Friday, March 28, 2008

Open Skies - Ready to Launch

News agencies all over the world are reporting on the historic U.S./EU Air Transport Agreement, dubbed "Open Skies," which goes into effect this Sunday.  Under the Agreement, the old restrictions on which airlines have access to the lucrative transatlantic route between the United States and Europe have been abolished.  Many commentators are hopeful that the Agreement will bring about greater choice for consumers and result in lower airline costs.  However, as the BBC News has correctly reported, the current cost of fuel is likely to offset these anticipated price reductions.  What the BBC failed to get right-and what should be made perfectly clear-is that the Agreement still maintains the old strictures on foreign investment.  Contrary to the BBC's claim that U.S. airlines will be able to buy up to 49% shares in their European rivals while foreign investment in U.S. airlines is capped at 25%, the Agreement provides that European investors can acquire 49% equity stock in U.S. carrier with the possibility of gaining more, subject to Department of Transportation approval.  The 25% limit applies only to voting stock.  Under the Agreement, the EU is permitted to impose a reciprocal 25% voting stock on U.S. investment-a much tighter cap than what existed prior to the Agreement.

News agencies have also picked up on the fact that a "second stage" of negotiations between the U.S. and EU is set to begin on May 15.  One of the key issues for those talks will be opening up foreign investment.  Jacques Barrot, the EU Transport Commissioner, has already vowed to suspend rights under the current Agreement if a satisfactory outcome on the matter is not reached by 2010.  According to Barrot, the next stage of negotiations "will aim to achieve full liberalisation in traffic rights, new possibilities for investments by European companies in the United States and for U.S. companies in Europe, measuring the effect on the environment and constraints on exercising traffic rights, access to transport programs financed by the U.S. government, and leasing aircrafts with crew."

As readers of the blog may recall, the International Aviation Law Institute, in cooperation with the International Institute of Air and Space Law at Leiden University, convened an experts' Working Group in Dublin, Ireland last November to begin discussing the "second stage" issues.  This fall, the Institute will provide a full treatment of the evolution, implications, and future of the new U.S./EU open skies agreement in Professor Brian Havel's new book, Beyond Open Skies.

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