Separate US air deals on cards

Date: 25/07/1996

By Tim Jones

MEMBER states fully intend to carry on negotiating bilateral aviation deals with Washington even though Transport Commissioner Neil Kinnock has won his mandate to create a global EU-US 'open skies' agreement.

EU governments - led by the UK and backed by Spain, Italy, and Portugal - are queuing up to pen bilateral open skies deals with the US under pressure from their flag-carrying airlines.

They realise that key elements of an EU-US agreement will take years to negotiate and are anxious to get the best deals for themselves in the meantime.

This means that by the time Kinnock, or his successor, completes a deal, the aviation sector could be radically different.

The biggest prize of all for the Americans - access to London Heathrow - will be negotiated with the British government and not with the Commission.

A first round of talks took place last week and will resume in Washington on 30-31 July.

The US airlines are desperate to win extra rights to take off and land at Heathrow. While London can swap these 'traffic rights' for improved access for British Airways (BA) in the US, it cannot allocate actual 'slots'. Once the rights are granted, however, the big US carriers could buy them from other airlines.

They need these to feed their trans-Atlantic traffic to other destinations. Heathrow is ideal for this, acting as a hub for passengers coming off long-haul flights and travelling onwards.

BA claims that half of its Heathrow trans-Atlantic traffic comes in from somewhere else.

At the moment, only its new ally American Airlines (AA) and United Airlines can fly in and out of Heathrow, having bought the slots originally allocated to TWA and PanAm in 1991.

“We are looking for more access beyond Heathrow into Europe and the Middle East,” said Lizanne Peppard from AA, adding that the carrier wanted to move some of its Gatwick services over to Heathrow.

In the past, the problem for Washington was that BA had little to gain and much to lose from an 'open skies' agreement with the US. That changed with the news last month that BA wanted to form the world's largest civil aviation alliance with AA.

The US authorities have often linked their willingness to grant regulatory clearance of the increasing number of airline alliances to greater access for their airlines in Europe. Without anti-trust immunity, these link-ups cannot take essential joint decisions on issues such as pricing or scheduling without the threat of legal action.

But some US airlines have urged the administration to grant or reject immunity entirely separately from the open skies negotiations.

When the UK-US talks resume next week, Washington's demands will centre on these 'fifth freedom' rights to fly from Heathrow to elsewhere in the Union - which is just what the Commission fears.

Kinnock continues to warn that, through bilateral deals, US airlines will be able to build and control a network of intra-EU routes to feed into the long-haul traffic they already dominate, consequently undermining the nascent aviation internal market.

The UK, on the other hand, believes that even if the Commission has a mandate, member states can negotiate with third countries as long as this does not break the EU's internal rules.

When the moment comes for them to seek anti-trust clearance for trans-Atlantic alliances for their ailing carriers, the Spanish, Portuguese, Italian and even French governments will be using the same arguments.