Summary of points of interest to EU and US Airlines

On 2 March 2007, EU and US negotiators initialled a comprehensive first-stage agreement to liberalise air services between the US and Europe, the long awaited so called “Open Skies” Agreement (the Agreement).

The 27 EU Member States in the European Council and the US government must now approve the Agreement. Jacques Barrot, the EU Transport Commissioner, intends to submit the Agreement to the EU Transport Council on 22 March. If approved by both sides, the Agreement is likely to be signed at the EU-US Summit on 30 April 2007 and will be provisionally applied as from 28 October 2007.

The Agreement will replace existing bilateral air services agreements concluded by individual Member States with the US and is being hailed by the European Commission as the most important air transport agreement since the 1944 Chicago Convention. The Agreement has however met with mixed reaction from the EU industry mainly because while it opens up all EU airports to EU and US airlines for US and EU flights it does not provide EU airlines with access to US domestic routes nor the right generally to operate standalone passenger services from the US to third countries. Furthermore, the Agreement does not remove restrictions on foreign ownership of US or EU airlines. These issues appear most acute for the UK which accounts for over 40% of the EU-US airline market and so far the UK government has not said that it will support the Agreement.

It is clear that the Agreement will create new commercial opportunities for EU and US airlines and have a significant impact on the development of air travel in Europe and the US which together account for 60% of global air traffic. It will result in an increase in the number of transatlantic flights and traffic (estimated to equate to an additional 26 million passengers over 5 years). This, and the removal of price regulation from major EU and US airports, should lead to lower fares on these routes. It will also open the path for similar open skies agreements between the EU and third countries. Above all, the Agreement will be responsible for removing one of the last barriers to consolidation in the EU aviation sector paving the way for mergers between EU airlines.