Bureau of Economic, Energy and Business Affairs
March 9, 2007
U.S.-EU Air Transport Agreement - Open Skies Plus
On March 2, negotiators from the United States and the European Union initialed the text of a comprehensive, first-stage Air Transport Agreement that, if finally approved, will have significant economic benefits for America and Europe. The Agreement would replace existing bilateral agreements between the United States and EU member states and establish an Open-Skies Plus framework between the United States and all 27 EU member states.
Valuable Open Skies Benefits: The Agreement would authorize every U.S. and every EU airline to:
- fly between every city in the European Union and every city in the United States;
- operate without restriction on the number of flights, aircraft, and routes;
- set fares according to market demand; and
- enter into cooperative arrangements, including codesharing, franchising, and leasing.
In addition, the Agreement fosters enhanced regulatory cooperation in regard to competition law, government subsidies, the environment, consumer protection, and security. It establishes a consultative Joint Committee through which the U.S. and the EU can resolve questions and further develop areas of cooperation.
Investment Measures: The Open Skies Plus framework of the Agreement would:
- Allow U.S. investors to invest in a European Community airline, as long as the airline is majority owned and effectively controlled by a member state and/or nationals of member states;
- Make clear that, under U.S. law, EU investors may hold up to 49.9 percent of the total equity in U.S. airlines, and on a case-by-case basis even more;
- Open the possibility for EU investors to own or control airlines from Switzerland, Lichtenstein, members of the European Common Aviation Area (ECAA), Kenya, and America's Open Skies partners in Africa without putting at risk such airlines' rights to operate to the United States; and lastly,
- Grant new traffic rights to EU carriers that would open the door to cross-border airline mergers and acquisitions within the EU, which is possible today only if airlines are prepared to place their international operating rights in legal jeopardy.
Other Benefits: The Agreement erects a pro-growth, pro-competitive framework that would:
- Eliminate outmoded restrictive arrangements affecting London Heathrow airport, where U.S.-British service is now limited to only four airlines;
- Allow EU airline transport of non-DOD USG passengers (employees and civilian-agency-funded contractors) and cargo on scheduled and charter flights between two foreign points and on all U.S.-EU routes not covered by a GSA "city pair" contract; and
- Allow EU airline transport of cargo between the United States and all third (non-EU) countries, and transport of passengers between the United States and members of the ECAA as of the date of signature of the Agreement.
The EU Transport Council is expected to consider the Agreement March 22-23. If approved, it could be signed at the April 30 U.S.-EU summit in Washington, DC, which would allow rights to be applied October 28, 2007 (the start of the International Air Transport Association's Winter Traffic Season). The U.S. and EU have agreed to begin second-stage negotiations on possible further liberalization within 60 days of application of the Agreement.