Industry reaction to ‘open skies’ agreement

Airlines and travel companies have joined together to applaud the “open skies” agreement between the Euopean Union and the US, but some say it has not gone far enough.

Cheapflights.co.uk CEO David Soskin called for more progress on deregulation in the aviation industry.

“Since deregulation began in the UK almost 30 years ago, this agreement is a start but does not go far enough – there should be a total deregulation ensuring that European airlines can compete in the American market or own shares in American carriers”

He said US travellers should also have the right to a properly competitive market with no restrictions, and in the future companies should be able to own shares regardless of the nationality of the airline.

A spokesman for ABTA said: ” Anything that increases choice is good for both our members and their customers. However we do not anticipate open skies bringing in much lower fares as prices to the US are already very low, particularly in economy.”

Bmi said it was a “landmark decision that will bring overwhelming benefits of genuine competition to UK travellers”.

Nigel Turner, chief executive officer, said: “This was a brave move in the face of stiff opposition from the two UK airlines that have for years enjoyed a protected transatlantic market from Heathrow.

“We will now see the long-overdue scrapping of the protectionist Bermuda II agreement that limits the number of airlines permitted to fly between Heathrow and the US to four, which was declared unlawful by the European Court of Justice in 2002. The stranglehold has finally been broken.

“UK travellers alone could save up to £250 million a year, as identified by the UK Civil Aviation Authority (CAA).”

Bmi said the decision will have a major impact not only on its point-to-point traffic to the US but on the network competition that it will be able to provide from its domestic, European and other longhaul services.

The airline expects to announce shortly details of its first US services from Heathrow.

Meanwhile Continental Airlines immediately filed an amended application at the US Department of Transportation for rights to serve new routes to Europe once the open skies agreement takes effect.

It plans to inaugurate service from its Houston hub to Heathrow before summer 2008, subject to government approval and the airline obtaining necessary slots and facilities.

As it expands into Heathrow, the airline will retain service to Gatwick currently offered from the airline’s three US hubs.

“Our customers have always wanted more options for accessing London, and the open skies agreement will allow us to give our customers the convenience of choosing between Heathrow and Gatwick for their London travel plans,” said Larry Kellner, chairman and CEO.

Delta Air Lines chief executive officer Jerry Grinstein said: “We have supported a liberalised EU-US agreement from its inception because it ultimately benefits the millions of transatlantic customers who travel between Europe and the US annually.”

He said the agreement will allow Delta and its SkyTeam partners to participate more broadly in European markets, particularly Heathrow airport.

The ‘open skies’ deal allows EU-based airlines to fly from any city within the EU to any city in the US, and vice versa.

But Virgin Atlantic said the deal did not go far enough because although US airlines would gain free access to European airports, EU airlines would not be allowed the same rights on US domestic routes.

British Airways also expressed reservations about the agreement, which will challenge its dominance at Heathrow.

Chief executive Willie Walsh said: “The EU is naive to believe the US will deliver on the next stage of liberalisation without sanctions so we are pleased the UK government has recognised this and demanded an automatic termination clause. However, the five-month delay before implementation is unnecessary.

“With the EU having given away their most valuable negotiating asset – Heathrow – the UK government must stand by its pledge to withdraw traffic rights if the US does not deliver further liberalisation by 2010. Nothing short of an Open Aviation Area by 2010 will be acceptable and we want talks on the second stage to achieve this to start immediately.

“This means delivering a true Open Aviation Area under which airlines from both sides would have free access to each others’ market without restrictions and where it will be possible for a US airline to be 100% owned by investors from the EU and vice versa.

“It is disappointing that the EU has missed the opportunity to achieve these long term gains for customers. Instead, this deal will deliver short term gains for the subsidised American aviation industry.”

After yesterday’s announcement, EU Transport Commissioner Jacques Barrot said the deal was likely to lead to consolidation among European carriers.

By Bev Fearis