Branson warns US that protectionism will make Europeans 'rip up' open skies treaty

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The Independent Online

Virgin Atlantic's president Sir Richard Branson has warned that a treaty liberalising air travel between America and Europe will be "ripped up" unless the US government allows American carriers to be taken over by foreign rivals.

"It will depend on whether the American congress is going to go back to the bad old days and be protectionist, or be brave and truly open the skies," Sir Richard said. "It looks like they are backtracking completely on it."

Sir Richard issued the warning with four weeks left before open skies, a landmark treaty struck between European and US lawmakers that opens transatlantic routes to full competition for the first time.

He warned that EU politicians would scrap the deal if US politicians don't follow through on pledges to eliminate rules prohibiting foreign ownership of US carriers. He said: "The Europeans have already said that they will rip up the first stage if the US doesn't enter the second stage."

The first phase opens the transatlantic market and allows US carriers to fly routes between European cities. European carriers remain barred from the domestic US market however and are prohibited from owning US carriers.

If the US does eliminate its regulations, Virgin would increase its 25 per cent stake in Virgin America and take a direct management role there, Sir Richard said.

Any EU member state has the power to void open skies. That would be a disaster for many carriers as nearly all the major American carriers have announced new routes, while British Airways is planning a new airline, called OpenSkies, from continental Europe to the US. BA is also starting a business-class only airline flying between London and New York.

Talks about phase two could begin as early as May. Chief operating officer Lyell Strambi warned that Open Skies would be a "damp squib" that would change little for customers. He said: "Fares won't get much lower, as airlines are already offering economy tickets at their lowest levels for years."

Virgin has also unveiled a $2.6bn order with Rolls Royce to provide the engines on the first fifteen 787 Dreamliners, Boeing's widebody aeroplane, that the airline has ordered. The deal includes rights for RR to equip a further 28 787s.

Sir Richard issued the litany of announcements at a press conference in New York. Virgin also said it will carry out a pilot programme to integrate six GM hydrogen-powered sports utility vehicles into its fleet of cars that ferry first class passengers to airports in New York and Los Angeles.

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