The European Union has backed a plan to open up transatlantic air travel to greater competition under a so-called "open skies" accord.

EU transport ministers decided on Thursday to approve the deal, reached after four years of talks with the United States, which supporters say will increase flight frequencies, reduce fares and create jobs.

"I am delighted to have piloted this agreement to its destination with all passengers still on board," Jacques Barrot, the EU transport minister, said.

The agreement will allow any EU airline to fly between any city in the 27-nation bloc and any city in the United States.

 

It replaces the patchwork of existing bilateral air transport agreements between EU members and the United States, eight of which have been ruled illegal by the European Court of Justice.

"The deal is of great political and economic importance," Barrot said.

Economic benefits

The European Commission, which negotiated the deal on the EU's behalf, says consumers will see up to $16bn in economic benefits as increased competition brings down ticket prices.

The EU estimates that the agreement may generate more than 26 million extra passengers over the next five years and create 80,000 new jobs in the EU and United States.

It is set to be signed in Washington on April 30 but will come into effect only in March 2008, instead of October 28 this year as originally planned, after British objections.

Britain had been reluctant to lift restrictions on London's Heathrow airport without the US making it easier to invest in American carriers.

Currently, foreign investors are restricted to owning 25 per cent of voting rights, whereas US companies can control up to 49 per cent of EU carriers. 

Concessions demanded

European governments may suspend the parts of the deal if second-stage talks with Washington do not win concessions on the issue.

"If no agreement is reached in 2010, each member state may - if it wishes - notify the [European] commission of any particular rights they would like to suspend," Barrot said.

The deal means that Britain has more time before it has to open up Heathow Airport, the EU's busiest airport, to other airlines.

Only British Airways, Virgin Atlantic, AMR Corp's American Airlines and UAL Corp's United Airlines are currently allowed to fly transatlantic routes through Heathrow, a lucrative route that represents around a third of all EU flights to the US.

The new rules will abolish those restrictions but would not create extra take-off and landing slots at the busy aviation hub.

Speculation that "open skies" would trigger airline mergers boosted shares in BA and Spain's Iberia on Wednesday.