EU Sets Conditions for 'Open Skies'

Nov. 18, 2005
The possibility of a deal will become more clear once Washington has completed its review in January of the rules on airline ownership.

The European Commission said Friday that a deal on a new European Union-U.S. "open skies" air services agreement would depend on Washington granting foreign investors more control over U.S. airlines.

EU and U.S. negotiators were holding weeklong talks in Washington that were due to end later Friday. While the EU is focused on the ownership issue, the U.S. is seeking to pry open the most valuable global airline industry property to all of its carriers: London's Heathrow Airport, Europe's largest gateway for trans-Atlantic flights.

"We have made significant progress," in the latest round of talks, EU spokesman Stefaan de Rynck said.

The possibility of a deal will become more clear once Washington has completed its review in January of the rules on airline ownership. If the outcome is positive, an open skies agreement "could be reached in the first quarter of 2006," de Rynck said.

The U.S. administration said earlier this month that it is considering giving foreign investors a say in marketing, flight routes and types of aircraft operated, which might attract foreign capital to U.S. airlines.

An EU-U.S. open skies agreement would replace a mix of more restrictive treaties between individual countries that have organized the industry for more than half a century.

A single accord would bring together the world's two largest aviation markets, allowing EU and U.S. airlines to fly to wherever they want and charge whatever they want on trans-Atlantic flights, a move that could lead to lower ticket prices for passengers.

At this week's talks, the EU and U.S. reached agreement on regulatory convergence. De Rynck said the two sides agreed on common rules for handling antitrust cases, such as airline alliances, and on safety and security.

Under the present bilateral pacts, European airlines can fly to any U.S. airport only from airports located in their home country. For example, Germany's Lufthansa AG can only fly to the U.S. from airports based in Germany. Because of this so-called nationality clause, European airlines risk losing U.S. landing rights if they merge - which has led to fragmentation and inefficiency in the European industry.

In June 2004 EU governments rejected a proposed deal by Washington because it didn't grant access to the U.S. domestic travel market. Britain felt this was too high a price to pay in return for granting airlines greater access to Heathrow.

The talks resumed in October after EU governments expressed renewed willingness to do a deal.

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