EU inches closer to US ‘open skies’ dialogue

Date: 09/05/1996

By Tim Jones

MEMBER states are edging towards giving the European Commission the green light to begin exploratory talks with the United States over access to each other's civil aviation market.

After informal discussions in Washington between two Commission officials and their counterparts at the Department of Transportation and the State Department at the end of April, EU governments are now likely to sanction more formal talks over a pan-EU-US 'open skies' deal.

A two-day meeting of Union aviation negotiators this week indicated that either the June or the October meeting of EU transport ministers would call for further discussions with the US.

The Commission has been seeking a mandate to negotiate directly with Washington to create a so-called common aviation area between the Union and the US since Neil Kinnock took over as Transport Commissioner at the beginning of 1995.

Instead, the US has been negotiating bilateral agreements with member states, persuading individual governments to abolish the usual formal restrictions on fare-cutting and plane capacity. By the end of last year, the US had new deals with Luxembourg, Austria, Belgium, Denmark, Sweden and Finland.

A mini-deal with the UK was followed by a full open skies agreement with Germany and a commitment from the French to begin talks - but only after the US threatened to slash Air France's trans-Atlantic flight numbers.

In March, Washington sent its model open skies agreement to the authorities in the member states which have not yet signed deals. The Spanish, Italian and Portuguese authorities have all been approached to negotiate bilaterally with the Americans, while an existing Greek-US accord comes up for renewal this year.

As the aviation market becomes more cut-throat, European airlines are increasingly seeking US partners in order to reduce plane numbers as well as coordinating capacity, pricing and flight scheduling.

This has given the US even more leverage since the tighter these alliances become, the greater the likelihood that the airlines can be challenged for anti-competitive behaviour.

To be safe from legal suits, the airlines need to be granted anti-trust immunity by the US Department of Justice - leading many European carriers to put pressure on their governments to reach open skies deals. This is precisely what happened in the German case, when Lufthansa sought to deepen its alliance with United Airlines.

The Spanish authorities will be next to feel the heat as Iberia seeks a major private sector partner to help it buy back the Latin American operations it was forced to sell by the Commission in return for a capital injection from the state.

When they met their US counterparts, EU officials from DGVII, the Directorate-General for Transport, pressed the case for a 'balanced' deal which would cover anti-trust immunity.

US officials stressed their demand for 'traffic rights' - freedom to land even at congested airports, pick up passengers in one European city and land in another and even, eventually, the right to fly between cities in one member state.

“We favour liberal EU-US relations and if member states decide they want to reach that goal at the EU level, then that's fine,” said an American official.

Kinnock wants to ensure that traffic rights are not the only issue discussed with the US.

He believes an overall agreement should include reciprocal access for EU and American carriers, measures to avoid market disruption and unfair competition, a common threshold for foreign ownership of domestic carriers, norms and rules for equipment leasing and code-sharing, and strict definitions of when an airline is bankrupt.