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European Court deals blow to open skies deals

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European Court deals blow to open skies deals

Old 1st Feb 2002, 14:23
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Unhappy European Court deals blow to open skies deals

Brussels scored a crucial victory over eight members of the European Union on Thursday when the European Court of Justice indicated that the countries had broken EU law in signing air service agreements with the US.

The preliminary findings by advocate general, Antonia Tizzano, are non-binding but in most cases the panel of judges follows the ruling of the advocate general in reaching the final decision.

If the final ruling, which is due later this year, finds in favour of the Commission, it will strip EU member states of their authority to negotiate bilateral aviation agreements with the third countries, including the US, and transfer those powers to Brussels.

The transfer of power is likely to prove the catalyst in shaking up the arcane rules governing global aviation, which date from just after the second world war.

The regulations, established under UN charter, effectively prevent foreign ownership of airlines and have blocked cross-border consolidation in an industry that suffers widely from overcapacity and inefficiency.

A carrier that is not controlled by nationals of a particular country can be (and almost always is) refused permission to fly from the country in question to a third country.

British Airways pulled out of a proposed merger with KLM in 2000, after failing to reach agreement on an ownership structure that would have protected the Dutch carrier's international traffic rights out of its Amsterdam hub. Washington had threatened to refuse KLM permission to serve the US from the Netherlands if the merger went through.

The immediate impact of Thursday's ruling is likely to be a block on any further US-UK negotiations on "open skies". The UK cancelled planned talks earlier this week after the collapse of BA's alliance plans with American Airlines.

London insists it retains sovereign negotiating rights until the final court ruling but privately officials believe that the advocat-general's decision could tie their hands.

Such a freeze would leave Brussels holding a trump card in any future aviation talks with the US - access to London's Heathrow, the world's busiest international airport.

Currently only four carriers can fly between Heathrow and the US - BA and Virgin Atlantic of the UK and American and United Airlines of the US. The other four big US airlines - Continental, Delta, Northwest and US Airways - have lobbied for years for access.

More recently BMI British Midland, which is the second largest airline at Heathrow, has also sought to break into the transatlantic market.

The Commission brought the case in 1998 against the governments of Austria, Belgium, Denmark, Finland, Germany, Luxembourg and Sweden for agreeing so-called "open skies" deals with the US and against the UK for its highly restrictive bilateral accord with Washington.

Mr Tizzano found that all eight states had "infringed the Community principle of freedom of establishment" which should allow a company from any part of the EU to establish operations in another member state.

A nationality clause in each air services agreement means that only an airline from the signatory countries can use those rights.

The advocat-general also found that the seven countries that had signed up to "open skies" deals had "infringed the rules on the divisions of powers between the community and the member states" by making agreements with the US on fares and rules governing computer reservation systems. . . . .Source <a href="http://members.brabant.chello.nl/~j.vanderschaar00/news.htm" target="_blank">Aviation News</a>
avt100 is offline  
Old 1st Feb 2002, 17:19
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"Now it gets interesting" (as Accenture would say).. .Just watch BA's shareprice crumble as they see their protected and outrageously profitable business market go up for grabs to those continental Johnnies <img src="wink.gif" border="0">
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Old 1st Feb 2002, 17:58
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Nonsense, if anything this helps BA as they can now do a tie up with Klm. It is about time the EU took responsibility, the US has been bullying individual countries into agreements that suits only the US, while leaving in place trade barriers that allows their airlines a significant comparative advantage. The only reasons these bilateral agreements existed in the first place was to protect the contribution to the national infrastucture that airlines make. The US makes lot's of noises about free trade, but when push comes to shove either the Unions or big business protect their own and as they buy the president the buy the policy, only if European countries negotiate as one will they be bringing a big stick to the negotiating table with them. Ps. I am not slagging the US simply stating that as long as they have the whip hand they are going to use it.
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Old 1st Feb 2002, 18:21
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Assuming the final court ruling follows the Judge Advocate's opinion, it will then take some years for the EU to take actually over Open Skies negotiations. So what happens in the interim? Probably a status quo at LHR which will help BA/AA/bmi/VS & UAL.
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