New Open Skies Agreement Could Mean Big Changes

Phase two of the Open Skies agreement signed in 2007 has just been announced, and the changes, while largely behind the scenes, could mean big changes for the transatlantic air travel market.

The main element is a proposed change to U.S. business laws that would allow foreign entities to gain majority ownership of U.S. airlines. Currently, foreign ownership of U.S. carriers is limited to 25 percent; the proposed changes would allow ownership greater than 49.9 percent.

Congress would have to approve such a change. Presently, the likelihood of that happening is slim, but you never know.

Other highlights:

• The right for E.U.-based airlines to fly between the U.S. and a number of non-European countries (so-called “7th freedom right”) as well as the removal of obstacles for European majority investment in third country-airlines by facilitating access to the U.S. market. These rights are subject to legislative change in the E.U. concerning noise-based operating restrictions at airports.
• Even closer cooperation on aviation security with a view to achieving maximum reliance on each other’s security measures and avoiding duplication. The cooperation will also be based on coordinated responses to new threats and consultations prior to introducing additional measures. This will reduce the hassle for passengers while ensuring a maximum of security.
• A mutual recognition of regulatory decisions. This will substantially simplify the procedures, reducing the regulatory costs for airlines. For example, U.S. authorities will rely on member states’ regulatory decisions that an E.U. airline is financially fit and European-owned when dealing with applications from E.U. airlines.

Just to refresh your memory, the initial Open Skies agreement allowed greater freedom for airlines to operate between the U.S. and Europe. For example, European carriers were given permission to fly to the U.S. from countries outside their licensed home (i.e. British Airways flying from Paris to New York), and extended more codeshare flexibility.