.
However, the problem remains of how to allocate the traffic rights between the four US carriers who are forced to fly to London Gatwick, namely Delta Air Lines, Northwest and Continental Airlines and US Airways. "US carriers will not find this very satisfactory," warns Carolyn Ezzell, vice-president Atlantic region at Delta. Ezzell says Delta is looking for 11 frequencies, but just four are on offer. She believes the timing of slots is a critical issue, and this means the incumbent carriers will have to give up peak time slots.
The issue of access to scarce Heathrow slots scuppered a more wide ranging deal back in February. This would have seen oneworld partners BA and American granted antitrust immunity in exchange for a US-UK open skies deal.
BA is sceptical of the mini-deal idea. "Now is not the time to go in for destructive change," says Andrew Cahn, BA's director of government and industry affairs. He says BA would prefer to see a deal "with more substance" and notes the US reluctance to see full liberalisation.
With only bmi, Federal Express and the UK government pushing for a mini-deal, progress this time seems unlikely. "This is a UK template that is not acceptable to the US," states Chris Tarry, financial analyst at Commerzbank.
The timing of the talks is no coincidence. An ECJ judgement, expected in October, is envisaged to pass the mandate for negotiations for these types of deals to the European Commission (EC). Bmi believes that this will delay liberalisation. Chairman Sir Michael Bishop warns: "It could take years for the EC to win a mandate from all member states and many years more for an agreement to be reached with the US."
BA takes a more positive stance. "The decision will trigger a real effort to liberalise," predicts Cahn. "I'm not pretending it will happen in the next six months, but I believe the EC will get a proper mandate and that this will lead to liberalisation. It is the only way we can make progress." He believes the process could start just a few months after the court decision.
Bishop argues a mini-deal would benefit consumers. "Failure to reach an agreement could usher in years of uncertainty, market stagnation and the continuing neglect of the consumer interest," he says. However, Tarry argues that UK-US routes are already "very competitive".
COLIN BAKER LONDON
Source: Airline Business
