"European 'Open Skies' Deals With U.S. Are Ruled Illegal"

Tuesday, November 5, 2002                         
 
European 'Open Skies' Deals With U.S. Are Ruled Illegal
The Associated Press


LUXEMBOURG -- The European Court of Justice on Tuesday upheld a claim by
the European Union that eight EU states acted illegally when they signed
bilateral air-traffic deals with the U.S. offering advantages to their
national flag carriers.

The EU high court's ruling could have far-reaching implications for
trans-Atlantic air traffic by allowing European airlines greater freedom
to fly to the U.S. from EU nations other than their own.

The decision gives the European Commission, the EU's executive body,
crucial legal backing in its battle to replace national governments in
negotiating air-traffic agreements with the U.S. and other nations.

The Luxembourg-based court said in its judgment that the bilateral "open
skies" accords with Washington violated EU law since they infringed on
the power of the EU to regulate and negotiate air-transport accords with
non-EU nations. The court added that the bilateral agreements also
discriminated against airlines in EU countries that signed no such deals
with the U.S.

The ruling means the eight member nations must renegotiate their
bilateral airline accords with Washington to bring them into line with
EU law.

The commission says that will increase competition on lucrative
trans-Atlantic routes, bring down air fares and make it easier for
European carriers to merge.

The commission sued Denmark, Sweden, Finland, Belgium, Luxembourg,
Austria, Britain and Germany in 1998, accusing them of violating the
EU's founding treaty by discriminating against airlines from other EU
nations. The commission said that the treaty gave it exclusive powers to
negotiate trade agreements on behalf of the 15 EU states.

The court's decision endorses an assessment made by the court's advocate
general in February. The advocate general said the agreements involved a
"case of discrimination based on nationality" that is illegal. The court
has gone along with the advocate general's opinion in four out of every
five cases.

The "open skies" agreements let U.S. airlines fly into EU countries from
anywhere in the U.S. but let European carriers only fly to the U.S. from
their home bases. For instance, KLM can fly to American airports only
from Amsterdam, not Madrid or Rome, thereby protecting its home base at
the expense of other EU carriers.

Also, by negotiating individually, the commission argued, Washington was
able to play one EU country off against another. It argued that by
negotiating on behalf of all 15 EU states -- as granted through the EU
treaty -- it can strike a better deal for European airlines, notably by
securing rights to fly on domestic U.S. routes.

In its complaint, the commission also said that the "open skies" deals
kept the EU market fragmented, making it difficult for European airlines
to merge. This left a legacy of several financially ailing national
carriers in Western Europe, while enabling the U.S. air industry to
consolidate.


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