British Leery Of Open Skies Agreement

Members of European Parliament last week urged transportation officials from the 27 European Union countries to endorse the draft Open Skies agreement forged this month between the United States and European Union. Yet, opposition continues to mount in the United Kingdom, where transport officials and some airlines say the deal does not offer the same benefits to European carriers as it does to those in the United States. As such, the deal, which the E.U. Transport Council and the U.S. Congress must approve, faces hurdles, the first of which comes this week when E.U. officials vote.

Yet, few details of the deal have been publicly released. The Delegation of the European Commission to the United States this month released a statement that said the agreement includes "rights in the area of ownership, investment and control of U.S. airlines by E.U. investors" and "a number of access rights for Community airlines to the U.S. 'Fly America' program for the transport of passengers."

On this side of the Atlantic, the airline response has generally been favorable. Continental Airlines last week said "it fully supports the recently announced Open Skies agreement between the U.S. and the E.U."

American Airlines CEO Gerard Arpey said he generally supports Open Skies, as long as reciprocity is among the terms, and the Air Transport Association tentatively threw support behind the spirit of the agreement.

"While we have not seen the details, this tentative agreement has the potential for creating new avenues of economic development between the U.S. and Europe," said ATA president and CEO James May in a statement. "We are pleased that the parties were able to work through the issues to reach this result. We all look forward to developing a more complete understanding of what is envisioned."

An Open Skies agreement, which would give carriers greater access to foreign investment and markets, generally is considered a boon to consumers as it would increase competition for their business. "Liberalization is usually a positive force," International Air Transport Association chief economist Brian Pearce told BTN last week. "You get more competition that's good for passengers and that's good for airlines as well. With the current discussion in the U.S. and E.U., we don't know yet whether that will pass."

The loudest voices of dissent are resounding from the United Kingdom.

Last week, British Labour member of Parliament Brian Simpson said, "With over 40 percent of the E.U.-U.S. market, this particular agreement is of great interest, of course, to the United Kingdom. While I accept that the agreement could deliver some benefits to consumers, it has still to my mind failed to address some fundamental issues and has a number of question marks over it." Simpson noted the deal does not provide European carriers the level of access they seek in U.S. markets.

British Transport Secretary Douglas Alexander this month emphasized similar shortcomings in the draft agreement. "I do not take lightly the significant economic benefits that would flow from such an agreement," Alexander said. "Given past discussions, I also recognize that the deal on the table falls short of providing the kind of access to the U.S. market that a number of E.U. carriers would like."

Alexander said the deal needs to set forth a level playing field for European and U.S. carriers, since "geographically and economically, the E.U. and U.S. represent broadly equivalent markets." For example, Alexander noted, a U.S. carrier would be permitted to fly into the United Kingdom then onward to another E.U. city, like Frankfurt, but a European carrier serving New York would not be permitted to fly on to San Francisco.

Although Alexander noted that Open Skies could remove some restrictions on routes and frequencies, "we need to go further, because it does nothing to deal with the issue of ownership and control." Alexander said the "ultimate prize" is an aviation market like that in the European Union, "with all restrictions on operations and investment lifted between participating countries."

Alexander, however, said he welcomed the ongoing efforts among negotiators and the improvements that have been made to a failed draft agreement in 2005. Alexander noted that the U.K. is "prepared to end the highly restrictive Bermuda II arrangements, as part of the right multilateral deal—to open our skies, and unlock real benefits for our airlines, our passengers and our economies. Alexander said the current political climate in the U.S. likely would not allow a "full, transatlantic, open aviation area in one step," but the U.K. has been "prepared to contemplate a phased approach."

Some U.S.-based airline unions have shown opposition to the deal, and urged Congress to nix the plan. News reports last week said House Transportation Committee chairman James Oberstar (D–Minn.) sent a letter to U.S. Transportation Secretary Mary Peters critical of the deal.