EOW May 2007

for the ‘open skies’ agreement that would lead to more flights and lower fares. If, as expected, the deal gains US Congressional approval, the new rules would take effect on 28 th October. The accord would allow European airlines to fly into the US from anywhere in the 27-member bloc, not just from their home countries. Restrictions on US airlines flying to Europe would also be liberalised. Notably, authorisation to fly into Heathrow Airport, near London, UK, would be broadened. Under current rules, only two US carriers – American Airlines and Delta Air – have that right. The agreement has existed in broad outline since November 2005, but was held up by the request of officials in Brussels for a change in US rules limiting equity ownership by foreign airlines in American carriers to 25% of the voting stock. Eager for the open-skies deal, President GeorgeW Bush tried to persuade Congress to change the rules. But opposition from labour unions and some domestic airlines caused the administration to abandon the effort last December. Now, both parties have somehow managed to finesse the problem, at least enough to justify a preliminary announcement. The European Commission said that the US and Europe have agreed on ‘rights in the area of ownership, investment, and control of US airlines by EU investors’ – although it provided no details. But a European official told Nicola Clark, of the Washington Post (3 rd March) in Paris, that the US had consented to allow European airlines to acquire more than 50% of the total capital of a US airline without risking a legal challenge. Under current rules, for reasons of national security Washington may block investments that exceed such limits. (‘US and Europe in Accord on Air Routes,’ 3 rd March) If Washington seems to have made a rather large concession here, the potential benefits of an open- skies policy are also considerable. According to the International Air Transport Association, a Geneva-based ❈

trade group, the transatlantic market represents 60% of global air traffic. The IATA said it welcomed the announcement of a draft aviation agreement between the US and the EU as a ‘first step in the right direction’ for liberalisation of the industry,

but called for more. IATA’s director, Giovanni Bisignani, said: “Airlines are businesses. In any business, the ability to respond flexibly to consumer demand is critical to success. [This agreement] is a good start, but both sides must think bigger and lead the way.”

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EuroWire – May 2007