Opening up London's busy Heathrow airport was the main demand of US negotiators. In return, the EU had been looking to loosen laws restricting ownership and control of US airlines to American citizens.
While the EU had agreed to US demands, Washington had refused to bend. Negotiators have therefore been looking for ways to make the deal more acceptable to the EU while keeping it 'sellable' to US Congress.
Under the draft agreement reached on 2 March 2007, negotiators agreed to the following:
- Removing restrictions on route rights:
As in the November 2005 package, the draft agreement would see the removal of current restrictions on the number of carriers that are allowed to fly the transatlantic route.
EU airlines would be allowed to fly from any European city to any American city, regardless of their home country. And, conversely, more US airlines will be allowed to fly into EU airports.
The main purpose of these provisions is to put an end to the current situation in which only four carriers – British Airways, Virgin Atlantic, American Airlines and United, are allowed to serve the route between London's Heathrow Airport – which accounts for more than 40% of all flights from Europe to America – and the US.
Liberalisation could lead to companies including Lufthansa and Air France, as well as low-cost airlines such as Ryanair and easyJet, operating the lucrative route from Heathrow. This increased competition should push down prices for consumers.
However, the UK is determined to resist such a move – which would force its companies to give up prime landing and takeoff slots and lose an important part of their profits – without significant reciprocal concessions from the US.
- Foreign ownership:
Washington will not ease rules that prevent European companies and individuals from owning more than a 25% stake of voting rights in US carriers.
Instead, the agreement will make it harder for American companies to invest in European airlines, by setting a reciprocal 25% limit, non-existent until now.
The deal would also make it easier for European companies to buy up to 100% of non-voting shares. Currently, they can own only 24.9% of non-voting equity on top of the 25% voting stock.
Nevertheless, observers are doubtful about whether cash-short European airlines will use this opportunity, which would actually entail investing in potential competitors without the possibility of having a say in how their operations are run.
- Other provisions:
The US has also offered the EU a number of other concessions, including:
-
- The right for EU airlines to fly between the US and non-EU countries that have an open skies agreement with it, such as Norway, and;
- the right for European carriers to establish subsidiaries in the US to carry domestic traffic if they meet stringent requirements.
- Economic benefits:
Despite British concerns that the US has given far too little ground on loosening foreign ownership restrictions in return for what the EU is offering, the Commission says that the deal is worth it. It believes that allowing more planes to fly the transatlantic route will lower the costs of tickets and could boost passenger traffic by more than 50% in just five years.
"This unprecedented agreement would represent a step change - it could be worth up to €12 billion in economic benefits and up to new 80,000 jobs," said Transport Commissioner Jacques Barrot.
