EU sees 'Open Skies' talks with US finished by 2010

BRDO, Slovenia Fri May 16, 2008 9:07am EDT

BRDO, Slovenia May 16 (Reuters) - The European Union expects to complete by 2010 talks with the United States on liberalising transatlantic aviation, the bloc's chief negotiator said on Friday, paving the way for increased competition.

"I hope that ... 2010 could be the year when we finalise the negotiations but it will depend a lot on technical work," Daniel Calleja Crespo, head of the European Commission's Aviation Directorate, told reporters after talks in Slovenia ended.

The second round of "Open Skies" discussions, which started on Thursday, builds on an agreement which entered into force in March, allowing airlines to access any U.S. city from any point in the EU and vice versa.

The move promises to increase competition between carriers, could cut ticket prices and may eventually pave the way for transatlantic mergers to create the first global airlines.

The United States surprised EU negotiators on Tuesday by saying it would seek a wider deal by pledging to drop access restriction for airlines from more than 60 nations.

"We think that's in our mutual interest because we have a leadership role. There are no two areas of the world that have done more to liberalise aviation," said John Byerly, U.S. Deputy Assistant Secretary of State for Transportation Affairs.

"We think we can lead the world and when you lead you have to bring the rest of the world along," said Byerly, who is the U.S. chief negotiator.

But the EU said it wants to complete the talks with Washington before inviting others on board.

"Once the United States and Europe agree on liberalising aviation, we would like other countries to share... but we think we should first agree with the United States and then expand this to the rest of the world," said Calleja.

He said, however, the U.S. proposal should not delay ongoing talks and called it "a positive contribution" which has to be integrated in the overall negotiations.

INVESTMENT LIBERALISATION

Byerly said investment liberalisation was likely to be the most challenging issue in talks.

"Both sides have made proposals on investment liberalisation because it can help our airline industry on both sides... to have access to capital. We have different views, different proposals," he said.

Britain has led critics of the earlier agreement and is calling for the abolition of U.S. federal laws that cap foreign control of U.S. airlines at 25 percent of their voting stock.

British Airways had said relaxation of U.S. ownership rules was the most crucial issue, allowing airlines on either side of the Atlantic to increase efficiency through mergers.

European airlines also want greater access to the U.S. domestic market -- with the right to sell tickets for flights between U.S. cities.

Britain has warned it will exercise its right to terminate the Open Skies agreement if U.S. barriers are not lowered during the current talks but Calleja said it was too early to say if such a termination was likely to happen.

British Airways has been among the first to capitalise on the existing agreement, with plans for flights to the United States from Paris Charles de Gaulle airport in addition to its traditional hub at London's Heathrow airport. [nL16352090]

Meanwhile, rivals Air France and Delta Air Lines are planning to move on Heathrow in a joint venture they expect to generate $8 billion a year.

The next round of negotiation will take place in Washington in September. (Reporting by Marja Novak, Editing by Louise Ireland)