EU clouds 'open skies' deal after rejecting US proposal

Prospects of a deal this year to liberalise lucrative aviation routes to the US - and open up Heathrow - nosedived yesterday when EU ministers rejected American terms for an open skies agreement.

Prospects of a deal this year to liberalise lucrative aviation routes to the US - and open up Heathrow - nosedived yesterday when EU ministers rejected American terms for an open skies agreement.

After a meeting in Brussels yesterday, Alistair Darling, the Transport Secretary, said a US proposal for liberalisation was unbalanced, unacceptable and would hand Washington everything it wanted.

The Irish presidency of the EU said a deal cannot now be reached this year and the European Commission warned that European countries that have bilateral open skies agreements with the US may be asked to scrap them.

Britain is among the EU nations that do not have a full open skies deal because it is guarding lucrative landing slots at Heathrow. The Government wants the right for some European carriers to fly internally within the US - something fiercely resisted by Washington - before it loosens its grip on its main gateway.

After yesterday's meeting Seamus Brennan, the transport minister of Ireland, which holds the EU presidency, said that "it would not be possible to conclude an agreement this year". Commenting on an American offer to increase the maximum foreign ownership of US airlines from 25 to 49 per cent, he added: "In principle it would be acceptable but only if there are tangible improvements [in the US offer] bringing a better balance."

Loyalo de Palacio, the EU's Transport Commissioner, pointed out that bilateral deals between 11 of the 15 EU member states and the US (15 of the 25 after the EU enlarges in May) have been ruled illegal. "If the negotiations do drag on, we may find ourselves obliged to ask member states to renounce existing agreements," she said.

Ways of allowing the EU into the US internal market could include permitting European firms to lease aircraft with crews in America or to invest in starting new US airlines, the commissioner added.

Mr Darling said that "the prize of a genuine open skies agreement between the EU and the US is very great indeed" but added: "The offer the Americans made is unbalanced; it was not acceptable to us, and therefore also to other EU member states." He observed that the run-up to November's presidential elections in the US is a difficult time to clinch a deal.

The negotiations are hugely important because the routes between Europe and the US account for half of the world's air traffic.