26-Mar-2010 11:10 AM

US and EU complete second stage of open skies negotiations

US and the European Union reached (25-Mar-2010) a preliminary agreement on the second stage of their Open Skies aviation agreement, agreeing to an expansion of the 2007 Open Skies pact to provide for greater US-EU cooperation on a wide range of aviation issues. The new agreement affirms that the terms of the 2007 agreement will remain in place indefinitely, allowing airlines from both sides to select routes and destinations without limitations on the number of US or EU carriers that can fly between the two sides or the number of flights they can operate. The EU will submit the draft agreement for approval by the EU Transport Council in Jun-2010. Details of the second stage agreement include:

  • Market access & ownership:
    • Adoption of 'Fly America', further opening EU carriers’ access to US Government-financed traffic.
    • EU airlines will gain new commercial opportunities to fly between the US and non-EU countries, subject to “certain changes to the legal framework for noise-based airport restrictions”;
    • A number of obstacles to EU and US investments in 3rd countries' airlines will be removed. Foreign ownership of voting stock in US carriers is currently limited to 25%. No formal timetable has been established.
  • Environmental cooperation:
    • Agreement requires compatibility and interaction of market-based measures (such as emission trading schemes) to avoid duplication;
    • Enhanced transparency for noise-based airport measures;
    • Enhanced cooperation on green technologies, fuels and air traffic management; Agreed to continue negotiations toward a global approach to aviation emissions regulation under the auspices of ICAO;
    • Proposed US trading system for carbon emissions could reportedly be linked with the existing European system.
  • Social issues:
    • Agreement includes dedicated article on social dimension the of EU-US aviation relations, to esure that existing legal rights of airline employees are preserved, but that the implementation of the agreement contributes to high labour standards.
  • Security cooperation:
    • Raised levels of cooperation to better allocate resources at threats to the aviation system, promoting maximum mutual reliance on each other's security measures as well as coordinated responses to new threats.
  • EU-US Joint Committee role extension:

European Union: "Whatever majority ownership threshold the US Congress permits, the EU will reciprocate," EU spokeswoman, Helen Kearns. Dow Jones, 26-Mar-2010.

US Department for Transport: “The new agreement contains no commitment to change existing statutes that reserve service in the US domestic aviation market to US airlines and limit foreign ownership and bar foreign control of US airlines," DoT spokesperson. Source: BTNOnline, 25-Mar-2010.

European Commission VP responsible for Transport, Siim Kallas, welcomed the preliminary agreement as "a major step forwards" that sees both sides agreeing to “increase regulatory cooperation, and remove the barriers to market access that have been holding back the development of the world’s most important aviation markets”.

US Transportation Secretary Ray LaHood stated (25-Mar-2010) the agreement “strengthens our already close aviation relationship with our European partners”.

IATA stated it was "disappointing that, at this critical time, we did not make significant progress on the issue of ownership. The agreement was not a step backwards, but it did not move us forward." Director General and CEO, Giovanni Bisignani, urged both sides for an "urgent follow-up” as the "long-term financial sustainability of the industry is dependent on normal commercial freedoms". [more - IATA]

British Airways stated it was disappointed with the ownership provision and called on both sides “to honor the firm commitments they have made in this agreement to further liberalisation, and to redouble their efforts going forward” (New York Times, 25-Mar-2010).

British Airways: "We had hoped that the conclusion of the second stage negotiations would have resulted in the immediate removal of restrictions on ownership and control, Fly America and cabotage. We call on both sides to honour the firm commitments they have made in this agreement to further liberalisation," British Airways spokesman. Source: Reuters, 25-Mar-2010.

Virgin Atlantic Airways stated the agreement “falls somewhere short” of the commercial and ownership freedoms it desired and expressed its hope the commitments agreed “will mean that the European Commission, EU Member States and US government lose no momentum in removing the remaining barriers to full market access” (Bloomberg, 25-Mar-2010).

Continental Airlines congratulated (25-Mar-2010) the US Government on the agreement. Continental stated it supports aviation liberalisation and believes close coordination and cooperation with the European Union on aviation matters is important to the US and international economies." [more - Continental Airlines]

United Airlines applauded negotiators for concluding a "historic agreement today that will further liberalise the transatlantic market and enable airlines and their alliance partners greater commercial flexibility to better serve their customers". [more - United Airlines]

Air Transport Association of America applauded the "work and visionary leadership of the US and EU negotiating teams in delivering today’s important agreement". ATA President and CEO, James C May, stated the agreement is a "win-win on both sides of the Atlantic" and will produce significant new consumer benefits in the trans-Atlantic market, as the commercial and operational freedoms it provides drive both increased competition and more service improvements. [more - ATA]

Airports Council International-North America President, Greg Principato, applauded the second stage air transportation agreement stating it "builds and improves on the ground-breaking first stage air transport agreement reached in 2007”. ACI-NA welcomed the "improved regulatory cooperation on security, safety, competition, environment, air traffic management, facilitation and other issues, enhanced liberalisation, and strengthening of the US/EU aviation relationship and market promoted by the second stage agreement." [more - ACI NA]

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