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When a new regulatory framework governing commercial aviation between the United States and the European Union takes effect on 30 March, Europe's airlines will be able to service U.S. government employees and government contractors on routes previously off limits. The first phase of the U.S.-E.U. Open Skies deal creates new exceptions to the Fly America Act, a regulation essentially requiring all those traveling on the federal government's dime to use U.S. airlines whenever and wherever possible.
The specific impact of new access for European carriers to U.S. federally funded travel won't be known until the U.S. General Services Administration issues new federal travel regulations reflecting the changes.
"E.U. airlines have access rights for routes for which no citypair contract has been awarded," according to European Commission officials, including "New York-Lisbon or Boston-Dublin, but not ... Washington-Brussels or Chicago-London."
The GSA Airline City Pair Program provides government agencies with considerable discounts on airfares for thousands of routes. GSA and U.S. carriers each year add, renew or discontinue those contracted rates. For fiscal 2008 (from 1 October 2007), the U.S. government secured more than 1,100 contract rates for routes between U.S. and international airports, including many major European markets.
But not all ocean-crossing U.S. airlines bid on international citypair contracts every year, leaving certain key routes open to foreign competitors. Moreover, new routes added by U.S. carriers won't necessarily be covered right away. In those cases, travelers funded by the U.S. government in theory can use European airlines, even if a U.S. carrier operates on the route in question. GSA in August posted a notice to the Federal Register, saying it "intends" to submit draft changes for federal travel regulations to account for Fly America modifications, but a GSA spokesperson confirmed that those changes have not yet been proposed.
"What can [government travel programs] legally do?" asked Marc Stec, president of the Society of Government Travel Professionals. "It will take time from when the guidance [from GSA] comes out to when it sinks in."
In addition to routes on which GSA has negotiated citypair contracts with U.S. airlines, E.U. airlines still will be denied business funded by U.S. military and defense agencies. According to Citibank, the U.S. Department of Defense's new travel charge card provider, the program during fiscal 2007 totaled $4.9 billion in travel spending, or 61 percent of the governmentwide total. That massive portion is excluded partly to allow U.S. carriers to continue accommodating the Civil Reserve Air Fleet program, which contractually commits them to provide aircraft to DOD during emergencies.
That leaves "a small piece of the pie" for Europe's airlines, according to Stec.
However, European carriers now have greater access to cargo shipments paid for by the U.S. government. While DOD's business is excluded--as it is on the passenger side--there are no citypair program restrictions on cargo for any other federal agencies.
A further relaxation of Fly America rules--which are seen by some as protectionist and anticompetitive--is a likely discussion point in May, when U.S. and E.U. negotiators begin phase two Open Skies negotiations. E.U. last year said both sides "expressed their intentions to explore" revisions providing European airlines with greater access to U.S. government-funded travelers.
Should that come to pass, it would help to balance out the Open Skies deal that some saw as more favorable to U.S. airlines. "This is not the end game," said one European airline executive, regarding the first phase changes.
The Fly America Act includes pre-existing exceptions, notably a provision allowing government-funded travelers to use foreign airlines that partner with and carry the designator code of a U.S. airline. Other exceptions relate to authorized class-of-service availability, flight schedules, number of connections and en route travel time, or when use of a non-U.S. airline is deemed "necessary" by the federal agency paying for the airfare.
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