Airlines told to end bilateral deals

The European Commission yesterday gave member states 12 months to scrap restrictive air travel agreements with the US in a move that threatens to cause chaos on transatlantic services from Heathrow.

The European Commission yesterday gave member states 12 months to scrap restrictive air travel agreements with the US in a move that threatens to cause chaos on transatlantic services from Heathrow.

Loyola de Palacio, the EU's outgoing Transport commissioner, said the present bilateral air service deals violated European law and must be abolished. "These agreements prevent free competition. Member states must recognise their legal responsibilities."

Brussels was given the authority to negotiate EU-wide air service agreements with the US in November 2002 after the European Court of Justice declared the bilateral deals signed by member states to be illegal.

Talks aimed at forging a new EU-wide agreement failed last month after a few member states, led by Britain, argued that the proposed deal gave far too much away to American carriers with too little in return for European airlines.

Britain's agreement with the US restricts the number of carriers operating from Heathrow across the Atlantic to four. In theory, scrapping the accord, Bermuda 2, would open up Heathrow to all carriers.

A spokeswoman for British Airways said that if this did happen, the airline industry would be in uncharted territory, making it impossible to say what would happen at Heathrow. She said: "Until an EU-US agreement is in place, we are opposed to be getting rid of individual bilateral agreements. We don't think aviation negotiations need to be undertaken in such a confrontational manner."

Rival airlines, such as bmi, which has been seeking to begin transatlantic services from Heathrow for five years, will welcome the Commission's move, which may break the deadlock in talks with the US.

The Commission also gave approval for the Italian government to provide a €400m (£266m) lifeline to the state-owned carrier, Alitalia, despite objections from BA. But Brussels ruled out further state aid.