EU ‘loses out’ in open skies free-for-all

Date: 30/11/1995

By Tim Jones

FAILURE to negotiate a joint 'open skies' aviation agreement with the United States will distort the emerging free air-traffic market in the EU, the European Commission will warn next week.

In a paper prepared for the 7-8 December meeting of transport ministers, the Commission argues that if the US continues to strike bilateral market-opening deals with member states, the whole Union will lose out.

This is the latest salvo in the Commission's battle to win the right to negotiate a joint EU-US 'open skies' agreement on behalf of member states and bring an end to the proliferation of bilateral agreements Washington has been notching up with smaller EU countries.

But since the paper has only been finalised a week before the transport ministers' meeting, no definitive decisions are expected.

The US has long sought freer access to the EU market, but the issue came to a head in December 1994, when the Clinton administration invited Austria, Belgium, Denmark, Luxembourg, Sweden and Finland to sign bilateral 'open skies' deals simultaneously.

The aim was to put pressure on France and Germany to grant greater access, as well as securing the richest prize of all, London's Heathrow.

An inkling of this came in June this year when the UK and the US signed a mini-deal offering an extra slot to a second US carrier and more flights for British Airways between Heathrow and Philadelphia.

Transport Commissioner Neil Kinnock decided to act, worried that the US would win lopsided access to the EU market bit-by-bit while European carriers fail to obtain rights in the American market.

“In any other area, people would be puzzled if they heard of member states negotiating individually rather than as a group,” a Commission official said. “The tactic followed by the US is to divide and rule by working through small member states, gradually increasing pressure on the larger ones.”

US carriers already have so-called 'fifth freedom' rights within the EU, allowing them to pick up passengers in one member state and disembark them in another. While European airlines can fly between some North American destinations, they cannot fly between US destinations.

If these bilateral deals continue, the Commission paper warns, US airlines will be able to build and control a network of EU routes to feed passengers from EU destinations into long-haul services.

This is an area of business they already dominate.

In 1993, US carriers ran 48&percent; of the flights between the UK and the US, 60&percent; of the traffic to and from Germany, and 69&percent; to and from France. Competition in this area is fierce, with a fares war breaking out over the summer.

“The internal market of member states is negligible, but the danger is that once the US have a series of agreements with 'fifth freedom' rights, this will have a cumulative effect,” said the Commission official. “The US has said openly that it will start using this. It needs a critical mass of agreements and it is getting nearer to this.”

As part of a two-pronged attack on the bilateral agreements, the Commission told transport ministers in June that it would draw up a paper showing why a Union mandate would achieve more than national bargaining with the US. It also promised to show the kind of damage that individual negotiations can cause.

With the seven new bilateral agreements only recently down on paper, the Commission analysed the first of the deals done with the US, struck back in 1992 with the Netherlands.

According to the paper to be presented next week, this 'open skies' deal - combined with the link-up between Dutch national carrier KLM and Northwest Airlines and their 176 code-shared destinations in the US - has distorted competition within the European market.

The paper analysed the 1992-94 period when transatlantic passenger traffic was stable at around 1.2 million per year. At the same time, the number of Germans opting for Schiphol instead of their national airports to fly to the US grew by 80&percent;.

“If some have deals and others don't, you will have unfair competition,” said the official.

To avoid this, Kinnock wants a joint negotiating mandate which would supersede all the bilateral deals, although those agreements signed before the advent of the single aviation market in January 1993 would remain in force as long as they complied with EU law.

With the debate on the Commission's proposal for a joint mandate set to heat up once the paper is presented to ministers, Kinnock is still keeping the option of legal action against the 'open skies' seven open.