New start on open skies

OPEN skies talks between the UK and US aimed at liberalising transatlantic air travel will resume next month after ending abruptly in October, when the US delegation stormed out claiming insufficient progress was being made.

"There are going to be informal exploratory discussions in the middle of February," a Department of Transport spokesman said on Friday.

Airlines on both sides of the Atlantic publicly support the idea of an open skies agreement that would allow UK air carriers to fly more freely in the US, and US operators to fly more freely into Heathrow and from Heathrow to other European destinations.

"We believe it vitally important for the two sides to resume talking," declared a British Airways spokesman. "We have long been an exponent of an open skies air pact between the two nations."

Beneath the surface, however, there is mounting frustration and mistrust on all sides of the multi-faceted talks. A BA/American Airlines business alliance, which might be one of the fruits of an open skies agreement, remains bogged down three years after it was first proposed. Rivals to BA and AA on both sides of the Atlantic fret that the alliance would shut them out of the lucrative transatlantic air route.

"I think BA is facing a softening economy, its stock is way down, and it realises that a large part of its profits come from its hold on Heathrow," said Steven Wolf, chairman of US Airways. "I think they are less inclined to give that up now."

Testing the tone of the February discussions, US Airways plans this month to press its case for slots at Gatwick, allowing it to fly between the UK and Charlotte, North Carolina.

"The Brits pooh-pooh this," said a US government official. "But it's serious. North Carolina is the home of Senator Jesse Helms. Jesse is chairman of the Senate Foreign Relations Committee. The Senate Foreign Relations Committee oversees the State Department, which is leading the US side of the open skies talks."

Beyond the details, both sides wonder if there is a basis for an agreement in the first place. The US has signed bi-lateral open skies agreements with 32 nations. It is pressing to make the UK number 33. But the UK argues that it has the second-most dynamic airline industry in the world after the US, and so should not be forced to make the concessions to Washington that US negotiators have winkled out of other governments.

UK and US negotiators are now talking about a phasing-in of an open skies agreement. This would mean the UK opening Heathrow slots to US air carriers on a graduated basis, as the US allowed UK carriers to select routes it could fly internally in the US.

At the end of this process, US air carriers might have what they want - access to Heathrow and the right to fly on from Heathrow to Paris, Amsterdam, Frankfurt and other destinations like British and European airlines.

UK air carriers might have what they want. BA wants the US Justice Department to grant its alliance with American Airlines immunity from US anti-trust legislation. This would allow BA and AA to share customers and costs.

Virgin wants the right to buy or build its own airline in the US. Currently, US law restricts foreign ownership of US airlines to 25 per cent, although the Clinton administration has publicly called for this limit to be lifted to 49 per cent.

The problem is, the talks are so complex that whenever a concession is granted to one party in one aspect of the talks, it offends another party in another aspect of the talks.

Meanwhile, British officials see American price-cutting on air routes as predatory. US officials see the UK opposition to cut-rate air fares as restrictive.

"Not soon," said one airline official when asked when air travellers might expect a new, deregulated transatlantic regime to materialise.

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