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Last Updated: Sunday, 30 March 2008, 09:49 GMT 10:49 UK

Q&A: Open skies

Jumbo jet
Open skies could mean more of these flying across the Atlantic

The so-called "open skies" deal between the US and European Union has come into effect, aiming to open up trans-Atlantic air travel.

Ending limits on which airlines can fly between Europe and the US, it is expected to start a large rise in the number of different carriers flying across the Atlantic.

What does the deal mean?

Put simply, open skies eases restrictions on air travel between the EU and the US.

Any European airline is now potentially able to fly to the US from anywhere in the EU - not just from its home nation as was previously the case.

So, German airline Lufthansa, for example, will be able to offer direct flights to the US from Madrid or Rome, rather than simply Frankfurt.

And looking at it from the other way around, any US airline can now launch flights to the EU.

Will it boost competition overnight?

Changes at the major airports such as London's Heathrow will be minimised because of the limitation of take-off slots.

As a result, most new trans-Atlantic service are likely to be launched from smaller airports.

Having said that, US airlines Continental and Delta have already started new flights to America from Heathrow.

Prior to 1 April, only British Airways, Virgin Atlantic, United and American Airlines could offer direct flights from Heathrow to the US.

Will prices come down?

Most analysts say the increased competition will inevitably bring down prices. But with aviation fuel continuing near-record highs, any cut in the cost of tickets will be limited unless this situation also changes.

Virgin Atlantic has already cautioned that it will be difficult to see ticket prices go any lower.

Is the deal between the US and EU equal?

No. As it presently stands, US carriers have two main advantages.

Firstly, US airlines will now be able to offer services from two points within the EU, say from Paris to Rome. EU airlines are not getting the same access in return.

Secondly, US airlines will now be able to buy a stake of up to 49% in a European carrier, while EU airlines will be contrast still only be able to buy a 25% stake in US rivals.

EU Transport Commissioner Jacques Barrot has promised to get parity on these issues by 2010 or else pull out of the open skies deal.

Yet with the US economy showing signs of downturn, analysts are very sceptical about whether the US will open up its domestic routes.

"Political protectionism in the US should not be underestimated in troubled economic times," said Ian Giles, a competition lawyer with law firm Norton Rose.



SEE ALSO
US calls for EU open skies assent
05 Mar 07 |  Business
BA and Virgin knock open sky deal
04 Mar 07 |  Business
EU and US outline open skies deal
02 Mar 07 |  Business
US drops plan to open up airlines
05 Dec 06 |  Business
'Open skies' deal faces delay
04 May 06 |  Business
EU-US land 'open skies' agreement
18 Nov 05 |  Business

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