U.S., EU strike comprehensive deal to open airline competition

U.S., EU strike comprehensive deal to open airline competition    Negotiators for the United States and European Union have reached an agreement to deregulate the transatlantic aviation market that would potentially allow airlines from the United States and 25 EU member states to virtually operate with no government interference.
   The two sides said they struck a deal Friday after nearly two years of negotiations on a regional open skies treaty that would lift controls on everything from prices, to aviation services, access and operating freedom granted foreign airlines. The provisional agreement, which opens competition within the airline industry to foreign carriers, must be approved by the EU’s Council of Transport Ministers. The council is expected to next meet sometime in December.
   The agreement “provides an historic opportunity to increase travel, reduce fares, expand commerce and bring two continents closer together than ever before,” said U.S. Transportation Secretary Norman Y. Mineta in a statement. “The agreement also goes beyond traditional open skies agreements by applying those principles on a regional basis.”
   Officials said the most significant achievement is that the deal would allow commercial passenger and all-cargo airlines from every EU nation and the United States to fly between every city in the European Union and every city in the United States. Also important for freight carriers is the ability to operate from and fly beyond the EU and the United States to third countries without returning to their home country — a concept known as seventh freedom rights.
   The deal would replace 15 bilateral open skies agreements the United States has in Europe, and in effect would make existing seventh freedom rights usable. In the past airlines were not able to take advantage of those rights because third countries were not party to the agreement and didn’t allow European carriers to provide service from locations in Europe outside their home country to third countries like the United States.
   U.S. carriers benefit from the deal because for the first time they would get expanded access to the coveted market in the United Kingdom, which have only been served by United Airlines, American Airlines, Virgin Airlines and British Air.
   That access is subject to the availability of slots, most of which are controlled by British Air.
   The air transport agreement, which could go into effect as early as October 2006, also eliminates restrictions on the number and type of flights, routes, aircraft airlines can use and allows them to freely set fares. The two sides would establish a joint committee to ensure proper implementation of the agreement and resolve questions.
   The State Department and EU transport authorities plan to begin a second round of negotiations on other aviation issues within two months of the agreement’s effective date.
   Approval by the EU ministers is contingent on the outcome of a proposed rulemaking issued by the U.S. Department of Transportation earlier this month which would expand opportunities for foreign investors to get involved in the daily management of airline operations, without running afoul of American citizenship requirements that cap the amount of foreign voting stock in an airline at 25 percent. The proposal to modify the administrative interpretation of the citizenship law is designed to encourage investment by investors who previously were reluctant to put money in a U.S. airline because they had almost no say in the direction of the company. The DOT is collecting comments on the proposed rule through early January.
   “We are dramatically changing the whole template of international aviation” if the EU Council accepts the agreement, Jeffrey N. Shane, undersecretary for policy, told American Shipper. “It will really change the way we do international aviation in most other parts of the world within five to 10 years,” he said.