Open-Skies Deals will take Wing; Major Flight Agreement Expected this Month

The first and largest deal between the US and the EU is expected to be signed April 30


With one, and possibly two, major international agreements revving up on the runway, the world of aviation is about to change, bringing more competition between airlines, more choices for air travelers and the prospect of cheaper airfares.

Open-skies agreements loosen legal restrictions on which airlines can fly to which airports and how often they can fly there, putting in motion a train of consequences.

"Open skies will give consumers more choices, and there will be more seats available," said Terry Trippler, an industry analyst in Minneapolis. "And if more choices and more seats follow course, it means better airfares."

"This is good for everyone. I do not see a downside to open skies," he said, embracing a view widely held in aviation industry circles that open-skies agreements are both highly desirable and long overdue.

The first and largest deal, an open-skies agreement between the United States and the European Union, is expected to be signed April 30 and take effect next March 30. The second deal, with China, is further from realization, but hopes are high. Talks with the Chinese are scheduled in Chengdu, China, next week and in Washington next month, and Transportation Secretary Mary Peters says she hopes to see a rough draft with China by year's end.

International open-skies agreements have been on the world aviation industry's radar screen for years, but national pride, security concerns, protectionist laws and bureaucratic red tape have grounded such high-flying notions.

Until now. In an age of accelerating globalization and liberalized international trade rules, the situation is starting to change -- though just how open skies play out remains to be seen.

"It's unlikely we'll see any major change right away," said Henry Harteveldt, airline analyst in the San Francisco office of Forrester Research. Traditional factors such as the price of fuel, currency exchange rates, commercial availability of airport gates and the availability of aircraft will still go a long way toward determining where and when airlines fly, he said.

Still, he said, "more competition generally means lower fares." Leisure and excursion fares could fall substantially, though sky-high business class fares could persist.

The rules changes will provide business opportunities for airlines but present challenges as well. British Airways and Virgin Atlantic Airways have long resisted open-skies pacts, apparently to protect their prominence on lucrative routes between the United Kingdom and the United States.

Major U.S. carriers, just now recovering from several years of huge financial losses, have banked on overseas routes to pump up profits. Those profits may soon have to be divided among more players.

And all hub-and-spoke network carriers face the possibility of fresh competition from entrepreneurs such as Ryanair's founder and Chief Executive Officer Michael O'Leary, who recently said he plans to create an affiliated startup airline to fly the Atlantic, offering attention-getting promotional fares as low as 10 euros ($13.50) from London to New York, in the next three or four years.

Given that the EU deal won't take effect for nearly a year, hard facts about future fares, routes and schedules are difficult to come by. Airline executives and airport officials said they are still in a planning mode, but they also said they're excited by the possibility of a lot of new business, and the advent of a freer, market-driven age of aviation.

The U.S.-EU deal, for example, will allow U.S. carriers to fly from this country to any city in the 27-nation European Union. It will also give airlines from EU countries such as Germany and Great Britain greater latitude to serve additional U.S. cities.

That's quite a contrast to present agreements, which are highly restrictive.

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