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EU / USA open skies negotiations

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Old 14th Jun 2004, 15:18
  #61 (permalink)  
 
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I think you're right, but equally if anyone thinks that the UK/EU are going to permit Uncle Sams state-subsidised hordes to descend on LHR and wipe out the home market of the UKs longhaul carriers in return for the right to fly unrestricted , unprofitable point-to-point routes to the US then they are just as mistaken.
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Old 14th Jun 2004, 16:18
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its such a relieve, despite some of the previous posts, to understand that "Shannon and the Irish Goverment" are not the "one and only" ingredient threatening to bring these negotiations to a stumbling halt!!!
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Old 14th Jun 2004, 18:26
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Despite Hobie's inexplicable doubts about the gravity of the Shannon stop, I'll pass over that and focus on what baffles me about the current position.

Originally, we started with the idea that any airline from either the US or EU could fly transatlantic between any two points. Now I know LHR is a big issue, but I don't think cabotage is on the table; indeed, I'm surprised (a) that the Americans have granted as much as they've granted and (b) worse still, that the Europeans should even want to fly domestically in the US. I mean, the fight against low costs is not much different in the US than it is here; the big airlines are being hit left, right and centre by low cost carriers like Air Tran, Spirit, JetBlue and that lot from Texas. If European carriers were to be thick enough to wade through all the formalities of getting into the US, they'd be setting up a full service airline, marketing to get their names better known and then, the low cost carriers, which can move a lot faster than the big boys, would cut the two feet from under them. Why would they possibly WANT to do this? Wouldn't they be far better advised to focus on the fight they're currently involved in, rather than opening up a new front?

So, this raises a question about what the hell Loyola and the Brussels lot are playing at? Yes, US carriers want more access to LHR; yes, it's slot restricted, but if they want this, why not trade like for like; give bmi its coveted routes, allow access to more US cities from LHR (such as those like DFW, CVG, ATL and IAH currently only served from LGW) and focus on transatlantic flying. The second biggest tragedy of this silliness is that the chance of building the world's biggest open aviation area is being impeded by something that even if won, may never be used. The biggest tragedy would be that some airline might actually use and lose thousands of jobs and have to shut down as a result. So, stop arsing around and get the deal done.
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Old 15th Jun 2004, 14:14
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Iron City

So if I understand you correctly, and since the EU should be treated as one big "domestic" market, then N-reg. UPS and FedEx aircraft will be barred from performing the sort of flying that they currently do? Don't have a problem with that ....
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Old 15th Jun 2004, 23:31
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So the logical answer is to cancel all outstanding intra-EU traffic rights enjoyed by any US entity (ie UPS, FEDEX, etc...).

Wonder whether the EU powers-that-be have the cojones for that??
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Old 16th Jun 2004, 04:42
  #66 (permalink)  
 
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Been absent for a while, but good thread.

A few points to ponder:

How many major airports in the US are served by BA? How many major airports are served in the UK by a single US airline?

I think BA serves 11 airports in the US, where as I think AA serves three or four in the UK, with UAL even less. VA probably serves more destinations in the US than any US carrier does in UK.

There is one airport in the UK that all US airlines wish to go to, LHR. How about we restrict VA, BA and BMI to one major US airport!

The RPK's generated by less people in the US is larger than more people in the EU. There is just more flying in the US than anywhere in the world.

The US airlines are not really the ones psuhing for open skies, they have litle to gain, call it protectionism if that makes you feel better, but it is just the way it is. We do not prohibit EU airlines from serving the US, we just wish to get something in return and there is not much being offered, since the US have the largest market. Someone said that BA should not be forced to give up slots at LHR, well, cannot have your cake and eat it too, but that is what it appears to be the EU wants.

Yes, some airlines were subsidized as a result of 9/11. Most EU airlines, through the times, have been state subsidized because of poor economics, a few still are, so lets just call that an even draw. Heck, BA certainly gained from being state owned.

So I ask all my friends from across the pond: "How would open skies be a benefit to US airlines and perhaps more importantly, why are the EU airlines so keen on geting it?

Last edited by Diesel8; 16th Jun 2004 at 04:53.
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Old 16th Jun 2004, 06:58
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There is one airport in the UK that all US airlines wish to go to, LHR. How about we restrict VA, BA and BMI to one major US airport!
Again missing the point that the EU is a single market. How many EU cities do Delta/ United et al fly to?
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Old 16th Jun 2004, 07:10
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Perhaps no-one in America knows that there is anywhere else in the UK but London. Ya'll know, Buckingham Castle in Londonshire?
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Old 16th Jun 2004, 10:27
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Diesel8 - your post misses the point in all sorts of ways. Firstly, bmi have the slots at LHR but currently can't fly to anywhere in the US from there - the right for them to fly to one airport would be an improvement.

Next, to the best of my knowledge, there are no restrictions on US carriers operating to anywhere in the UK with the exception of LHR - so if they want to fly to Bristol, Blackpool or Biggin Hill, then they can.

Next, in trade terms, we aren't comparing UK with US, we are comparing EU with US. And whilst AA may only fly to three or four destinations in the UK, they fly to considerably more than that in the EU.

Next, you can't call it a draw when there are definite losers. There are private companies in Europe who have never had subsidies, and never sought them. You are saying that the huge US airlines - privately owned! - ought to be compared to the inefficient products of bureaucracy that are the state airlines in the EU? Privately owned airlines in the EU either survive or disappear - and there have been more than a few that have tried to get into the US market that haven't managed it. bmi is only the latest. Privately owned airlines in the US get state subsidies when they can't turn a profit - and if that isn't enough, then they stop paying their creditors for as long as it takes to sort out their finances again.

In the real world of finance, rather than the protected world that is the US (and secondarily, the restricted world that is Bermuda II), UA would have had to sell assets to survive bankruptcy - in a much more compact shape than before - and some of its best assets are its slots at LHR, which held their value. That would have allowed airlines who thought they could make a go of it to buy them and do something with them. In the real, demand-led world of economics, rather than the supply-led regime that exists at LHR and through Bermuda II, airlines would have to set fares to compete with each other - which would make access to LHR a lot less desirable, anyway - it is only because there is a restricted marketplace that the London-US routes are so lucrative - with business class fares typically 50% higher than comparable unrestricted routes elsewhere in Europe, and oddly enough, almost the same for the four airlines that operate on the routes (according to old British Midland press release).
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Old 16th Jun 2004, 14:11
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First off, the thought that americans have no clue about EU land is getting a bit tiresome and secondly, I was born and raised over there.

Yes, Delta et al serves a decent amount of EU destinations. However, due to travel patterns, for every one destination a US carrier serves in europe, that corresponding country's carrier serves 2-4 in the US. Case in point, SAS serves three US destinations, where as no US carrier serves Copnhagen. Not because of lack of access, at least that I know of, but lack of passengers. I know, that UAL, a member of the star alliance, wanted to serve CPH from Dulles, but apparently that was opposed strongly by SAS. SAS of course being a partnership
of Denmark, Norway and Sweden.

The point here being, that while many US carriers do have atlantic flights, it is not the lifeblood of the airlines, the domestic US market is more important.

LHR is not the only airport in the UK, but I think we can agree, that it is the most desireable in terms of getting access. As we have seen, it does command a fare premium. So, one could say, that not getting meaningful access, would indeed be a advantage to BA. Not only on the atlantic portion, but even domestically.

Carnage says:"I think you're right, but equally if anyone thinks that the UK/EU are going to permit Uncle Sams state-subsidised hordes to descend on LHR and wipe out the home market of the UKs longhaul carriers in return for the right to fly unrestricted , unprofitable point-to-point routes to the US then they are just as mistaken."

As far as state subsidies goes, I am curious what US airlines we are talking about and whether we are talking post 9/11? The US is not in the habit of subsidizing airlines, owning them or having shares in them. The list of airlines in the EU that recently have been or still is subsidized, owned or in part held by the repsective goverment is rather long. So, while I do not think UAL should be granted a loan guarantee, I also feel that vis a vis EU airlines, that it is a moot point and in the case of the vast majority of US carriers, it was a direct result of 9/11, not an ongoing thing.

So my question is again, why should the US airlines push for open skies? What advantages would they gain? It is notable, that the big push is coming from EU airlines, not the US ones, so something tells me, that companies like BA sees an advantage, where as DAL does not.

Last edited by Diesel8; 16th Jun 2004 at 14:24.
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Old 16th Jun 2004, 15:11
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BA wants the status quo. That is why they are pushing so hard for a "comprehensive" agreement - meaning complete, meaning unachievable - to kick the ball out of touch for as long as possible. This means they can continue to use their restricted access to LHR to keep fares high. Incidentally, suppose there was much more access to LHR - what do you think would happen? My guess is that airlines would stop making money on business routes to the US, and the number of connections at LHR (which is what make it so attractive to business travellers in the first place - let's face it, it has few other redeeming features!) would fall.

With regard to UA, who do you think is the dominant airline in Star? I'll give you a clue, it's not SAS.

"However, due to travel patterns, for every one destination a US carrier serves in europe, that corresponding country's carrier serves 2-4 in the US. Case in point, SAS serves three US destinations, where as no US carrier serves Copnhagen"

These two sentences are meaningless. Do you mean, "If a US airline flies to city XXX, then the flag carrier that is based in city XXX will fly to 2-4 US cities"? I think that's kind of what you mean. If so, this says nothing about the level-ness of playing fields or otherwise. I mean, it wouldn't surprise me if the reverse applies as well - "If a EU airline flies to city YYY in the US, then a US airline will fly from there to 2-4 EU cities."

I know that people in the States have got used to justifying anything by reference to 9/11 - but why should US airlines have received subsidies as a result? Before you answer that, bear in mind that European airlines generally don't receive subsidies now - certainly nothing like the billions of dollars that were thrown at US carriers in the last couple of years - and didn't as a result of 9/11. There are countries who have lost their flag carriers since then whilst all the dinosaur US carriers - not flag carriers, just businesses exploiting their dominant market position and fortuitous location - are still lumbering along.

"Lack of passengers" - low cost airlines make their own passengers! Or do you think that we - or the federal government - should pay US airlines to operate on more routes that they can't make profitable?
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Old 16th Jun 2004, 15:43
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"The French state injected about 20 billion francs (3.05 billion euros, 3.54 billion dollars) in Air France subsidies between 1994 and 1997."

"The recent reported statement by the chairman of Alitalia claiming that government help is needed to prevent the bankruptcy of the Italian flag carrier." (Again??)

"1996, under the eagle eye of Commissioner Kinnock, Iberia received state aid of £460 million and that was approved under the market economy investor principle. We shall see how that works out. In other words, the flag carriers of six European Union member states out of 15 have between them received £6.364 billion of state aid over the past five years. Forty per cent. of EU states have received that grotesquely large amount of state subsidy--and some, such as Air France and Iberia, have repeatedly come back for more."

"On Wednesday, Ms de Palacio announced a limited package that would allow European governments to help airlines, after the 11 September attacks pushed the crisis-bound industry into turmoil."

Should I go on?

Yes, that sentence came out a bit backwards. What I meant by travelpatterns, is that a lot more europeans travel to the states than vice versa. People in the US seem to fly more domestically. While that is certainly no ones fault, that is just how it is and as such, I cannot see why open skies would be advantageous to US airlines, just like opening LHR would be disadvantageous to BA.

SAS, can because of their network, profitably serve the US, but only by pulling people from all over Scandiland and to a limited extent EU. But, in the reverse, no US carrier serves CPH, because there simply is not enough americans going there. Sure, a american carrier could, after open skies, set up the same network, but I doubt it will happen, since US carriers are more concerned about domestic ops.

(In case of Star, from what I can see, Lufty and UAL are the big dogs)

As much as this pain you, there are a lot more people wanting to visit the states, than visit EU. Europeans tend to travel on EU airlines and to a limited extent, prefer their own national brand.

Again I must ask, because I never get an answer, why should US airlines push for open skies? The fact that I canot seem to get a response to that, tells me, that EU airlines has lots to gain and US most to lose.

Last edited by Diesel8; 16th Jun 2004 at 16:08.
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Old 16th Jun 2004, 15:48
  #73 (permalink)  
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Young paul

Tell me European airlines of comperable size to PANAM, EASTERN, MIDWAY, TWA and BRANIFF that are not in existance in a similar time frame?

European airlines are FAR more subsidized than US airlines that have to pay health insurance and retirement costs for their employees far above what a European airline would have to pay because of the Nanny state.

Then of course you have the direct cash gifts to European airlines that DWARFS anything that goes on in America

Deisel 8, You forgot Olympic airways. Just got another round of grants.


Cheers
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Old 16th Jun 2004, 17:35
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that have to pay health insurance and retirement costs for their employees far above what a European airline would have to pay because of the Nanny state.
I think you'll find my employer pays an awful lot of pension and National Insurance contributions for me, not to mention private healthcare. Wouldn't want to live on the $100 per week state pension now.

Diesel8s quotations on EU subsidies are rather disingenuous. AF had susbsisdies ending in 1997. Iberia got the cash in 1996. Alitalia are banging the begging bowl but the Italian government has repeatedly said no. Olympic haven't had any cash for a long while. The quote about 40% of EU states paying subsidies is undated.

What is clear is that since 2001 the US carriers have received billions of dollars in direct subsidy from the ATSB, plus free security enhancements (flight deck doors for example), Chapter 11 protection and still they appeal for assistance because of the high price of oil. Since 2001 AFAIK no European airline has received any state subsidy. Somebody mentioned that more Europeans visit the USA than vice versa and they prefer their own national carriers. Well if thats the case then why are US government permitting the subsidies to be spent on international routes? By all means take the cash if thats what it takes to maintain an essential domestic air network, but using it to compete with unsubsidised airlines on your loss making international routes is nothing other than pure protectionism.
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Old 16th Jun 2004, 21:33
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Second that about the cost of employment in the EU. Do you know how much the "nanny state" costs??!! I do payroll for 2 people, and the cost of employing them is as much as a third person.
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Old 18th Jun 2004, 14:48
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Are there any comparisons showing that the EU airlines are competitive with the US airlines as far as operating costs are concerned? Would the inter-US market be profitable for foreign carriers?
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Old 18th Jun 2004, 18:59
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I'm sure there are comparisons available, but I think the key issue is that European carriers have enough on their plate trying to fend off the likes of FR, EZY, etc., without opening up a new front. It's not the "majors" they need to worry about; it's the likes of Southwest, Jetblue, Airtran, etc, which are not only a lot more efficient, but can move a lot faster. So, the danger is that a European carrier could go to all the trouble of setting themselves up, marketing etc, only for a low cost like Southwest to come in and make mincemeat of them. And where would they base themselves? A major city, to which they fly internationally, which isn't already a hub of a major carrier or which isn't coveted by a low cost carrier. Let me know if you find one!!

To cut to the chase; winning this concession would only be equalled as a disaster by some European carrier actually using it.
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Old 22nd Jun 2004, 19:14
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I was just wondering if anyone had heard any progress on this; is it completely impossible that a deal might be done in time for this weekend's summit in Ireland?

I read this week (can't remember if it was Airwise or ATW news) that there was a dispute between various EU members (possibly along the lines of the EU constitution talks this weekend), where the Germans and others were objecting to having to wait for the LHR issue to be sorted out.

What's most frustrating is that everyone knew that the LHR issue would be a fraught and incredibly difficult one to deal with; I still don't understand why cabotage has to be brought into it; a third UK airline wants to fly to the US and more US airlines want to fly to LHR; can't they just agree two allow one from each country and a progressive growth in the number of cities served and frequencies. This could go on for years otherwise, holding everyone else up.
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Old 23rd Jun 2004, 12:10
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quote

"From an Irish perspective, our own government is acting up over SNN again (although I suspect that much of that is drum beating ahead of the Euro elections), so as soon as the deal can be done, we get increased access and the SNN stop gets phased out, hopefully very quickly."

and

"I was just wondering if anyone had heard any progress on this; is it completely impossible that a deal might be done in time for this weekend's summit in Ireland? "

don't know if this is a good sign or a bad sign for SNN but guess where the Summit meeting between President Bush and the EU leaders is to be held? ...... yes!!!! ... Shannon !!!!
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Old 23rd Jun 2004, 16:14
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It is a cruel (but much deserved - and even more enjoyable ) irony that the deal, if it is done, to end the SNN stop could be signed a mere 8 miles from Shannon itself!

Unfortunately, there's been very little news, apart from reports of a split between various European countries. It seems absurd that LHR is still the sticking point and that it's holding everyone else up. My hope, however forlorn, is that the EU and US are working feverishly together to cobble a deal together in time for the Summit. At the very least, I hope a mini deal can be done, excluding LHR.

It is a cruel (but much deserved - and even more enjoyable) irony that the deal, if it is done, to end the SNN stop could be signed a mere 8 miles from Shannon itself ! I didn\'t miss that irony!

Unfortunately, there\'s been very little news, apart from reports of a split between various European countries. It seems absurd that LHR is still the sticking point and that it\'s holding everyone else up. My hope, however forlorn, is that the EU and US are working feverishly together to cobble a deal together in time for the Summit. At the very least, I hope a mini deal can be done, excluding LHR.
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