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U.S. tries to open skies again
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May 14, 1999: 11:36 a.m. ET
U.S. and U.K. negotiators to take a last shot at liberalizing the air market
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LONDON (CNNfn) - Washington is set to make one last concerted push next week to liberalize the air transport market with the United Kingdom, the busiest over the Atlantic, but industry experts see little hope of success.
U.K. and U.S. officials will hold private talks in London next Wednesday and Thursday in a bid to hammer out an agenda for official talks in Washington in June.
Both sides are making encouraging noises about progress this time around, after talks in February failed to break the deadlock over a so-called open skies agreement the U.S. is pushing in a bid to obtain full, liberalized access.
But if these talks fail, as numerous other attempts have over the last five years, airline industry officials and observers agree that it will be 2001 at the earliest before talks are likely to start again.
"If there is no deal done by October, then it will start to run into the U.S. presidential campaign. Because of that, this will be the last chance for two years to get a deal done," a senior British Airways official told CNNfn.com.
U.K. Deputy Prime Minister John Prescott attempted to get the momentum going again when he visited Washington two weeks ago. "He had a positive meeting with [U.S. Transportation Secretary Rodney] Slater after which he said he hoped things would start moving again and hoped there could be a formal agreement by June," one airline official told CNNfn.com.
But one industry analyst questioned the U.K.'s commitment to seeking a deal. "You get two politicians together after a meeting and they always say things that are meant to sound wonderful."
The onus is on the U.S.
Indeed, the onus is very much on the United States. "A deal is more important for the U.S. than it is to the U.K. side," Jon Ash, managing director of Global Aviation Consultants in Washington, told CNNfn.com.
A successful conclusion to any talks would give the Clinton administration a major boost, as it seeks to score political points ahead of campaigning for the U.S. Presidential elections in November.
Washington has spent much of the 1990s pushing liberalization agreements on its major trading partners. But the United Kingdom. is the only remaining major Western nation still holding out.
Unrestricted access to Heathrow
And an agreement with the U.K. is so significant to Washington because it would, in theory at least, allow unrestricted access to the world's busiest international airport, London's Heathrow.
"It's big and it's visible. The U.K. is the lone hold-out (in Europe) and success would liberalize a significant air transport market," Ash said.
London is proving hard to break down because the current agreement restricts access to Heathrow to two carriers on either side, with U.K. carrier British Airways dominating the number of runway slots available across the Atlantic with a 34 percent market share.
Washington seeks a compromise
The U.K. government is asking Washington to give its airlines full access to the huge U.S. domestic market in return for opening up Heathrow, among other demands.
Washington has long rejected that demand but now is seeking to compromise on other issues, such as a phased-in open skies agreement and possibly increasing above 25 percent the stake that non-U.S. airlines can own in domestic carriers.
One Washington insider concedes that this is unlikely to persuade the British authorities to give in to U.S. demands. "We have been here many times and there are still not enough incentives there on the British side. I am not optimistic that the two sides will clear these high hurdles," he said.
BA and AMR muddy the picture
The other complicating factor is the alliance between BA and American Airlines, a subsidiary of AMR Corp. The two carriers originally sought antitrust immunity from U.S. authorities but pulled back when regulators in Washington and Brussels demanded they give up more than 300 weekly slots at Heathrow. Between them the two carriers control around 45 percent of transatlantic slots out of London.
Along with the slot concessions, Washington also demands that the U.K. sign the open skies agreement in return for granting BA and American immunity.
The senior BA official said the airline is "trying to take the alliance off the back burner and drive it forward again."
But one industry source questions how many airlines really want the open skies deal. The incumbents at Heathrow -- BA, Virgin Atlantic, American and United Airlines -- are all benefiting from the restricted access.
And even some of those airlines that want in may not be able to compete. "There's not a lot of enthusiasm to get a deal done other than at the political level. Should Delta Air Lines gain access to Heathrow, it gives them a chance to get killed, as it doesn't have a strong enough domestic hub in New York to compete," the source in Washington said.
-- by staff writer Mark Odell
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