Pessimism on 'open skies' talks

Competition is heating up for transatlantic flights

Two-day talks between the UK and the US aimed at bringing more competition to the transatlantic flights market started on Tuesday.

Negotiations on the "open skies" proposals broke down in January this year.

But at this stage, there is little optimism that an agreement will be reached.

The head of Virgin Atlantic, Sir Richard Branson, said on Tuesday he feared the talks would not result in an agreement because the UK government seemed to have "caved in."

"We would like to see the government striving to get permission for British carriers and British cargo carriers to fly internally within the United States and to have the right to pick up all American citizens," Branson told BBC radio.

We believe the American government were willing to give it up but at the very last minute the British government seem to have caved in," he said.

More talks later

And officials warned earlier that a decision may be postponed until a later date.

"This meeting tomorrow and Wednesday will be to establish a framework for substantive talks later, but we haven't got a date yet," a spokesman for the Department of Environment, Transport and the Regions said.

US Transport Secretary Rodney Slater has said he wants to conclude an agreement on liberalising passenger and cargo to and from the UK by the end of this year.

At present, only four airlines can offer flights between Heathrow and the US and more airlines from the two countries want access to the lucrative market.

The current agreement allows only British Airways, Virgin Atlantic, American Airlines and United Airlines to fly direct scheduled flights between Heathrow and the US.

But other airlines, which have seen the large profits that can be raked in on what is a restricted market, have been keen to enter the fray.

For instance, British Midland's Chairman Sir Michael Bishop believes Heathrow should be opened up to groups of airlines or alliances.

British Midland is now part of the Star Alliance, linking Lufthansa and United, and also has more slots at Heathrow than any other airline except British Airways.

Virgin and BA talk

The talks come amid growing speculation of a thaw in relations between British Airways and Virgin Atlantic.

Sir Richard is due to meet BA's new chief executive Rod Eddington for lunch at his home on Tuesday lunchtime.

Relations between the two companies have been tense for years and hit a low-point in the early 1990s when Virgin won a High Court libel case over BA in what became known as the "dirty tricks" campaign.

Sir Richard's relationship with BA's new boss is expected to be much smoother, as they have already met several times when Mr Eddington was head of Australian airline Ansett and of Hong Kong carrier Cathay Pacific.

The two sides are seeking different outcomes from the open skies talks, but they agree that the UK should not give in to the US without getting something in return for UK air carriers.

The UK is just one of four European countries not to have negotiated an open skies deal with the US.

The others are Greece, Ireland and Spain.

If British Airways was to do a deal with Dutch airline KLM, it would be able to fly to the United States from Amsterdam's Schipol Airport as well as from Heathrow.