European Union transport officials have unanimously approved an Open Skies agreement to liberalize air travel between the EU and the U.S. The pact, which was approved March 22 and will go into effect in March 2008, is likely to increase competition among U.S. and EU airlines by removing restrictive rules on flights across the Atlantic and between EU countries.
The agreement replaces existing treaties that dictated that European airlines only offer flights from their home countries to the United States. Under Open Skies, European carriers will be able to operate flights between any EU country and the U.S., but will not be able to operate point-to-point within the U.S. In contrast, U.S. airlines will be allowed to fly between cities within the EU under the new rules.
Open Skies also opens London’s Heathrow Airport to additional carriers that have the cash to secure a slot at the congested airport. (A fifth terminal is planned for 2008.) Under previous treaties, only four carriers—British Airways, Virgin Atlantic, American Airlines, and United Airlines—were allowed to operate direct flights between Heathrow and the U.S.
The agreement is scheduled to be signed later this month; however, its fate is still debatable, as the deal leaves issues over legal restrictions on foreign ownership of U.S.–based airlines—a point of contention that caused previous negotiations to collapse—largely unresolved. EU officials could suspend the deal if the U.S. declines further compromises.
Industry analysts expect international airfares to plummet in the short term once the treaty takes effect. “Initially, we’ll see downward pressure on airfare as a result of the increased competition brought about by this agreement,” says Bob Harrell, president of New York–based aviation consulting firm Harrell Associates. However, he notes that “it will likely be a year before things really shake out.”
Some airlines have already begun planning new services. Continental has announced plans to operate flights between Houston and Heathrow before summer 2008, while Ireland-based low-cost carrier Aer Lingus stated plans to fly from Dublin to San Francisco, Orlando, and Washington Dulles once the agreement takes effect.—Rachel Gecker