EU-US Open Skies Airline Agreement

The EU-US Open Skies Agreement

The EU-US Open Skies Agreement is an airline agreement that exists between the United States and the European Union. This treaty allowed any airlines that belonged to either of the regions to fly to the other countries without much restriction (Truxal, 2013). The two nations signed the agreement on 30th April 2007 though it became effective on 30th March 2008. However, there we challenge that later led to another phase of negotiation that was signed and took effect from June 2010. The treaty has been of both positive and negative influence on the regions, but there is still a high level of commitment to it.

History and Development of EU-US Open Skies Agreement

Prior to this agreement, there had been bilateral aviation agreements between individual EU states such as Finland, Belgium, and Sweden and the US. However, such commercial alliances were later seen to undermine EU's external competence as well as breaching market rules given that the airlines from the nations that had no commercial arrangements with the US were hindered from business (Dobson, 2017). Therefore, the European Court of justice declared the incompatibility of the system with EU law in 2002 and ordered for a collective negotiation that would apply to the entire region. Nevertheless, the deliberations with the US were not immediately successful given the reservations over business and security concerns.

Despite the challenges that surrounded the EU's desired agreement with the US

, the US started to embrace the idea after the two regions designed a compromise package in 2005 that restricted the move by foreign companies to invest and operate in one another. Besides, the consideration of the economic benefits such as the potential creation of 80,000 new jobs and growth in revenues further motivated the US to accept the proposal (Buonanno, Cuglesan, & Henderson, 2015). Finally, the agreement was made on 30th April 2007 where each of the regions had their airlines freely fly to the cities of one another and take off to the rest of the destinations. Also, the EU airlines could also fly between the US and non-EU countries such as Norway and Croatia.

Later on, a lack of consensus on some rules facilitated the second negotiation

which began on 15th May 2008 (Morandi, Malighetti, Paleari, & Redondi, 2014). For example, the deal allowed the US airlines to fly between two EU member states though it restricted the EU airplanes to move within different points in the US unless they operated US-based subsidiaries. Also, there were restrictions on owning voting shares in any airline within foreign countries. The second negotiation then came after the EU obtained a suspension clause that threatened to put on hold the US access rights to EU (Duval, 2016). Therefore the US opened up its domestic market by relaxing its rules regarding foreign investment and ownership of shares, thus, ending the stalemate in 2010.

Problems faced by the Countries Involved

The countries that are involved in the EU-US Open Skies Agreement have to compromise their desired foreign ownership structure to enable create a free market for the regions. The scenario has seen the nations fail to have the local investors take full control of the economy. Additionally, the influence of the big foreign airline companies that operate subsidiaries in other states has further hindered the potential growth of the local companies given the increased competition (Morrison & de Wit, 2017). Additionally, it is hard for the individual countries to create any open skies agreement with other non-US or EU foreign nations without informing the US and EU. Any move of such kind could undermine the EU-US Open Skies Agreement given that the parties to the treaty might end up getting limited landing space and time.

How the System affected Airline Competition, Local Economies, and Consumers

Concerning the airline competition, this agreement led to increased competition given that all the EU member countries were now allowed to fly through US cities unlike earlier on when the right was preserved to the few that made individual agreements with the US. At least all the airlines from the EU could now receive customers who wanted to fly to the US (Christidis, 2016). The opening of the London Heathrow to the rest of the airlines within the two regions other than just the Virgin Atlantic Airways, British Airways, American Airlines, and United Airlines also intensified the level of competition. Also, provision for foreign investment through subsidiaries further made local competition stiff given the increased number of airline firms both in the US and EU.

The local economies also realized substantial growth given that the deal lead to increase in employment of up to 80,000 individuals in the airline industry for both the regions. Besides, there was growth in revenues that resulted from the increase in business efficiency where goods could be moved to the market with ease. The consumers of the airline services also benefited from the enhanced transportation since they did not have to take short connecting flights before flying to their final destinations (Winston & Yan, 2015). For example, a passenger who wanted to go to the US but was in an EU member country that had no single deal with the US before the EU-US Open Skies Agreement would be forced to take a domestic flight to another state that had the authorization to fly to the US.

Conclusion

The EU-US Open Skies Agreement has existed since its approval in 2007 regardless of the challenges that even led to the second negotiation between 2008 and 2010. At least the adjustments increase the level of confidence and commitment from the two regions given the further compromise. Nevertheless, the countries that are involved face the challenge of high competition and restrictions when it comes to entering aviation treaties with non-US and EU states. Typically, the deal led to increase in competition in the airline industry, growth in the economy, increase in employment, as well as reduced traveling worries among the people. Therefore, most of the nations embrace the agreement, and it is still likely to continue binding them in airline operations given the substantial benefits.

References

Buonanno, L., Cuglesan, N., Henderson. (2015). The New and Changing Transatlanticism: Politics and Policy Perspectives. Routledge, 2015.

Christidis, P. (2016). Four shades of Open Skies: European Union and four main external partners. Journal of Transport Geography, 50, 105-114.

Dobson, A. (2017). A History of International Civil Aviation: From Its Origins Through Transformative Evolution. Taylor & Francis, 2017.

Duval, D. T. (2016). Air Transport in the Asia Pacific. Routledge, 2016.

Morandi, V., Malighetti, P., Paleari, S., & Redondi, R. (2014). EU-US Open Skies Agreement: what is changed in the north transatlantic skies?. Transportation Journal, 53(3), 305-329.

Morrison, W., & de Wit, J. (2017). US Open Skies Agreements and Unlevel Playing Fields (No. 0104). Laurier Centre for Economic Research and Policy Analysis.

Truxal, S. (2013). Competition and Regulation in the Airline Industry: Puppets in Chaos. Routledge, 2013.

Winston, C., & Yan, J. (2015). Open Skies: Estimating Travelers' Benefits from Free Trade in Airline Services. American Economic Journal: Economic Policy, 7(2), 370-414.