Brussels, 05/03/2007 (Agence Europe) - Eagerly awaited since 2003, a draft Open Skies agreement has finally seen the light of day. A deal was struck on 2 March at the second meeting this year of US and EU experts. It includes a protocol on ownership and investment rules and monitoring US airlines but does not require any changes in US legislation -the point on which the success of the negotiations hinged. Alongside areas of the deal negotiated back in November 2005 (see below), there are new rules on airline shareholdings and shareholder voting rights, removing restrictions on international routes and facilitating competition and trade.
On ownership, investment and control rules, the draft deal struck on Friday foresees that the United States will be able to continue to apply a 25% upper limit on foreign ownership of voting equity in US airlines. This was a symbolic issue for the US, which doesn't want foreign companies to control business likely to be crucial for national security. In return, the EU was able to get the US government to agree that ownership by nationals of one or more EU Member States of as much as 49.9% of the total equity of a US airline shall no longer be deemed, of itself, to constitute control of that airline and any exceptions shall be considered on a case by case basis. The compromise means that no changes in US legislation are required.
EU and US airlines can continue to enjoy what are known as '7th Freedom Rights for Passengers', namely the right for EU airlines to operate flights between a city in the US and a city in the EU and then fly on to a different country. Two preconditions for the 7th Freedom have been scrapped, namely the obligation to negotiate a bilateral agreement with the third country in question and the obligation to fly from an airport of the EU airline's country of origin. Once the draft deal has been endorsed by the Council, Spanish airline Iberia, for example, will be able to fly between Mexico and Miami (this is not possible at present because Iberia is forced to fly from a Spanish airport under current rules). This measure will no doubt act as an incentive for EU airlines to open offices outside the EU and fly directly from those countries. The same rule will also apply to all-cargo transport (see below).
The EU has also been able to win access to the US 'Fly America' programme which was previously not possible for non-US companies. 'Fly America' covers the transport of passengers and cargo financed by the US federal government. Another important part of the deal for the EU are the provisions on antitrust immunity to facilitate the development of airline alliances. Equally important for the EU is the fact that the draft agreement foresees that if an EU airline acquires control of a third country airline that has signed agreements with the US, the benefits of those agreements will no longer be lost once the deal goes through.
Another concession won by the EU negotiators are rights in the franchising and branding of air services. Without applying cabotage, EU airlines will be entitled to sell their brandnames to operators flying in the United States.
There is not yet a full meeting of minds on provisions on EU-US technical cooperation in relation to climate change, and whether civil aviation should be incorporated in the EU's carbon trading system - Washington is fiercely opposed to this (see EUROPE 9340). The deal does, however, include provisions on joint EU-US approaches in international organisations like the International Civil Aviation Organisation (ICAO).
The above elements are to be added to the existing provisions of the November 2005 agreement, which provides for flights to be operated between any city in the EU and any city in the United States without any restrictions on pricing or capacity.
When it comes to freight, EU airlines have won the right to operate flights from the United States to third countries without the obligation to fly from the EU ('7th Freedom - All Cargo) but the equivalent right will not be granted to the US by all Member States (it will be granted by the Czech Republic, France, Germany, Luxembourg, Malta, Poland, Portugal and Slovakia).
The deal also includes a number of other provisions to boost security and consolidate trade relations, including the establishment of a Joint Committee to handle any issue covered by the agreement. The first part of the agreement is expected to be endorsed by the EU Council on 22 March 2007 and by the US Congress by October this year. (aby)