EU-US open-skies deal is cleared for take-off

Date: 12/06/03

By Karen Carstens

"IF YOU want to build a ship with others don't begin by gathering wood, but awaken in them the longing for the wide open ocean."

Antoine de Saint-Exupéry, the French poet, pilot and Le Petit Prince author shot down during World War II, would doubtless have been pleased with the EU's longing for 'the wide open sky' in the form of an open aviation area across the Atlantic.

The Union's transport ministers last week gave Loyola de Palacio, the transport and energy commissioner, the all-clear to negotiate an EU-wide open skies agreement with Washington, with the aim of replacing an existing patchwork of bilateral pacts between most member states and the US.

Their 5 June decision endorsed a landmark European Court of Justice ruling last November that found elements of these bilateral deals contradicted EU law in eight member states.

The new EU-wide mandate covers a large range of issues, including traffic rights, routes, capacity, slots and fares, application for competition rules, safety standards and security. It marks the biggest reform in European aviation regulation since the creation of the internal aviation market in 1992.

The goal is to negotiate a treaty with the US to form an Open Aviation Area, combining the two biggest aviation markets in the world - the European Union and US.

Along with the entire North Atlantic region, they would account for some 60 of world aviation traffic. A deal would give all EU carriers open access to any US airport and vice-versa.

Now, however, the ball is very much in America's court.

Industry experts predict it could take years before a transatlantic pact is hammered out, with US officials expected to stall the process. Washington is wary about opening its routes and airports up to full-blown competition at a time when US carriers are at an all-time low, triggered by the 11 September 2001 attacks and fuelled by a global economic downturn, an American reluctance to travel and health scares such as the SARS epidemic. EU officials have also complained that the US industry remains protectionist for a wide range of reasons.

"They're going to be pretty slow in opening the market up to competition," said London-based BNP Paribas European airline analyst Nick van den Brul. "The industry is extremely wary."

But, he added, the important thing is that "the route rights have very effectively been put in the EU arena". This has two major implications: "Mergers can take place more easily and, in theory, any carrier can fly out of any airport to any destination."

Van den Brul scoffs at fears about carriers vanishing as a result. "A lot of airlines have been going out of business for the last two years anyway," he said.

Instead, he added, "there should be more consolidation in the industry, particularly in Europe". At the same time, the EU's four top players - Air France, British Airways, Lufthansa and KLM - will share the bigger spoils, offering "much more effective competition on long-haul routes".

Fears about the 'pride and prestige' of Europe's classic national carriers fading away are also exaggerated, claimed van den Brul, although there could be a longer-term shift towards travellers identifying with an alliance name, such as Star Alliance. which includes Air Canada, Lufthansa and BMI, rather than individual carriers' brand names.

He predicted that a first concession the US might make would be dropping the controversial 'Fly America' policy under which public officials must fly with US airlines.

The Commission last week was also given a second so-called horizontal mandate to replace existing bilateral agreements with non-EU countries with Europe-wide deals. A proposed regulation on air service agreements was also put forward.

So, although it will take a minimum of two years to come to fruition, according to van den Brul,the EU is heading for a new chapter in aviation history that will free the market from a great deal of excess baggage.