EU backs 'open skies' deal

Supporters say transatlantic pact will boost competition and create jobs.

    BA objected to the deal which will abolish restrictions on carriers operating from Heathrow [GALLO/GETTY]
    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.

    SOURCE: Agencies


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