Progress towards an open skies agreement between Europe and the USA remains slow, and Brussels has declined Washington's offer of an "early harvest" mini-deal.
Washington's proposals for an early deal included a commitment to press for a raise in the 25%foreign ownership cap, to match the 49.9% permitted within the European Union (EU). However, Transportation Department (DoT) officials say that any formal agreement would depend on Congressional approval for raising this cap.
The USA is also effectively offering transatlantic open skies, which would allow any European carrier to fly to the USA from anywhere in Europe. However, that would mean an end to any existing bilateral restrictions, crucially including those that restrict US airline access to London Heathrow.
The European Commission (EC), largely supported by states and airlines, worries that any such mini-deal would give away its main bargaining chip without securing the vision of a full open aviation area on the transatlantic. The EC's ambition is to free up ownership and cabotage rights, as well as ending the Fly America policy for US government staff.
At a meeting in Washington in February between US and EC officials, Brussels made clear its view that any "early harvest" would only be possible with a commitment by the US negotiators to a timeframe for further liberalisation measures. In a statement, the EC said the US proposal "fell considerably short of its objective of establishing equal market opportunities through an open aviation area". UK transport minister Alistair Darling, who attended the negotiation, described the US proposals as "unacceptable".
Access to London Heathrow airport, the key gateway between Europe and the USA, plays a critical role in the talks. Some say that Heathrow must be addressed within the context of the multilateral talks. But others, including US authorities, now believe that Heathrow can be dealt with in a commercial way, with airlines wanting entry into the airport simply acquiring slots on the grey market. Once the larger deal was agreed, they would "find a way" into Heathrow for Delta and for other US carriers now restricted to Gatwick and other UK airports, says one US official. But such an understanding still assumes that a deal would have been reached.
On the bright side, the Europeans believe that the negotiations, which were always expected to take a number of years, are at least on track. The Association of European Airlines (AEA) has noted "with satisfaction" the commitment of both delegations to further liberalisation.
However, the organisation's secretary general Ulrich Schulte-Strathaus has called for Brussels to go even further and seek a "comprehensive agreement that would include from the outset market access opportunities for EU carriers".
Schulte-Strathaus told a Washington audience in late March that it is time to move towards a framework to harmonise airline-airport policies on both sides of the Atlantic - a goal he conceded was ambitious. He wants to move beyond negotiations and institutionalise a mechanism for an exchange of views between the industries on each side of the Atlantic.
European airlines have made it clear that they want to be certain they can lift the limit above the key 49.9% mark to allow majority ownership. This in addition to firm agreement on cabotage and "beyond" rights for carriers.
The EC does not reject an incremental deal out of hand, says Francis Morgan, administrator of airports agreements for the EC, but any steps agreed on "must work together and provide steps on the staircase". Morgan concluded in late March that "frankly, from a European perspective, there just isn't enough there" in the latest US initiative.
The next round of talks will take place in Brussels at the end of April. In the meantime, further informal discussions will take place behind the scenes, and the Commission will report back to COREPER, the Committee of Permanent Representatives - a powerful body of member state diplomats in Brussels. After the EC gave transport ministers an update on the US talks at a meeting in early March, it also put forward the case for Brussels getting a mandate to discuss Community-wide bilaterals with certain neighbouring countries. The ministers agreed that COREPER should look into the implications of authorising negotiations with Morocco, Lebanon, Jordan and the Balkan countries.
Meanwhile, the EC is continuing its quest to achieve a more even footing with its counterparts in Washington. Starting in May this year, EC competition authorities will have the power to investigate co-operative deals, including alliances and codeshare agreements between European and third-country carriers. Previously, Brussels had powers with regard to carriers within Europe, but member states have had the prerogative when it comes to third-country agreements.
The additional powers may have some wider implications for third-country relations. Up to now, the EC has not had the powers to investigate the competitive issues surrounding air service agreements, which in a number of cases include clauses covering prices and capacity. Lawyers in Brussels say that it is unclear at the moment to what extent the EC will use its powers to curtail what it may see as anti-competitive aspects in bilaterals. However, the additional powers may give Brussels another means of promoting a system of open aviation areas.
The extra powers will play a role in the atmosphere surrounding negotiations going forward. The widespread European belief that US carriers have wallowed in $10 billion or more government largesse, is ironically, very much the mirror image of the view from the US side.
There are many in government and industry who believe that state aid has continued to European carriers, and the possibility of further state aid to Alitalia has renewed such US suspicions.
These differing views of a complex reality cannot but exacerbate tensions going into negotiations of larger and longer-term issues.
COLIN BAKER LONDON AND DAVID FIELD WASHINGTON
Source: Airline Business
