Open Sky Talks

“Open Skies” Talks
The Times

Talks aimed at creating open skies between Europe and America are set to resume in October after a personal intervention last week by US transportation secretary Norman Mineta.

Mineta called his counterpart Jacques Barrot, Europe’s transport commissioner, early last week in an attempt to break the stalemate on the talks, which collapsed in June last year.

The two sides will meet for informal negotiations in September, and then decide whether formal talks can start in October. Supporters of an open-skies agreement, which would remove all restrictions on flights across the Atlantic, and could also scrap bars on the foreign ownership of American and European airlines, say there is a realistic prospect of a deal by Christmas.

This is likely to trigger a round of airline mergers and acquisitions, with one of the first deals tipped to be between British Airways and Iberia, the Spanish flag carrier.

BA already owns a 9% stake in Iberia, and senior executives have long made clear their desire to increase the holding once an open-skies deal is approved.

One likely sticking point in the talks is access to Heathrow, the major London airport. Only four airlines — BA and Virgin from the UK, and United and American from the US — are currently allowed to fly from Heathrow to the US, but an open-skies deal would allow free access to all carriers.

Another obstacle is the continuing reluctance by the US to remove restrictions on foreign investment in American carriers. At present foreign groups can own only 25% of a US airline, although some legislators have called for a removal of the ceiling in order to draw in fresh investment for the ailing domestic airline industry.

Liberalisation of US-EU flights has become a tricky trade issue, with successive rounds of talks over several years proving fruitless. Last year’s collapsed in part because Alistair Darling, the UK transport secretary, insisted the deal was not good enough for European airlines.

Conclusion of a liberal agreement should also allow British Airways and American Airlines to achieve their long-held ambition of securing immunity from US anti-trust laws for their transatlantic alliance. But Gerard Arpey, American’s chief executive, has told The Sunday Times that the two companies did not want a deal “at any price”, saying they would not be prepared to give up valuable runway slots at Heathrow.