EU and US set for ‘open skies’ collision

EU and US set for ‘open skies’ collision
By Kevin Done in London, Andrew Bounds in Brussels and Doug Cameron in Chicago
Copyright The Financial Times Limited 2007
Published: March 22 2007 11:54 | Last updated: March 22 2007 20:56


The European Union and the US were set on a collision course on Thursday night over the next stage of liberalising transatlantic aviation.

Within hours of European transport ministers approving a first stage “open skies” deal with Washington, political leaders on each side of the Atlantic set out conflicting visions for the onerous second phase of negotiations.

The UK government warned rights granted to the US could be withdrawn if Washington failed to agree to much more radical reforms by the end of 2010.

Douglas Alexander, UK transport secretary, said in Brussels the EU’s goal remained a fully liberalised open aviation area, free of restrictions on airline ownership and control, rather than the modest US-style “open skies” accord agreed on Thursday.

If a second-stage deal had not been agreed by the end of 2010, the EU would “automatically withdraw traffic rights unless the Council decides unanimously not to do so,” he said. He said he had “ensured” that the UK would have “the right – in 2010 – to re-impose some or all of the restrictions that US carriers face today”. That sent “a very clear signal to the US that we are serious about making early progress to a second-stage deal”, he said.

However, while Mary Peters, US transportation secretary, welcomed the agreement as an “historic decision”, Congress immediately shot down European demands that the cap on foreign ownership of US airlines be removed in a phase-two deal.

James Oberstar, chairman of the House of Representatives transport committee, who successfully opposed much weaker ownership reforms proposed by the administration for phase one, said he would work to ensure the deal did not lead to foreign control of US airlines.

The EU wants the US to lift rules that limit foreign investment in US airlines to 25 per cent of voting shares.

John Byerly, chief US negotiator of the open skies treaty, said “we have not agreed on either side the content of a second stage. There is no endorsement or presumption of change in US or European laws.”

Sir Richard Branson, Virgin Atlantic chairman, said the airline was “actively looking at expanding in Europe, offering flights from key European hubs such as Paris, Frankfurt, Amsterdam, and Madrid to New York”.

Continental Airlines and Delta Air Lines of the US said they planned services from the US to Heathrow. Aer Lingus said it would open services from Ireland to San Francisco, Washington Dulles and Orlando before the year’s end. BMI British Midland intends to give details soon of its first US services from Heathrow.

However, according to the deal agreed on Thursday, additional rights have been agreed for European and US airlines which could lead to lower transatlantic airfares and increased competition.

Additional reporting by Eoin Callan in Washington