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US offers UK inferior open skies deal - FT

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US offers UK inferior open skies deal - FT

Old 8th Mar 2018, 12:24
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US offers UK inferior open skies deal - FT

The US is offering Britain a worse “open skies” deal after Brexit than it had as an EU member, in a negotiating stance that would badly hit the transatlantic operating rights of British Airways and Virgin Atlantic.

British and American negotiators met secretly in January for the first formal talks on a new air services deal, aiming to fill the gap created when Britain falls out of the EU-US open skies treaty after Brexit, say people familiar with talks. The talks were cut short after US negotiators offered only a standard bilateral agreement. These typically require airlines to be majority owned and controlled by parties from their country of origin.

Such limits would be problematic for British carriers as they have large foreign shareholdings. Under existing arrangements, UK-based airlines are covered by the open skies treaty that requires them to be majority EU owned. One person attending the London meetings to “put Humpty Dumpty back together” said: “You can’t just scratch out ‘EU’ and put in ‘UK’.” A British official said it showed “the squeeze” London will face as it tries to reconstruct its international agreements after Brexit, even with close allies such as Washington. Negotiators are confident of an eventual agreement to keep open the busy UK-US routes, which account for more than a third of current transatlantic flight traffic. But there are legal and political obstacles that could impede the two sides from reaching a deal in time to give legal certainty to airlines booking flights a year in advance.

In its opening stance the US side rolled back valuable elements of the US-EU agreement, the most liberal open skies deal ever agreed by Washington. Its post-Brexit offer to the UK did not include membership of a joint committee on regulatory co-operation or special access to the Fly America programme, which allocates tickets for US government employees. Washington also asked for improved flying rights for US courier services such as FedEx.

The Americans will play it hard. The mood has changed [against liberalisation], it’s the worst time to be negotiating Senior EU official The UK has also yet to formally offer the US access to overseas territories such as the British Virgin Islands and Cayman Islands, which were not included as part of the original US-EU deal, according to people familiar with the talks. There are also potential issues over the continuation of antitrust exemptions, permitted by the US-EU open skies agreement, which allow airline alliances to set fares and share revenue, according to people familiar with talks. The biggest sticking-point is a standard ownership clause in Washington’s bilateral aviation agreements that would exclude airlines from the deal if “substantial ownership and effective control” does not rest with US or UK nationals respectively. In effect it requires majority ownership by one of the two sides if an airline is to benefit. London asked the US to adjust its long-held policy since it would exclude the three main British-based transatlantic carriers, which all fall short of the eligibility criteria. These are IAG, the owner of British Airways and Iberia; Virgin Atlantic; and Norwegian UK. Sir Richard Branson owns 51 per cent of Virgin, making it majority UK-owned. But he is in the process of selling 31 per cent to Air France-KLM, which could complicate Virgin’s access rights to the US. US airline Delta owns the remaining stake.

The challenge is most acute for Willie Walsh, IAG chief executive, whose group must also clear the EU’s 50 per cent ownership threshold to avoid losing his European operating rights after Brexit, when UK nationals are no longer counted. The EU has been arguing for a change to the ownership and control rule for decades. If the US has never bent before why would they do it just for the UK? Andrew Charlton, aviation consultant One senior EU official said the airline operator was heading for “a crunch”. “From the US point of view, there is not a single big airline that is UK-owned and controlled,” he said. “ Copyright The Financial Times Limited 2018. All rights reserved. Lates
Heathrow Harry is offline  
Old 8th Mar 2018, 22:54
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Just the start of the Brexit nightmare......
Barling Magna is offline  
Old 9th Mar 2018, 00:00
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Don't worry. David Davies will sort it out with a click of his fingers. Easy as toffee.
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Old 9th Mar 2018, 05:18
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Black passports though...
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Old 9th Mar 2018, 06:46
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I thought they were to be blue .........
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Old 9th Mar 2018, 08:48
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Originally Posted by Barling Magna View Post
Just the start of the Brexit nightmare......
Or more opportunities.....
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Old 9th Mar 2018, 09:00
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Anyone who think the Yanks won't squeeze us for all they're worth is nuts.... they are a short-track bully on commercial matters
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Old 9th Mar 2018, 09:33
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Over the 40 plus years in which the UK has been involved in the Europe project, our industries have become increasing European / internationally orientated, by which I mean working across internal European borders / and owned across European / international borders.

The existing Open Skies agreement is between the USA and the European Union / EEA, and our principal transatlantic international airlines are European owned, so under the agreement can operate between UK and the USA, even though the majority shareholders may not be British.

The USA is going to insist that the airlines involved in any new USA / UK Open Skies agreement must be majority USA or UK owned - easy for the USA, which I believe bans majority foreign ownership of the carriers, much harder / impossible for the UK, and in Trump's view of world "free" trade that's fine by him.

Few people who voted in the referendum would have given a second thought to trivial maters like international air agreements; but the thought of possibly fewer flights, less competition and higher fares may make them wonder what they voted for. Once wonders how the likes of our two biggest tour operators and their associated airlines, neither UK owned, will cope trying to offer holidays to Florida, for example from the host of UK airports from which they currently offer service at competitive prices. Could lead to the return of charter flights operated by American or possible new UK owned long haul charter airlines I suppose, but it will potentially challenge their vertically integrated business models.
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Old 9th Mar 2018, 09:41
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Would it be right to say that Norwegian Airways would still be able to fly from the UK to the USA without restrictions, them being members of the EEA.
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Old 9th Mar 2018, 09:52
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Apart from the policies of the USA, why ever would the UK want a Spanish airline to provide its services rather than a British one?
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Old 9th Mar 2018, 09:52
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Clearly an opportunity for a new airline..

lets see.....

A British & Scottish Airline - lets call it British Caled.... maybe not

A cheap airline just running across the Pond or Lake - lets call it Lake.... noooo

Perhaps something new and virgina..... damn

Back to the Eurostar to CDG or AMS I guess
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Old 9th Mar 2018, 09:53
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Originally Posted by Jetscream 32 View Post
Or more opportunities.....
You’re right actually, airlines will be falling over themselves to take advantage of new liberalised agreements with Saudi Arabia and Azerbaijan
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Old 9th Mar 2018, 09:53
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Originally Posted by oldart View Post
Would it be right to say that Norwegian Airways would still be able to fly from the UK to the USA without restrictions, them being members of the EEA.
I would say, if the USA stick to their ownership rules, definitely not, as where the aircraft are registered, they are still a non-British carriers, which under a new agreement could / would prove a major stumbling block. Under the USA / EU agreement they appear to be getting away with it.

Primera will have the same problem as Norwegian, no matter where they base register their aircraft.
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Old 9th Mar 2018, 09:54
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Saudi - The New Dubai!!!
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Old 9th Mar 2018, 09:55
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Originally Posted by Heathrow Harry View Post
Saudi - The New Dubai!!!
May not be too far fetched if the Saudi Crown Price get's his way.
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Old 9th Mar 2018, 09:57
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Yes it's about ownership and control. This isn't the Americans playing hardball, it's pretty standard practice. Otherwise, what would stop - for example - Emirates buying a UK AOC?
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Old 9th Mar 2018, 09:57
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Originally Posted by Council Van View Post
I look forward to the northern favourite airline, a very British company making profits that stay in the UK, starting its holiday operation to Florida etc.

It will make a change from Malaga and the Canaries!
Could be an opportunity for Jet2 to provide charter aircraft for TUI or Thomas Cook, they are well place as one of a very few "British" airlines of any size left!
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Old 9th Mar 2018, 16:23
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Originally Posted by ATNotts View Post
Could be an opportunity for Jet2 to provide charter aircraft for TUI or Thomas Cook, they are well place as one of a very few "British" airlines of any size left!
Wouldn't work as the marketing carrier would not but UK in this case so not allowed (unless TC stays UK controlled and divest Condor).
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Old 9th Mar 2018, 16:25
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Originally Posted by SWBKCB View Post
Yes it's about ownership and control. This isn't the Americans playing hardball, it's pretty standard practice. Otherwise, what would stop - for example - Emirates buying a UK AOC?
The ownership and control clause in all US agreements, and always has been. The killer is the control part as it is much harder to demonstrate than just having 50%+1 owned by UK shareholders.
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Old 9th Mar 2018, 18:13
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I'm amazed at how blase Willie Walsh and IAG are about this. Taking an "it'll be all right on the night approach "
Like many here, I struggle with the "gobsh**e motor mouth" approach of Mr O'Leary but Ryanair have built a huge operation on the back of the common European aviation rules - I do think this is an area where O'Leary has an enormous depth of technical and regulatory expertise in this stuff.
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