US and European Union negotiators concluded a fresh draft deal to deregulate the transatlantic airline market yesterday, amid scepticism over whether it would be approved.
The European Commission said it would submit the agreement to EU governments this month after "a breakthrough" in meetings in Brussels. However, there is expected to be fierce debate when transport ministers meet on March 22nd, as the US has given little ground on loosening restrictions on foreign ownership of its airlines.
The quest for an "open skies" agreement has eluded the two sides since talks were launched four years ago. A 2005 deal foundered in December last year because of congressional opposition to ending a bar on non-US citizens owning a controlling stake in domestic airlines, which the EU made a condition of the deal.
Foreign companies and individuals can own only 25 per cent of voting stock and a further 24.9 per cent of non-voting equity.
The draft agreement merely sets out in writing existing US policy, critics say. In 2004, the Commission sent a similar deal for EU approval, only to see resistance from Britain and Germany sink it.
Britain has, in the past, been determined to resist the loosening of restrictions on the lucrative market between London's Heathrow airport and the US without reciprocal US concessions. Only British Airways, Virgin Atlantic Airways, United Airlines and American Airlines have the right to use the route.
Jacques Barrot, EU transport commissioner, said the deal was worth it. "In economic terms, this unprecedented agreement would represent a step change - it could be worth up to €12 billion in economic benefits and up to 80,000 new jobs."
The US has offered EU airlines the ability to fly between the US and countries with an open skies agreement with it. They could also establish subsidiaries to carry domestic traffic if they met stringent requirements and flew cargo via the US.
The EU has also won the right to restrict US investment in its airlines, and to carry passengers financed by the federal government under the "Fly America" programme, although not on routes between big cities.
The Association of European Airlines, which represents scheduled carriers, gave cautious backing to the deal. "Our initial reaction is that there seems to be a substantially improved balance in the wording of the agreement," said Ulrich Schulte-Strathaus, secretary-general.
The European Court of Justice has ruled that the network of bilateral deals is illegal. If the talks fail, airline alliances would lose their protection under antitrust law. Smaller EU countries, such as Ireland, favour a deal. If ministers do back it, it would come into force in October.
