Open skies: Will there ever be truly open transatlantic air services?
On April 14, the GMF hosted a luncheon panel discussion entitled "Open skies: Will there ever be truly open transatlantic air services?" The event is part of the GMF's Ttansatlantic marketplace & international regulatory cooperation projects that examine how cooperation can be enhanced to benefit the transatlantic economy.
To consider the challenges and opportunities of second-stage U.S.-EU so-called "open skies" negotiations, scheduled to begin this May in Slovenia, Brian Havel, Director, International Aviation Law Institute, DePaul University; Julie Oettinger, Managing Director, Regulatory Affairs, United Airlines; Clive Wright, First Secretary, Transport Policy, Embassy of the United Kingdom; Russell Bailey, Senior Attorney, Air Line Pilots Association gave diverse views on the subject. GMF Transatlantic Fellow Richard Salt moderated the discussion that held under Chatham House Rules to encourage an open and frank exchange of ideas. Three central questions framed the debate: What lessons can be drawn from first-stage negotiations and how might those lessons be effectively integrated into the next round, which issues will complicate or enhance the debate, and will or should there be a genuinely open transatlantic aviation area?
Central to the discussion was the assertion that the United States and European Union are approaching the discussion from markedly different perspectives. It was argued that the U.S. saw transatlantic open skies based in the existing system of bilateral agreements that regulate international air services, which is one of approximately 90 so-called "open skies" agreements between the United States and third parties. As such, it was firmly grounded in the existing international aviation law regime, governed by the 1944 Convention on International Civil Aviation (the "Chicago Convention") that, in effect, protects the sovereignty of national labor and commercial laws. According to critics, however, such "bilateral rigidity" may be ill-suited to address the regulatory challenges of globalization and market interdependence. Airlines face redundant and confusing security, environment, infrastructure, alliance, and ownership regulations, making it difficult for carriers to monitor and comply with change.
For the EU, on the other hand, transatlantic discussions were nothing less than the next step in an effort to effectively re-write the rules of aviation for a global era. European integration in air services had created a genuinely single market in Europe, with EU airlines free to offer services between any two member states under the regulation of its home country. Indeed, it was noted that European integration in this sector had achieved far more than in many other sectors of the economy. As such, the EU envisaged taking this approach globally, reflecting the global characteristics of the sector and, far from talking of a bilateral open skies deal, talked ambitiously of an "open aviation area" between the EU and United States.
It was argued that foreign ownership and control rules will likely prove to be the most contentious issue in second-stage negotiations. These had been removed within Europe, and one success of the first-stage agreement was its Community Air Carrier Clause through which the United States effectively recognized European carriers as such, and not by the particular member state in which they were based. This has successfully removed limitations on the ability of European airlines to fly from any location within the EU to the United States, an option already being taken advantage of by Air France and British Airways.
However, both jurisdictions restrict investment between the European Union and the United States to at least some degree, although U.S. rules appear tighter, wherein at least 75 percent of voting shares in an airline need to be in American hands. Advocates of investment liberalization argued that the benefits of transatlantic investment will outweigh implementation costs, citing a European Commission-sponsored study by Booz Allen Hamilton that predicted substantial economic growth and job creation. It was also viewed as a possible solution to the current economic difficulties that U.S. air carriers face. One proponent highlighted that U.S. carriers have recently shed 150,000 jobs and dramatically reduced new aircraft purchases.
Critics argued that implementing ownership and control rule changes would prove counterproductive without an appropriate legal framework. Labor laws are national and there is no existing legal mechanism to mitigate disputes (pilot's seniority lists, route allocation) that arise between "transnational" air carriers. The changes would place both jurisdictions in a legal "no man's land." Further, there was concern about the impacts on employment from investment liberalization.
Panelists concurred that reaching consensus on the more controversial issues in second-stage negotiations will be challenging. However, there is the need for future collaboration to explore innovative solutions to these challenges. Several comments focused on the need to discuss labor rules in the next round of talks. Searching for mutually-beneficial solutions to divergent rules and regulations in the air services sector will likely require patience, persistence and a commitment to an inclusive process of transatlantic problem-solving.