UK urged to block US 'open skies' deal

Britain is set to block the European Union's latest attempt to forge a deal with the United States to liberalise transatlantic air travel and open up Heathrow airport to full competition.

The UK's two leading long-haul carriers - British Airways and Virgin Atlantic - both said they would urge the Government to reject a draft open skies agreement with the US announced yesterday by Brussels.

Although the European Transport Commissioner Jacques Barrot maintained that EU and US negotiators had made "decisive progress" after four days of talks in Brussels, UK sources said the draft agreement contained very little that was new and was still heavily biased in favour of American carriers.

The EU Transport Council will meet this month to consider the outline agreement but Douglas Alexander, the UK Transport Secretary, will be under pressure from BA and Virgin to veto the proposed deal in the face of attempts by other member states, notably Germany and Ireland, to push it through. The two UK airlines, along with American Airlines and United Airlines of the US, are the only carriers allowed to fly transatlantic services from Heathrow.

The UK has the power to veto the draft agreement because it is not dealt with under the system of qualified majority voting.

The UK accounts for 40 per cent of the entire EU-US air market, thanks largely to Heathrow's dominant position as the world's biggest international airport.

Mr Barrot said the "unprecedented agreement" had the potential to "unlock major benefits on both sides of the Atlantic", generating €12bn (£8.1bn) of economic benefits and up 80,000 new jobs. "The decision of the next Transport Council will be crucial. The open aviation area could be a centrepiece for a reinvigorated transatlantic relationship."

But UK sources said it did nothing to address the key issues of access to the US domestic market for EU carriers and EU investment in US airlines while giving any American carrier the right to fly into Heathrow and beyond to the rest of the EU.

A BA spokesman said: "This is not a good deal for Europe or for the UK. It is a dead end rather than a pathway to a truly open aviation area."

Steve Ridgway, the chief executive of Virgin Atlantic, said: "We would love to see full and proper open skies but this draft agreement doesn't come near that. This appears at first glance to be a missed opportunity to create a truly competitive transatlantic aviation market."

But BMI, which has been pressing for seven years for the right to launch US services from Heathrow, hailed the announcement from Brussels as a "major breakthrough" and said it was "vital" that the UK Government supported and approved the draft agreement when the Transport Council meets on 22 and 23 March.

Talks between the US and EU stalled last December when Congress refused to sanction a change in ownership rules which would have allowed foreign airlines to exercise management control over American carriers. The two rounds of negotiations which have taken place since then were designed to allow the US side to come up with fresh concessions to make up for this and rebalance any agreement.

But UK sources said the concessions proposed by the US were "miniscule and of hardly any value at all". For instance, the US offered to relax its Fly America policy which prevents US government employees from using foreign carriers but only on routes which handled fewer than 60 passengers a year.

UPS cancels $2.8bn A380 freighter order

Airbus suffered a fresh blow yesterday after the only remaining customer for the cargo version of the A380 superjumbo scrapped its order.

United Parcel Service said it had cancelled its $2.8bn order for 10 A380s because it was no longer confident that the aircraft could be delivered even by the revised schedule of 2012.

FedEx, another US parcel carrier, scrapped its order for A380 freighter aircraft last year. There is severe doubt now whether Airbus will be able to proceed with a cargo version of the plane.

The European planemaker, which this week announced 10,000 job losses and the partial or complete sale of six sites, had estimated the market for the A380 at 1,665 aircraft, of which 400 would be cargo versions.

Michael Harrison