Open Skies deal offers trans-Atlantic flight opportunities

European companies would be allowed larger stakes in US airlines under a tentative agreement reached between the US and European Union.

It also would give carriers more freedom to choose trans-Atlantic routes and potentially lead to lower fares.

The agreement, announced yesterday by the US Transportation Department, would allow European airlines to fly from anywhere in the EU to any point in the US, and vice versa.

For example, it would end restrictions on the number of airlines allowed to fly between the US and London’s Heathrow Airport, one of the world’s busiest.

Only four carriers – United Airlines, American Airlines, British Airways and Virgin Atlantic – now serve that market.

Transportation Secretary Mary Peters said the agreement “will offer more choice and convenience to American consumers.”

Another key aspect of the deal enables European companies to own up to 49.9% – and in some circumstances, more than 50 percent – of US airlines, up from the current 25% limit. Yet another provision could help Richard Branson’s Virgin Group Ltd. Gain regulatory approval needed to launch a US subsidiary, Virgin America Inc.

EU Transport Commissioner Jacques Barrot said he would ask EU nations to back the deal when EU transport ministers meet on March 22.

There is a US-EU summit in May at which the deal would then likely be considered. The US Congress must also back the deal before the new rules would kick in on October 28.

“We have an opportunity to unlock major benefits on both sides of the Atlantic,” Barrot said in a statement. “In economic terms, this unprecedented agreement would represent a step change.”

Air travel in Europe and the United States accounts for 60% of global air traffic, and an ambitious EU-US open skies deal could allow more airlines to fly the lucrative trans-Atlantic routes, possibly offering cheaper tickets.

The EU forecasts that within five years the deal could put an extra 26 million people on trans-Atlantic flights. Just under 50 million travellers now make that trip every year.

“Any agreement … would provide enormous benefits to airline passengers,” David Stempler, president of the Washington, DC-based Air Travellers Association said.

Airlines, meanwhile, were cautious in assessing the tentative deal.

Michael Whitaker, senior vice president at UAL Corp, the parent company of United Airlines, said: “We have long pressed for completing the work of deregulation and are encouraged by the progress and the opportunities that the tentative agreement would bring for United and our customers.”

A spokesman for American Airlines said the company would not comment until it had seen the details.

An EU official, speaking before the deal had been approved, said the US had also agreed to drop current rules that make it harder for EU airlines to buy stakes in carriers based in Africa or non-EU European countries.