Second-Stage Open Skies Pact Would Lift Fly America Restrictions
Some government contractors are poised to be released from restrictions that the Fly America Act has imposed on their air travel programs for decades, thanks to a new provision in the second-stage U.S.-EU Open Skies deal initialed by negotiators last month and set for finalization in June.
By overturning some of Fly America's restrictions, EU carriers that had been locked out of air deals with U.S. civilian government contractors would get a shot at new business and such U.S. companies could gain a deeper pool of carriers competing for their transatlantic travel.
However, advances in transatlantic joint ventures and a loophole in the Fly America Act that already allowed government contractors to fly foreign carriers under codeshares with U.S. partners may mute benefits for some contractors.
The text of the new agreement gives European carriers "the right to transport passengers and cargo on scheduled and charter flights for which a U.S. government civilian department, agency, or instrumentality" is traveling. The agreement does not apply "to transportation obtained or funded by the Secretary of Defense or the Secretary of a military department."
John Byerly, the chief U.S. negotiator for new bilateral aviation agreement, told BTN, "Many of the contractors are DOD-funded, and we can't touch them by law, but Lockheed Martin, Northrop Grumman, whoever can say, 'We have a corporate contract with, for example, Virgin Atlantic covering all of our employees in Washington. We really like Virgin Atlantic for all the other business, but in the past we weren't able to take advantage of that because we had to fly America.' Once the agreement kicks in, they could take advantage of their corporate contract with Virgin Atlantic and no longer have to fly America."
Lockheed Martin Corp. director of global travel and meeting services Richard Wooten said at first blush the impact on the company's travel program would be minimal. "As a significant part of our business is in support of DOD programs, it would be extremely difficult for us to manage when employees could or could not use an EU carrier." Still, Wooten said the proliferation of joint ventures-the result of the first-stage transatlantic Open Skies agreement enacted two years ago-already has afforded government contractors new negotiating opportunities, as the likes of Delta, Air France and KLM have effectively merged their transatlantic operations, as have Continental, United, Lufthansa and Air Canada. A similar American Airlines, British Airways and Iberia entity at press time awaited final approval by regulators.
Though some EU carriers had expressed concern that the new Open Skies agreement does not fully overturn Fly America, which they have considered anticompetitive for decades, Byerly said negotiators were not empowered to strike the entire act due in part to U.S. carriers' role in the Civil Reserve Air Fleet.
In exchange for voluntary participation in that program, which provides emergency services to the military, U.S. passenger carriers get exclusivity in bidding for government business through the General Services Administration's citypair program. "If we negotiated that away, arguably that would disincentivize all the U.S. passenger carriers from remaining in CRAF, because the pool in some sense is a little diminished," Byerly said.
The terms that U.S. and European negotiators agreed to last month affirm the first-stage Open Skies deal enacted two years ago and gives U.S. airlines greater night-flying rights in Europe, but the pact makes no changes to U.S. foreign ownership rules or restrictions on European airlines serving intra-U.S. routes. The second-stage agreement calls for further cooperation between the United States and the European Union in aviation security, safety, competition and environmental issues in addition to "a ground-breaking article on the importance of
high labor standards in the airline industry," DOT said.
Byerly told BTN he expects no material changes to the text of the agreement between now and the end of June, when he expects the final deal to be signed before the end of the term of the Spanish president of the EU.
"We're hoping we can sign in June, and the agreement provides that upon signature the agreement will provisionally be applied by the two sides, meaning it will apply in practice," Byerly said, "but then formal ratification is required by parliaments in some of the European countries."