US-EU open skies

I've been slow reporting on the news this week that EU and US officials have tentative agreement on open skies, mainly because so many other blogs have already commented on it. As I'd expect, UK is against the agreement (refer The Independent). No surprise there - British Airways and Virgin Atlantic could be significant losers under open skies.

With the help of Upgrade Travel Better's post on open skies and a handy guide to freedoms by The Cranky Flier, what does the tentative agreement mean?

Currently the right to fly to, from and over a country are negotiated bilaterally. The open skies agreement however would apply to USA and all of the European Union at once.

1. Allow European airlines to fly from anywhere in the EU to any point in the U.S., and vice versa.

This replaces negotiated 3rd and 4th freedoms (eg Air France can take passengers in both directions between France and USA, and a US airline can take passengers in both directions between USA and France) with 7th freedom (eg Alitalia can take passengers in both directions between France and USA).

This also would appear to give US airlines the ability to take passengers on flights within Europe (or rather between EU countries), and not just those going to or from USA.

That is a huge concession from EU as European airlines don't have the option to take passengers on flights solely within USA (which requires 9th freedom).

2. If open skies goes ahead any US or EU airline can fly between USA and London Heathrow airport (LHR), subject of course to getting slots.

I mentioned British Airways (BA) and Virgin Atlantic earlier. Currently they have a cosy deal whereby only 2 UK and 2 US airlines are allowed to fly between USA and London Heathrow (LHR) airport. Effectively BA has a highly lucrative oligopoly at this important hub.

Which is where the third UK airline comes in. Bmi has a significant proportion of LHR slots, and recently gained some more through the purchase of BMed (despite the similar name a previously unrelated airline which contracted for British Airways). Lufthansa is in a good position having an option to take over Bmi.

3. Enable European companies to own as much as 49.9% — and in some circumstances, more than 50% — of U.S. airlines, up from the current 25% limit.

   That would help Richard Branson get Virgin America up and running, and opens the door to trans-atlantic mergers (perhaps Air France KLM Delta Northwest?).

There are still hurdles to cross in both US and EU for the agreement to be ratified. Watch this space.