U.S., EU Reach Open Skies Agreement

The U.S. and European Union have reached a tentative agreement that would give airlines greater freedom to choose trans-Atlantic routes and potentially lead to lower fares, the government announced Friday.

Transportation Secretary Mary E. Peters said the agreement "will offer more choice and convenience to American consumers."

While details of the pact were not released, it is intended to allow European airlines to fly from anywhere in the EU to any point in the U.S., and vice versa, while shedding rules that restrict how much carriers are allowed to charge fliers.

EU Transport Commissioner Jacques Barrot said he would ask EU nations to back the deal when EU transport ministers meet March 22. The U.S. Congress must also back the deal before the new rules would kick in Oct. 28.

"We have an opportunity to unlock major benefits on both sides of the Atlantic," Barrot said in a statement. "In economic terms, this unprecedented agreement would represent a step change."

Air travel in Europe and the United States accounts for 60 percent of global air traffic, and an ambitious EU-U.S. open skies deal could allow more airlines to fly the lucrative trans-Atlantic routes, possibly offering cheaper tickets.

The EU forecasts that within five years the deal could put an extra 26 million people on trans-Atlantic flights. Just under 50 million travelers now make that trip every year.

"Any agreement...would provide enormous benefits to airline passengers," David Stempler, president of the Washington, D.C.-based Air Travelers Association said.

The agreement also opens up new horizons for European airlines who are currently prevented from combining with airlines based in other EU nations or from taking over airlines in other parts of Europe or in Africa.

But the deal also creates the possibility for the EU to restrict U.S. investments in European airlines - a tit-for-tat move that follows the U.S. administration's failure to lift a 25 percent limit on foreign ownership of U.S. carriers' voting shares - effectively turning down one of the EU's key demands.

The EU's executive arm said it had negotiated EU investors' rights to own stakes in U.S. airlines.

An EU official - speaking under condition of anonymity because the deal has not been approved yet - said the U.S. would scrap a rule requiring U.S. officials to authorize any bid a European would make for more than 50 percent of an American airline's capital.

He said the U.S. had also agreed to drop current rules that make it harder for EU airlines to buy stakes in carriers based in Africa or non-EU European countries. Currently, if a British airline buys a Nigerian one, the new purchase loses the right other Nigerian airlines have to fly to the U.S. because American authorities view it as a European airline.

Airline company shares received little boost from the news. Shares of UAL Corp., the parent of United Airlines, fell $1.54 or almost 4 percent on the Nasdaq Stock Market, while shares of AMR Corp. fell 76 cents, or 2 percent, to $32.97 on the New York Stock Exchange.


AP Business Writer Aoife White contributed to this story from Brussels.

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