EU, Canada Reach Deal to Open Aviation Markets

BRUSSELS, Belgium --

The European Union and Canada will open their aviation markets to each other by removing restrictions on direct flights and foreign ownership in airlines, according to a deal reached Tuesday.

The deal is the EU's most far-reaching and open aviation pact with a trade partner, and appears meant in part to pressure the United States to agree to upgrade its "open skies" agreement with the EU.

EU Transport Commissioner Antonio Tajani said the deal with Canada would spur trans-Atlantic trade and competition once it comes into force in the first half of 2009 as planned.

"The new agreement makes the EU-Canada market one of the most open in the world," Tajani said in a statement.

Under the deal, airlines based in the 27-nation bloc will be able to fly directly to Canada, with Canadian carriers enjoying similar access rights to points in Europe.

Restrictions on routes, prices and the number of flights between the two sides will be removed, according to the deal.

Limits on investment and foreign ownership in airlines will also be phased out - which eventually could lead to European investors setting up airline operations in Canada.

Airlines will also be able to launch new code-sharing agreements - which would let them book passengers on one another's planes.

Meanwhile, the EU is hoping to upgrade its "open skies" aviation pact with the United States, which came into force earlier this year but still prevents European airlines from taking over U.S.-based airlines.

Negotiations on a wider agreement with the U.S. started earlier this year.

While the EU-Canada deal is likely to lead to more competitive airfares, it could spell trouble for Canada's two dominant airlines - Air Canada and its low-cost rival WestJet Airlines Ltd.

Air Canada went through bankruptcy earlier this decade, and when it emerged in 2004 it was losing customers to WestJet. The two airlines rely heavily on U.S.-bound routes.

The deal is estimated to bring economic benefits of at least euro72 million ($92.6 million) and more than 1,000 new jobs in its first year, the European Commission said. An EU study said an EU-Canada aviation pact could generate an additional 500,000 passengers a year on routes between Canada and the EU.

Similar but more limited bilateral aviation agreements with Israel and Armenia were also announced Tuesday.