The United States and European Union late last week tentatively agreed to a regulatory framework for a new, liberalized air transport agreement. The announcement came as other related issues in the transatlantic aviation market developed further, including a U.S. proposal to ease foreign-ownership restrictions and bids for expanded antitrust immunity from both SkyTeam and the Star Alliance.
"Today's completion of the text of a first-step agreement between the United States and the European Union provides an historic opportunity to increase travel, reduce fares, expand commerce and bring two continents closer together than ever before," said U.S. Transportation Secretary Norman Mineta in a Friday statement. "It provides new opportunities for U.S. and European airlines, healthier competition for a growing travel market and greater connections between cities and towns of all sizes on both sides of the Atlantic."
According to published reports, the deal would allow airlines from both sides to fly to all cities covered by a common transatlantic aviation area and would include expanded access to London Heathrow. E.U. transport ministers still must approve the pact, which is seen as contingent on the outcome of a U.S. proposal to ease foreign-ownership restrictions.
British Airways, for example, said it generally supported progress on an open aviation area, though it noted that there have not yet been agreements "on the more critical issues of market access and the U.S. proposal to relax restrictions on foreign participation in American carriers," said Andrew Cahn, BA director of government and industry affairs.
That proposal is open for public comment and already has elicited mixed reactions from lawmakers and U.S. and international carriers
(BTN, Nov. 14).
"In the coming months, much work needs to be done by the experts to clarify and satisfy the industry that there is genuine and sustainable commercial value in the U.S. proposal and that it is legally secure," BA's Cahn added. "Right now, the U.S. proposal falls short of the legislative solution that could have delivered a very real transformational change to restrictive ownership and control rules."
Considering restrictions on cross-border mergers in the aviation industry, many larger domestic and international carriers instead have pursued antitrust-immunized alliances. The latest request to DOT came from the Star Alliance on Nov. 4. That request essentially would add LOT Polish, TAP Air Portugal and Swiss to a pre-existing alliance agreement in place between United and Austrian, BMI, Lufthansa and SAS. It covers scheduling, route planning, code and revenue sharing, pricing, marketing and distribution.
Members of rival SkyTeam—Air France, Alitalia, Czech, Delta, KLM and Northwest—in comments submitted last week in response to Star's request, said DOT first should rule on a SkyTeam antitrust-immunity request that encompasses multiple U.S. carriers.
"The SkyTeam ATI applicants urge the Department to issue a decision in their pending matter, which will define U.S. policy with regard to full and effective global alliance participation by U.S. carriers, before entertaining this application by Star to add three more European ATI partners," SkyTeam wrote.
The SkyTeam request initially was submitted in September 2004. DOT has not shed light on the status of the application since Delta and Northwest filed for bankruptcy protection in September and various parties, including competitors and the U.S. Department of Justice, voiced opposition
(BTN, Sept. 19).