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EU Is Expected to Back Deal With U.S. to Boost Trans-Atlantic Flights

Associated Press
Wednesday, 21 Mar 2007 | 10:38 PM ET

The European Union is expected to give its support Thursday to a deal with the U.S. that should boost the number of people flying across the Atlantic.

EU transport ministers will meet to approve the "open skies" pact negotiated with the U.S. that would lift restrictions beginning Oct. 28 on what trans-Atlantic routes airlines can offer, in a move that should help cut air fares.

Diplomats said earlier this week they expected the deal to go through despite British worries that allowing more airlines to fly to the U.S. from London Heathrow, Europe's busiest airport, would hurt the two British carriers -- British Airways and Virgin Atlantic. The two currently enjoy a joint monopoly there with two U.S. carriers, American Airlines and United Airlines , for the lucrative trans-Atlantic routes.

It is still unclear if Britain will try on Thursday to insert extras to the pact -- which EU officials call a done deal -- to get more time before Heathrow must be opened up to rivals.

The aviation agreement will allow European airlines to fly from anywhere in the EU to any point in the U.S., shedding current rules that do not allow them to charge what they like.

The EU said this would reduce the cost of tickets, putting an extra 26 million people on trans-Atlantic flights within five years. Just under 50 million travelers now fly those routes.

It claimed the deal will generate benefits of up to $16 billion in five years as ticket prices fall, airlines generate savings and the market grows. That would also create up to 80,000 jobs spread equally between Europe and the U.S., it said.

But EU negotiators have been criticized by British Airways for agreeing to open up Heathrow without securing U.S. commitments to scrap rules that limit foreign investment in American airlines -- specifically a law that does not let non-U.S. investors gain more than a quarter of a carrier's voting shares.

This was one of the EU's key conditions for a deal, and talks stalled for more than a year while the administration of U.S. President George W. Bush tried and failed to liberalize U.S. aviation, amid protest from airlines and labor unions that it could cause job losses and lead to security worries.

EU officials said they would keep up the pressure on the U.S. to open up its market, holding out the threat of suspending part of the pact in 2010 if there is no progress by mid-2009.

Airlines have mixed feelings about the deal and the prospect of greater competition, despite welcoming an expected surge in traffic.

Delta Air Lines spoke up for a fully deregulated trans-Atlantic market on Tuesday, saying it would ultimately benefit millions of passengers who fly the routes. At the moment, it does not have the right to fly from Heathrow to its Atlanta hub, the center for U.S. domestic traffic.

"A key focus for Delta has been to obtain meaningful access to London's Heathrow International Airport," said Delta CEO Jerry Grinstein.

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