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"US offer on air services falls short of expectations"

Monday, May 24, 2004

US offer on air services falls short of expectations 
By Kevin Done
United Kingdom - The Financial Times

European airlines are to meet in Brussels on Monday to assess the latest
US offer aimed at breaking deadlocked negotiations over liberalising air
services between the US and the European Union.
It is understood that the US proposal would allow European airlines
limited rights to develop franchised cargo and passenger operations in
the highly protected US domestic market, enabling them to gain some
exposure for their brands to US consumers.

According to the draft US proposal given to the European Commission late
last week European airlines would be able to exercise "marketing rights
by acting as freight forwarders and tour operators with respect to air
transportation" in the US.

Any such service would still have to be operated by a US airline using
its own aircraft, however. It would be under the control and ownership
of the US carrier, but a European airline could use its brand and livery
on the service for both aircraft and crew.

The limited US offer will confirm fears in Europe that any deal on offer
from Washington will fall far short of the ambitious open aviation area
sought by EU member states.

Andrew Cahn, director of government and industry affairs at British
Airways, said on Sunday the US offer "turns out to be a damp squib.

"There is nothing there that adds to our existing rights and nothing
that offers commercial opportunities to any European airline. To call
this market access is a fantasy. It is absurd."

The mandate given by member states to the European Commission last year
was to negotiate a comprehensive deal to liberalise air services and
dismantle the web of regulations - at least between the EU and the US -
that have severely hampered the consolidation of the global airline

Most importantly the EU is seeking eventually to remove the limits on
foreign ownership of airlines, 25 per cent in the US and 49 per cent in
the EU, to gain access to the protected US domestic market, and to
remove Washington's Fly America policy by which US government officials
can only fly with US airlines.

The US has warned that it would be difficult to agree to such measures,
however, as they would require changes to US legislation and would meet
tough opposition in Congress.

Instead it has offered a limited first stage deal in which it would
accept a European Union nationality clause for EU airlines to replace
the present national identities, but only in exchange for agreeing to
the US model of so-called "open skies" being introduced across all EU
member states.

The US remains optimistic, however, that a deal can be agreed next

Norman Mineta, US transportation secretary, said on Friday, "I am more
than hopeful. I just feel very strongly we will be able to have the
details of this agreement wrapped up so that our leaders will be able to
sign it at the summit in June." The EU-US summit is due to be held in
Dublin on June 25-26.

Barry Humphreys, director of external affairs at Virgin Atlantic, the UK
long-haul airline, said on Sunday the latest US offer was "a real

"It seems to be offering the ability to franchise, and it was our
understanding that this was already possible.

"Unless there is a considerable change from the US, we will be trying to
persuade the UK government to hold firm to the line that the European
Commission should not accept this."

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