Delta Hopes Pact Lands Greater Access to Europe

London --- Delta Air Lines has long believed gaining access to London's Heathrow Airport, the busiest trans-Atlantic gateway, would dramatically boost passenger traffic and ultimately the company's bottom line.

That's why the airline is enthusiastic about a preliminary "open skies" accord that would liberalize the $18 billion trans-Atlantic airline market and almost certainly result in cheaper prices and new choices for air travelers.

Olivia Cullis, a spokeswoman in London for Atlanta-based Delta, said the company is "cautiously optimistic" about a final deal to end restrictions on where airlines can fly.

But one issue --- letting foreigners own a bigger stake in U.S. carriers --- could keep the deal from winning approval at a meeting of European Union transport ministers in Brussels, Belgium, on Monday. That could delay the process for months.

After two years of talks, a preliminary open skies agreement was finally reached last month in Washington, and could take effect as early as October 2006 if all 25 European transport ministers approve.

The United States currently has open skies agreements with 15 EU countries, though not with Britain. The new agreement would create a single open skies treaty encompassing all EU members.

The deal would likely permit any EU airline to travel from any airport in the 25 member states to any airport in the United States, and vice versa. The tentative agreement would grant U.S. carriers such as Delta, Northwest and Continental airlines access to Heathrow.

Under the current U.S.-Britain air treaty, only two U.S. carriers --- American and United --- can use Heathrow. They got that status by buying route rights from TWA and Pan Am in the early 1990s.

British Airways and Virgin Atlantic Airways are the only British carriers allowed to fly to the United States from Heathrow.

Delta, which filed for bankruptcy court protection in September, is allowed to use Gatwick Airport near London but isn't permitted to travel to New York area airports --- creating a gaping hole in its network.

Delta hopes to add flights from both New York and Atlanta to Heathrow, which is favored by business fliers, Cullis said.

Daniel Hamilton, director of Johns Hopkins University's Center for Transatlantic Relations, said an open trans-Atlantic market for air service could increase annual passenger traffic by up to 11 million passengers on trans-Atlantic routes, and by up to 35 million on routes between EU countries. "An agreement would have a very big impact on travel and on tourism and many other industries," he said.

Dan Ikenson, a trade policy analyst at the Cato Institute in Washington, agreed that an open skies agreement would boost the economy and benefit consumers through new competition.

But Ikenson cautioned that an open skies agreement is not yet a done deal, because the preliminary accord was negotiated with the understanding that the United States would liberalize restrictions against foreign ownership of U.S. airlines. Some fear the Europeans won't move ahead without a clear sign of follow-up.

Ikenson believes easing of ownership restrictions would require a U.S. law change that could be difficult. The United States puts a 25 percent ceiling on foreign voting rights in airlines. The EU has a higher ceiling, 49 percent.

While not offering an end to the ceiling, the U.S. Department of Transportation has proposed giving foreign investors more control over some aspects of U.S. airline operations. Carriers could also get overseas financing more easily.

Objections raised by British Airways are another stumbling block. The airline says that while U.S. carriers would be allowed to pick up passengers at Heathrow and carry them on to another European destination, it would not gain the same right at New York airports.



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