Heathrow scramble starts as EU agrees historic 'open skies' deal

European transport ministers took the historic step of approving an open skies pact to liberalise the transatlantic airline market yesterday, triggering a scramble to launch new services from Heathrow to major US cities.

Several UK and US carriers announced their intention of beginning flights from what is the world's busiest international airport after the UK fell in line and decided to support the draft aviation agreement signed three weeks ago in Brussels.

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The agreement means that any EU airline will be able to fly to any point in the US from anywhere within the community while any US carrier will be able to serve Heathrow and internal EU routes. However, the US domestic market will remain off limits to EU airlines.

The deal fell short of what was wanted by the UK Transport Secretary Douglas Alexander and British Airways and Virgin Atlantic - an open aviation area covering the US and EU within which all restrictions on ownership and control of airlines would be scrapped.

Mr Alexander succeeded in getting a "termination" clause included in the agreement under which the EU can automatically withdraw traffic rights to US carriers if the American government fails to sign up to an open aviation area by 2010.

"We have secured, in effect, now not simply a commitment from the Americans to talk, but an obligation on the Americans to act in relation to stage two," he added. "This means that I have ensured that the UK will have the right in 2010 to re-impose some or all of the restrictions that US carriers face today."

Willie Walsh, the chief executive of BA, said the UK must stand by this pledge if the US did not deliver full liberalisation by 2010, saying that the deal, as it stood, provided no meaningful concessions to EU carriers but "short-term gains for the subsidised American aviation industry".

Mr Walsh said he believed that if the US failed to act and the UK government refused to revoke the agreement, then it could lose office. "I think the UK government would fall. How could a government sign up to something like this then turn a blind eye? Douglas Alexander has put his name to this. His reputation and that of the Government is at stake."

The new agreement will take effect in April 2008 and will replace a number of bilateral open skies deals already signed between EU member states and the US and the highly restrictive Bermuda Two agreement between Britain and the US which allows only four airlines to fly transatlantic routes from Heathrow - BA, Virgin, United Airlines and American Airlines.

BMI, which has been seeking access to the transatlantic market for nine years and has 13 per cent of all slots at Heathrow, said it would unveil which routes it planned to start operating this autumn. Sir Michael Bishop, BMI chairman, said: "Wwe will bring in more competitive fares. We have a formidable set of cards to play and we will be deciding how to shuffle them over the next few months. With our portfolio of slots we could replicate the entire Virgin Atlantic route network to the US if we wanted to."

Delta Airlines, which operates from Gatwick, said it intended to start flying from Heathrow as well. The routes it is likely to switch are to New York, Atlanta and Cincinnati. Continental Airlines said it had filed for "blanket" open skies authority and would inaugurate a service from Heathrow to Houston.

The Virgin chairman, Sir Richard Branson, said he was actively looking at expanding in Europe by offering services to New York from cities such as Paris, Frankfurt, Amsterdam and Madrid. BA said it would move its Houston service from Gatwick to Heathrow and possibly its Atlanta and Dallas routes.

Asked whether it would be a realistic proposition to suspend the agreement, should the US fail to give way, Mr Alexander said: "It is for that reason that I have worked with colleagues to ensure that the UK has the ability to take unilateral action."

Nevertheless the prospects of the EU winning concessions from the second-stage negotiations look far from certain. John Byerly, the US Deputy Assistant Secretary for Transportation Affairs, said the American government was "going to work in absolute good faith and seriousness with the EU on the second stage agreement". However he reserved his position on whether Washington will negotiate on the most sensitive areas. Mr Byerly said "it would not be correct to say the US is not objecting in principle to investment law and cabotage discussions".

Jacques Barrot, EU Transport Commissioner, abandoned his native French to declare: "I am delighted to have piloted this agreement to its destination with all passengers on board."