Aseem
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 Posted: Fri Mar 09, 2007 7:50 pm Post subject: Come fly with me |
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| Economist wrote: | Transatlantic aviation
Come fly with me
Mar 8th 2007
From The Economist print edition
An “open skies” deal between America and Europe
AFTER sitting in the hangar for four years, might an “open skies” deal to liberalise air travel between America and the European Union (EU) soon be cleared for take-off? Europe’s transport ministers will vote, later this month, on a provisional agreement announced last week that would allow any EU or American airline to operate flights between anywhere in Europe and anywhere in America. Its approval is far from certain. Although American airlines are already allowed to operate routes within Europe, European airlines would not be granted a reciprocal privilege within America.
European critics complain that the deal gives too much ground to the Americans. Previous negotiations foundered on European objections to America’s limits on foreign ownership of airlines. (Foreigners may not own any more than 25% of the voting capital of an American carrier.) The Bush administration’s failure to persuade Congress to lift these restrictions last year had dampened expectations of a deal.
So the European negotiators took a more pragmatic approach. They accepted that changes to ownership rules, and to “cabotage” rights that prohibit European airlines from operating on American domestic routes, were not on the table—but decided to press ahead regardless.
American negotiators have promised to revisit these two areas in further talks and insist that they have also made concessions. EU carriers will, for example, acquire limited rights to carry American government-funded passengers and cargo. Moreover, they will be able to invest in certain non-European carriers without sacrificing any American landing rights. Even so, the Europeans have moved the most.
Not for the first time, the loudest opposition to the deal has come from Britain, which has 40% of Europe’s transatlantic traffic. Martin Broughton, chairman of British Airways, called the deal a “con trick”. As one of four airlines (the others are Virgin Atlantic, American Airlines and United Airlines) allowed to fly between Heathrow and American destinations, BA has most to lose from competition.
Although capacity at the world’s busiest international airport is scarce, an open-skies deal could unleash a round of slot-trading between carriers who operate short-haul services from Heathrow and long-haul airlines vying for transatlantic slots. BMI holds valuable slots that it would love to use for more lucrative long-haul routes. Analysts at Deutsche Bank calculate that more than £400m ($780m) of BA revenue could be at risk.
The British government has reacted cautiously, saying that more work needs to be done. But it looks isolated. Countries that have not negotiated new bilateral deals with America, such as Ireland and Spain, are in favour. Angela Merkel, Germany’s chancellor and the holder of the EU presidency, is keen to inject some vim into transatlantic relations. A signing ceremony would make an ideal centrepiece to a planned transatlantic summit due to be held in Washington, DC, on April 30th.
Liberalisers are disappointed. “We wanted a giant leap and got baby steps,” says Anthony Concil of IATA, a trade organisation. But the wait for a perfect deal would be a long one—if, indeed, perfection is attainable. Congress is not about to change its position on ownership or cabotage. “If it’s all or nothing, we’re stuck with nothing,” says John Byerly, who led the American negotiating team. The ownership restrictions are largely theoretical in any case: it is unlikely that European airlines would rush to buy their American counterparts, even if they could.
Failure to agree a deal would both impede consolidation among European airlines and leave the door open to regulatory scrutiny of the existing bilateral deals between EU members and America, which have been branded illegal by the European Court of Justice. The proposed deal is certainly not perfect, but an agreement that offers greater clarity, competition and choice would surely be better than no agreement at all. |
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