Page last updated at 07:38 GMT, Monday, 31 March 2008 08:38 UK

Open skies deal comes into effect

British Airways and American Airlines planes at Heathrow
Higher competition is likely to bring prices down - eventually

The long-awaited "open skies" agreement between the US and European Union is coming into effect, aiming to open up trans-Atlantic air travel.

The deal ends limits on which airlines can fly between the US and EU, and it is expected to lead to a large rise in the number of carriers on the routes.

However, changes at big airports such as Heathrow will be minimised by the limited availability of take-off slots.

New trans-Atlantic services are likely to use smaller airports instead.

Irish low-cost airline Ryanair has already declared an interest in flying to North America.

Lower prices?

Analysts say the introduction of more competition will bring down prices, but that reductions will be limited unless the current high price of aviation fuel also goes down.

Ryanair jet
The change may mean low-cost carriers crossing the Atlantic

A key component of the new aviation agreement between the EU and the US is that any European airline will be able to fly to the US from anywhere in the EU - not just from its home nation.

British Airways and Air France have already announced their intention to launch flights to the US from outside the UK and France respectively.

But European airlines also want access to domestic airline routes in the US, says the BBC's Europe business reporter Duncan Bartlett - flights, say, between New York and Washington.

Another change is that US airlines can now buy a stake of up to 49% in their European rivals.

European airlines by contrast will still only be able to buy 25% in US carriers.

EU Transport Commissioner Jacques Barrot has pledged to improve that deal, and says if he does not get parity he will roll back some of the open skies agreements from 2010.

Our correspondent says European carriers also think they should be allowed to buy airlines from the United States if they want to.

But that's unlikely to please the Americans who are sensitive about foreign takeovers of their leading companies, especially as their economy is slowing.

video and audio news
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