Clearing the air before opening the skies

Date: 03/04/1997

By Chris Johnstone

AS EU and US officials prepared to meet this week for the first time since October to explore the possibility of getting an 'open skies' agreement between the two trading blocks, both parties acknowledged it would be little more than a getting-to-know-you session.

Since the last meeting, the negotiators have changed on both sides. And before talks get under way in earnest, a series of comparatively drab issues must be discussed, thanks to the contorted conditions governments insisted upon before they would agree to the negotiations taking place at all.

Transport Commissioner Neil Kinnock was only authorised by EU member states to discuss secondary issues - such as access to computer reservation systems, code-sharing, ownership restrictions and common state aid and bankruptcy rules - before talking about traffic rights. But pressure is mounting for the two sides to get to the point and broach the real issue of access to each other's markets.

One of the few noteworthy consequences of this week's meeting could be a decision by Kinnock's officials to press on and seek clearance from national governments at the June meeting of EU transport ministers for a mandate to discuss traffic rights with the US.

Officials are reasonably optimistic that they can win the required qualified majority in support of their request, even though the UK and France are expected to be hostile.

That clearance would at least give a signal to US officials that they are not wasting their time in talking to the EU at all.

The Americans only accepted the Union's invitation to the table reluctantly, objecting that Kinnock's two-pronged formula meant they would have to deal with side issues before they knew if the real substance would be addressed.

The Commission's argument for an open skies agreement is simple: it says the US is getting too many advantages through its current approach of signing agreements with individual Union countries. Kinnock insists member states would get a better deal if they joined forces to hammer out a more balanced EU/US accord.

The Union has threatened legal action against those governments which have signed individual open skies deals with the US, on the grounds that it has the prerogative of signing what are effectively trade deals.

The US attitude to the talks is much less committed and depends heavily on how far it is getting in hot and cold negotiations with the UK over an updated bilateral aviation agreement - the Clinton Administration warms to the EU talks when the British are blowing cold over a transatlantic deal.

At present, Anglo-American discussions are back on course after a period of breakdown late last year.

The proposed partnership between British Airways and American Airlines is injecting new urgency into attempts to seal a UK/US agreement. A new bilateral aviation deal is a condition for US clearance of the company alliance.

An accord with the UK is the big prize that has eluded US negotiators as they have jetted across Europe in the last few years signing similar accords with a series of other EU governments.

US airlines are queuing up to open new services to London's Heathrow airport, to which only two American carriers have access at the moment, and British Airways needs a deal allowing its code-share flights with American Airlines to go beyond the gateway airports to which it is currently limited.

Other UK airlines, such as Virgin Atlantic, are pressing for greater access to the US market.

Starting with the Netherlands in 1992, the US has now signed open skies agreements with Austria, Belgium, Denmark, Luxembourg, Sweden, Finland, Iceland, Norway and Germany.

There is heavy pressure on other countries to follow suit. French, Italian, Spanish and Portuguese flag-carriers (Air France, Alitalia, Iberia and TAP) are all likely to follow the current fashion and seek close partnerships with US airlines. They cannot afford to stand aside while rivals reap the commercial rewards of channelling passengers on to each other's planes.

Heavier pressure could also bring the stragglers to the table. Air France found out what being isolated and lacking any likely US partner meant last year when the US rejected its application for an extra 170,000 summer flights across the Atlantic out of hand.

Its talk of retaliation soon turned into acceptance that a new bilateral deal with the US would have to be discussed.