Wednesday, February 3, 2010

Virgin Contra Open Skies

According to a story out today, Virgin Atlantic CEO Steve Ridgway is calling on the European Union to take retaliatory measures against the United States under the 2007 U.S./EC Air Transport Agreement if the U.S. fails to raise its 25% limit on foreign investment in its airlines and grant EU carriers cabotage rights by the end of the year.  See Steven Rothwell, EU Should Scrap U.S. Open Skies Benefits, Virgin Says, Bloomberg, Feb. 3, 2010 (available here).  Under the 2007 Agreement, if either party is dissatisfied with the outcome of negotiations for a "second stage" treaty by November 2010, they may suspend some or all of the rights granted in the original agreementSee 2007 U.S./EC Air Transport Agreement, art. 21(3), 2007 O.J. (L 134).   4. 

If the EU follows through on Ridgway's advice, it could mean a return to the days when only American Airlines and United had authorization to fly to and from London Heathrow Airport and a concomitant loss of traffic rights for Delta Airlines, Continental, and US Airways.  On the other hand, EU carriers such as British Airways could also find their rights to operate services to and from the U.S. curtailed.  What a suspension would ultimately amount to is an aviation trade war between the two largest air transport markets in the world.  Given the tough economic climate and the massive financial losses incurred by carriers on both sides of the Atlantic, the impact of a war would prove devastating.

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