As European and the US negotiators prepare to open the first round of talks on a new aviation agreement, Brussels will have to steer a careful course between its long-term ambitions and some short-term political realities
This autumn the European Commission (EC) finally gets to fulfil another of its big ambitions as it sits down in Washington to talk transatlantic open skies on behalf of the whole of Europe. By common consent those negotiations are likely to be long and hard. But just how long and just how hard will depend on exactly what Brussels intends to put on the agenda. There is no shortage of potential items, but the real judgement will come in separating out what is practical and possible, without selling short its big free-market vision
Already there are broad camps emerging in Europe, divided between those keen to see a push for the big deal and those that would rather settle for a quick, practical first step, leaving the tough stuff for later. So what exactly can or should Brussels and Washington be talking about?
In order to make any sense of the talks, and its own legal case for holding them, Brussels must as a minimum establish a European agreement that overrides the existing mass of national deals. Any European Union (EU) carrier should be free to fly the transatlantic from anywhere within the EU, just as US carriers can within the USA.
In principle that should be easy enough to agree. As the USA is fond of pointing out, its present open skies template, already in place with 11 of the 15 current EU states, allows for just such flexibility. It is even fonder of pointing to the Kona deal with six nations in the South Pacific, which knits individual open skies bilaterals into a multilateral.
Europe could hardly accept leaving the individual open skies bilaterals in place in a sort of warmed up Kona. But some form of open skies at an EU-US level would secure three key goals. First, it ends the troublesome nationality issue. Second, it establishes EC authority to sign bilaterals on behalf of the single European air market. That in turn sets a precedent for deals anywhere else in the world, leaving existing national bilaterals to fade and die. Finally, it would help clear a major hurdle that has stood in the way of cross-border consolidation within Europe's fragmented airline industry.
For the US side, the central obstacle to EU-wide open skies comes from those four countries that have yet to sign up - a list headed by the UK with its hated Bermuda II deal. Practically, politically or philosophically the restrictions at London Heathrow could hardly be allowed to coexist within an open aviation agreement across the transatlantic.
That is no small hazard. The Heathrow issue has held US-UK talks in deadlock for years. The UK will not free access unless the US grants antitrust immunity to the British Airways-American Airlines alliance. The USA will not grant that without BA relinquishing slots to competitors, and so BA urges the UK government not to ease access. And so the cycle has continued. However, there is no apparent reason why the EC could not now simply overrule Bermuda II to free the way towards a core US deal and leave the slots issue for another day. There is certainly no precedent for slot confiscations to ease a bilateral. That issue would arise only later if and when BA again applied for antitrust immunity. By then the landscape would, in any case, have changed, since major rival alliances, already with a major presence at the airport, would also be capable of competing freely with BA on the North Atlantic.
There are those, however, who argue that the EC should push further, to tackle issues such as ownership, cabotage, wet leasing and the irritant of the US Fly America programme. The EC itself still talks of an open aviation area, borrowing from its original vision of a transatlantic market based on Europe's own single market model.
However, if it pushes for too much there is a distinct possibility that it will simply get bogged down. In the present climate, US politicians and unions alike seem at best luke warm and at worst outright hostile to anything that smacks of a weakening of US sovereignty. Even the most ardent of liberals in Washington admits that there is no market for the idea of foreign ownership in Congress.
With the exception of some recent headlines from Sir Richard Branson, neither does there appear much industry appetite for transatlantic acquisitions or investments. Even if there were, key issues of competition and regulation would need to be ironed out before cross-border ownership becomes an attractive, practical proposition. Within Europe's single skies it is still rare.
There is of course the risk that by shooting too low, the EC will squander a rare opportunity to force real change out of Washington. But the bigger risk may be that if talks get bogged down, Brussels will lose its momentum and potentially the fragile consensus back home. The US elections also loom. The EC should not give up on its big vision, but neither should it lose sight of the value of some quick and decisive wins as the first phase in a much longer journey.
Source: Airline Business
