European transport commissioner Neil Kinnock is hoping to turn a potentially serious threat to securing the external negotiating mandate to his advantage as the Commission aims to secure at least part of the elusive holy grail this year.
On the surface, the tentative open skies accord reached between the US and Germany in February threatens to undermine any Commission argument to take over negotiating air service agreements on behalf of the 15 member states of the European Union. Germany is the Commission's strongest ally in its struggle to wrest the mandate from the member states. The image of German transport minister Matthias Wissmann signing an open skies accord with the US would suggest Kinnock had lost his backing.
According to a senior Commission source, the opposite is true: 'Kinnock's view is that it doesn't make things worse, in fact it strengthens our case.' Indeed the Commission and Bonn are still allied in their cause. 'Kinnock has spoken to Wissmann and they both agree that the more member states that sign up to open skies the more pressure it will bring to bear on the opposition, especially the UK,' explains the official.
In order to remain consistent with the action taken against the smaller six EU members that signed up to the US' G9 open skies initiative last year, the Commission even intends to take the German government to court. But the official says any ruling against Bonn would not invalidate its open skies accord with the US. 'We want to use the court action to use the economic argument that joint negotiations would be better because jointly we would have more leverage.'
And leverage is what Brussels needs in its fight with the larger, reluctant member states, like Italy, France and Spain, but specifically the UK, which is actively lobbying in Brussels against an external mandate. And it appears that the Commission is making progress. Italy, which holds the rotating presidency of the EU until June, favours a two-tier approach which envisages Brussels negotiating with Washington on joint rules for competition, ownership, and CRSs, with traffic rights left for a later stage.
European transport ministers are scheduled formally to discuss a Commission report on the economic benefits accruing from joint bilateral negotiations at their next meeting in March and again in June. The Commission official believes this is the time to act. 'We are fairly relaxed about [getting the entire mandate], but there has to be a push for a partial mandate this year.'
In doing so, however, Brussels will not only have to contend with opposition from the UK but will also have to persuade the US of this twin approach, as Washington 'is against a two-stage approach and wants traffic rights thrown in,' the source confirms.
Nevertheless, the US is still trying to whittle away at the UK position on open skies and could help Brussels in the process. US senator Larry Pressler, chairman of the Commerce, Science and Transportation Committee, is planning to reintroduce a bill to raise the foreign ownership limit in US carriers to 49 per cent, which he hopes will bring London back to the negotiating table. But the UK has made it clear in the past that 49 per cent is not enough.
The UK's intransigence, stemming from its desire to protect London/Heathrow as Europe's dominant transatlantic gateway, contrasts starkly with Bonn's position towards the US. But the Germans accept open skies is the only way for Frankfurt to challenge Heathrow's position and for Lufthansa, with partner United Airlines, to compete with British Airways.
From the US side, transportation officials see the tentative agreement with Germany as a blueprint for what the US terms the Open Transatlantic Aviation Market (Otam). But getting the German accord formalised could still take some time.
The new accord envisages a complete lifting of capacity and pricing restrictions, as well as full liberalisation of third-country issues that are currently limited by fifth, sixth and seventh freedom restrictions. The only element that will see a phased introduction is ground handling; the deal will not permit carriers to self-handle until November 1997.
Though significant because of these facets alone, the US-Germany memorandum of consultations will also include language on Otam, which should help to strengthen Kinnock's case further.
The risk for the US, however, is that before any liberalisation is formalised with Germany, the US must first approve an application for antitrust immunity between alliance partners Lufthansa and United (see p74).
But the issue of immunity is at the core of the debate raging in Washington, which as of mid-February was still delaying Delta Air Lines' application with its three European partners five months after submission. Sources indicate that a bevy of reasons has held up Delta's application, including Department of Justice concerns that up to 10 transatlantic markets will suffer decreased competition if antitrust is granted. Officials at the DOJ and DOT are further concerned that Delta and its partners participate in Iata's tariff-setting conference, which both departments are trying to break up.
M Odell/M Jennings
Source: Airline Business
