Talks on 'open skies' to take off

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The UK and US governments are to reopen formal negotiations on an "open-skies" agreement, which will allow airlines in both countries more access to each other's markets.

The UK and US governments are to reopen formal negotiations on an "open-skies" agreement, which will allow airlines in both countries more access to each other's markets.

Representatives from the UK's Department of Transport (DoT) will fly to Washington next week to hammer out an agreement with staff at the US Department of State. The proposed deal hit turbulence recently when the US General Accounting Office, which advises Congress, said the advantages of an open-skies agreement were unclear.

A spokesperson for the DoT said the US has more restrictions to UK airlines than the other way round, so more concessions are likely on the US side. Topics of discussion will include increasing access to Heathrow for US airlines.

At the same time, the UK wants the US to loosen the restrictions on foreign ownership of US airlines and open up the domestic market. There are also concerns about the US's policy that public servants should fly on American airlines.

An open-skies deal could mean regulators will be more likely to approve the proposed antitrust alliances between British Airways and American Airlines, and, separately, BMI British Midland and United Airlines. Both duos want the deals so they can share commercial information, which could help them weather the aviation crisis.

Competition authorities are mulling over the alliances. The US Department of Justice is concerned that the proposed BA/AA deal would give the companies too much control over certain transatlantic routes, particularly Dallas-London and Chicago-London. But the DoT spokesperson said the proposed alliances would not be under discussion in the open-skies talks.

The talks will be overshadowed by the spectre of the European Commission, which wants the right to negotiate airline agreements between member states and other countries. The urgency for the Anglo-American talks has increased, because the European Court of Justice is believed to be close to ruling on the issue, possibly as early as 31 January.

Virgin Atlantic has been hotly opposing an open-skies deal, because, it says, more access to Heathrow would favour the US. The company would face more competition on its transatlantic flights if the deal went through.

And Virgin Blue, Sir Richard Branson's Australian low-cost carrier, is believed to be close to selling a 51 per cent stake to venture capitalists for around A$250 (£89m). The move is necessary if the company is to float next year. A spokesperson for Virgin would not comment on the sale but said that if the company meets its target of a A$24m (£17m) profit this year, it will be ready to float in the first quarter of next year for a minimum of A$1bn.

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