U.S., E.U. Take On Air Treaties

Washington - The European Union and the United States in September will begin "substantive negotiations" on a new liberalized aviation treaty that would replace existing bilateral agreements between the United States and individual European nations. A redefined framework between the world's two largest aviation markets could encourage further alliance and consolidation activity, spur foreign investment and free carriers to fly to many more airports within a transatlantic "open aviation area."

The announcement, made last month during an E.U.-U.S. summit in Washington, followed an early June mandate from the E.U. Council that European Commission aviation regulators as a single negotiating bloc engage the United States and other non-E.U. countries.

Specifically, the E.U. said it is seeking resolutions to "legal problems" in existing bilateral agreements between the United States and several of the 15 individual E.U. nations, raised last November by the EC Court of Justice (BTN, Nov. 5, 2002), and to establish an open aviation market free of foreign ownership restrictions on "each other's airlines." On the latter point, U.S. lawmakers are mulling a higher cap—49 percent from 25 percent—on foreign investment in U.S. carriers.

The E.U. added that an open aviation area covering both sides of the Atlantic would promote competition to the benefit of travelers, allow carriers to choose the airports they serve—free from longstanding protectionist policies that favor national flag carriers in their home markets and domestic carriers in the United States—and ease regulations on industry consolidation.

With those goals in mind, the E.U. likely will press for a relaxation on the ban against foreign carriers from operating between two U.S. cities, a principle called cabatoge. According to the U.S. Department of Transportation Web site, cabatoge currently is permitted only when DOT deems it to be in the public interest and after "all possible efforts have been made to place the traffic on U.S. carriers."

A key item on the U.S. wish-list is expanded access to London Heathrow Airport, which under the existing Bermuda II agreement—negotiated a generation ago—permits only two U.S. carriers to use the airport for transatlantic flights. American and United airlines currently hold that status, much to the dismay of other U.S. majors that have been locked out despite years of protest. Other issues on the agenda include routes, capacity, environmental regulations, fares and safety and security standards.

"An aviation agreement between the E.U. and U.S. would set the model for the rest of the world," said EC vice president Loyola de Palacio."These negotiations provide an opportunity to achieve fundamental reform of this sector that we should not waste."