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The EU has apparently won concessions from the US on the foreign ownership of its airlines, removing the main obstacle to an EU-US open skies deal.
EU transport vice president, Jacques Barrot, said negotiators had agreed to expand a preliminary agreement drawn up in November 2005 to include an additional protocol.
Without providing specific details, Barrot said the protocol included rights in the area of ownership, investment and control of US airlines by EU investors. It would also grant the EU ‘seventh freedom rights’ which would permit EU airlines to operate flights between a city in the US and a city in a third country. EU airlines would also have access to the ‘Fly America’ programme for the transport of US government employees.
A proposal made in early November 2006, already allowed for any EU airline to fly between any point in the EU and any point in the US and vice versa, without restrictions on pricing or capacity.
This is in contrast to the existing system of bilateral aviation agreements, which for example, restricts the number of carriers permitted to operate transatlantic services to the US from Heathrow to British Airways, Virgin Atlantic, United Airlines and American Airlines.
If the new ownership protocol is accepted at the upcoming EU Transport Council meeting on March 22, there could be an open skies deal in place by October 28.
Barrot said, “We have an opportunity to unlock major benefits on both sides of the Atlantic. In economic terms, this unprecedented agreement would represent a step change – it could be worth up to €12 ($18.5) billion in economic benefits and up to 80,000 new jobs. The decision of the next Transport Council will be crucial. The open aviation area could be a centrepiece for a reinvigorated transatlantic relationship.’
He also noted that the agreement could result in an additional 26 million passengers on transatlantic flights over the next five years, compared with current annual traffic of just under 50 million. The elimination of bilateral agreements and restrictions on traffic rights would also bring about a reduction in ticket prices over the next five years, he said, with economic benefits of between €6.4 ($10) billion and €12 (18.5) billion.
British Airways and Virgin Atlantic took opposing views to the news.
British Airways, saw its shares fall by 34.5p to 497p, based on fears that the airline would be the hardest hit by any new transatlantic competition. The deal would cause BA to lose the protected position it has held at Heathrow for more than 30 years, and expose its most profitable business to severe competition. Routes to America traditionally account for three-quarters of its profits. Not surprisingly, the airline said it did not believe this was a good deal for Europe or the UK.
According to the Sunday Times, BA is expected to mount a rigorous
lobbying campaign over the next two weeks to persuade the government to
kill the open skies deal between Europe and America.
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Virgin Atlantic, had a differing opinion, issuing a statement that said
“both sides in the open skies debate have a real opportunity to create
history and agree a long-lasting transatlantic deal which benefits
consumers globally, through greater choice and flexibility. Such an
agreement could act as a template for removing the shackles of
regulation on the aviation industry in other markets worldwide.”
Last week’s open skies talks were the eleventh since the launch of negotiations at the 2003 Transatlantic summit.