Monday, December 8, 2008

More on the Future of the U.S/EU Second-Stage Negotiations

While a number of commentators have adopted the approach of Chicken Little when it comes to the possibility of European Union Member States suspending rights under the 2007 U.S./EC Air Transport Agreement should the U.S. fail to relax its foreign ownership rules for airlines or grant cabotage rights to EU carriers as part of the second-stage negotiations to expand the first Agreement,  the U.S.'s chief negotiator is more circumspect. 

John Byerly, the U.S. Department of State's Deputy Assistant Secretary for Transportation Affairs, was reported by Air Transport World last week as calling it "nutty to think we're [U.S. and EU] going to take the whole transatlantic [aviation] structure down because one side doesn't get its way."  Byerly's remarks contrast those of Daniel Calleja, Director for the European Commission's Air Transport Directorate, who stated that the second-stage negotiations "have to succeed by 2010."  "Success," from the EU perspective, has been conceived of in terms of foreign ownership and cabotage since before the 2007 Agreement was even finalized.  How likely is it that the EU will be willing to accept another delay on these issues, especially in light of the fact that the U.S. has not proffered any comparably enticing alternatives?

Byerly, it seems, is banking on the fact that the EU isn't up for a game of aeropolitical hardball and that a trade war over transatlantic air services at this point in time would be disastrous for both sides.  Even if that is true for most EU Member States, the United Kingdom--spurred largely by lobbying from British Airways--has not backed off its commitment to suspend the U.S.'s recently-acquired traffic rights if the U.S. doesn't open its airlines up to substantial foreign investment.  Due to the importance of London Heathrow as the primary air gateway into Europe, the UK wields considerable clout; its unilateral suspension alone could seriously impact U.S. carriers.  The question the U.S. may need to ask is whether the UK might be disinclined from such rash action if, for example, the proposed deepening of the oneworld alliance between American Airlines and British Airways is granted approval and antitrust immunity from the U.S. Department of Transportation.  Considering the role this repeatedly proposed (and repeatedly thwarted) alliance has played in the oftentimes tense aeropolitical relations between the U.S. and UK, it's possible that the U.S. may finally tolerate the venture in order to appease this key (and openly disgruntled) air services trading partner.  Whether that and other air alliance approvals will be enough for the rest of the EU remains to be seen.

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