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Breaking: US and EU Agree to Open Skies Expansion

March 25, 2010 at 4:00 PM | by | Comments (3)

Don't get too excited. Congress can still step in and squash this new liberalization agreement, which looks to deepen the links between US and EU airlines in order to increase efficiency and reduce costs. The more significant version of Open Skies—allowing unlimited access to and from US and European airports for all American and EU carriers—was already signed three years ago. This new agreement is the next step. It lifts restrictions on foreign ownership of domestic airlines, currently capped at 25% in the US and 49.9% in the EU, thereby enabling closer coordination across mutually owned airlines.

Of course airlines could always exploit that coordination by reducing costs while keeping prices just as high. We don't put anything past them. But the idea is to level the playing field and hope that particularly cheeky airlines will take advantage of the opportunity to drive down ticket prices. Since the EU is predicting tens of thousands of new jobs on their end—the result of lower costs driving more travel to Europe—we're assuming they're presumably counting on someone to step in. Richard Branson, we're looking in your direction.

In the past, Congress has resisted lifting caps, rightly or wrongly reasoning that protecting the domestic airline industry was more important than airline liberalization. Hopefully this new deal is a sign that negotiators have worked things out on the domestic side, and that they can get this passed. In the meantime the Transportation Department has confirmed a bunch of other smaller steps, including cracking open some local restrictions on night flights that were preventing US carriers from accessing European airports. Not a bad day's work.

[Photo: Jpatokal / Wiki Commons]

Related Stories:
· EU strikes new "Open Skies" aviation deal with U.S. [Reuters]
· Open Skies Coverage [Jaunted]
· Airline News Coverage [Jaunted]

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Return to » Breaking: US and EU Agree to Open Skies Expansion


Lifting of Foreign Ownership Restrictions?

According to all other press reports I see, the new US-EU Open Skies agreement does NOT lift the foreign ownership restrictions, as you state. Per the AP: "The new agreement contains no commitment to change existing statutes that limit foreign ownership in U.S. carriers and bar foreign control of U.S. carriers, DOT spokesman Bill Mosley said."
IflySFO on March 25, 2010 at 9:06 PM #Permalink

Reuters story linked says opposite

Very interesting. The Reuters writeup - and all the other reports that were based on it - seems to have changed.

Old version headline: "EU strikes new "Open Skies" aviation deal with U.S."

Old version lede: "European airlines might soon be able to take majority control of U.S. airlines and get access to lucrative U.S. government business in a deal struck on Thursday -- but real change will hinge on approval by the U.S. Congress, a far from certain prospect."

Old version grafs: "This draft deal represents a significant breakthrough in the process of normalizing the global airline industry," European Transport Commissioner Siim Kallas said. "Both sides have agreed to increase regulatory cooperation, and remove the barriers to market access that have been holding back the development of the world's most important aviation markets," he added. Current laws in the United States limit foreign ownership of U.S. airlines to 25 percent, but that will be loosened if Congress approves the measures agreed on Thursday."

Now Reuters has changed their article to "EU/US boost Open Skies, ownership still a question" and taken out the stuff about mutual cap lifting completely. I wonder if someone leaked something a little too early, and now folks are walking it back. Or if it was flat wrong. Definitely something to look into...

Omri on March 25, 2010 at 11:05 PM #Permalink

Map

What is that a map of and where did you get it?  Is it a map of all the long-haul air routes?
Max Drillings on March 26, 2010 at 9:07 PM #Permalink

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