EU–US Open Skies Agreement

The EU–US Open Skies Agreement is an open skies air transport agreement between the European Union and the United States. The agreement allows any airline of the European Union and any airline of the United States to fly between any point in the European Union and any point in the United States. Airlines of the United States are also allowed to fly between points in the European Union. Airlines of the European Union are also allowed to fly between the United States and non-EU countries like Switzerland.^[1] The treaty disappointed European airlines as it was tilted in favour of United States airlines: while they are allowed to operate intra-EU flights, European airlines are not permitted to operate intra-US flights nor are they allowed to purchase a controlling stake in a US operator.^[2] The Agreement replaced and superseded previous open skies agreements between the US and individual European countries.

The initial agreement was signed in Washington, D.C., on 30 April 2007. The agreement became effective 30 March 2008. Phase two was signed in June 2010.^[3]

Impact

London–United States

Under the agreement, London Heathrow Airport was opened to full competition. This ended the exclusive right granted for only two US airlines and two UK airlines (Bermuda II) to fly transatlantic services out of Heathrow. These four airlines were British Airways, Virgin Atlantic Airways, United Airlines, and American Airlines.

This right also exists for third-country carriers with incumbent fifth freedom rights to carry passengers between London Heathrow and the United States. These rights were previously exercised by Air New Zealand (between Los Angeles-London Heathrow), Air India (between New York City-London Heathrow), and Kuwait Airways (also between New York City and London Heathrow). El Al also had such rights but chose not to use them, and Iran Air technically also had similar rights, but is prohibited from flying to the US due to US government economic sanctions against Iran.

Delta Air Lines announced it would begin services to London Heathrow from Atlanta and New York (JFK).^[4] Delta has since also begun service from Boston, Detroit and Seattle. US Airways announced it will begin service to London Heathrow from Philadelphia.^[5]

Other airlines, such as Northwest Airlines and Continental Airlines, also began services to Heathrow, but have since ceased independent operations under these brand names, following mergers with airlines also serving Heathrow.

Nevertheless, expansion of transatlantic flights to or from Heathrow continue to be limited by lack of runway capacity (currently its two runways operate at over 98 percent of its capacity), government limits (especially when expansion plans to build a third runway and a sixth terminal was cancelled on 12 May 2010, by the new coalition government^[6]), and the fact that many take-off slots are owned by incumbent airlines. British Airways holds 40 percent of slots, while bmi holds 12 percent.

Other routes

Several airlines changed their routes and schedules when the agreement came into effect. Many airlines also bought take-off and landing slots at Heathrow. For example, bmi tried to buy slots from Varig.

Meanwhile, Virgin Atlantic said that it intended to add daily flights to New York City from several European cities, such as Paris, Frankfurt, Milan, Amsterdam, and Zurich, but since ruled out such services from 2010 at the earliest.^[7]

KLM announced a new service from Dallas/Fort Worth to Amsterdam.^[8]

Industry consolidation

The agreement seems to have generated renewed interest in airline industry consolidation,^[9] although mergers or acquisitions among international flag-carrier airlines are difficult to facilitate in the face of sometimes emotional national and financial interests. British Airways' 2007 plan to buy Iberia Airlines had to be shelved when it became apparent that a Spanish investment bank would prevent the deal. In 2008 a merger was proposed instead, which would retain both brands along the lines of the 2004 Air France and KLM merger.^[10]

Fares

There is little consensus about whether increased transatlantic competition will have any effect on fares. Some believe the market is already highly competitive. Other sources have been predicting radical changes, such as €10 flights.^[11]

In 2007, Ryanair announced that it was planning to start a new airline (RyanAtlantic) that would operate long-haul flights between Europe and the United States. The project has been cancelled.

References