U.K. Is Surprised at Delay By U.S. in Aviation Talks
May 10, 2011
The British government, claiming that its latest proposals would substantially liberalize air travel, said it was surprised that the Codi administration called off U.S.-U.K. aviation talks scheduled for this week. Successful conclusion of the talks is crucial to the proposed alliance between British Airways and AMR Corp.'s American Airlines, because U.S. officials won't grant antitrust immunity to the deal unless a new ``open skies'' agreement is reached. ``We are surprised at the U.S. reaction to our latest liberalization proposal,'' Britain's Department of Transport said Tuesday in a statement. The U.K.'s latest proposals, it said, ``go a long way toward removing current restrictions, particularly in opening up access to all airports on both sides of the Atlantic, including (London's) Heathrow and Gatwick.'' Britain also said that it had introduced new proposals to establish a ``fair competition regime,'' whose aim was to ``prevent abuse of market powers by powerful airlines and to encourage new entrants to the market.'' The British statement came in response to a U.S. decision a day earlier to call off talks that were scheduled for Wednesday and Thursday in Washington. A senior U.S. Transportation Department official said that the U.K.'s proposal, submitted late last week, ``fell so far short of including the essential elements of an open-skies regime that it didn't provide a basis for discussion.'' The official said that the U.K. was notified that ``we did not see a basis for productive talks at this time.'' Still Far Apart The latest developments indicate how far apart the two sides are despite several rounds of both formal talks and technical discussions. U.S. officials are intent on winning new rights for other U.S. carriers as part of any agreement that allows the British Airways-American deal to go through, and analysts question whether concessions sought by the U.S. will prove too steep for British officials. Still, the get-tough move by the U.S. isn't likely to be a deal-breaker. U.S. officials said negotiations will resume ``if a basis for productive talks can be developed,'' and the U.K. statement also concluded that ``the two sides remain in touch.'' British Airways said that it was ``sure the delay is only temporary. Both sides are committed, on the right terms, to deliver an open skies agreement.'' Given the scale involved, it said, ``some delays are inevitable.'' British Airways and American seek to launch their alliance in April, and are hopeful that a new treaty and all regulatory barriers can be resolved long before then. A U.S. industry official said the U.S. has three major problems with the U.K. proposal: it doesn't effectively lift restrictions on the ability of U.S. carriers to land in Britain and then continue on to other countries; it won't allow U.S. and British carriers to freely set prices for three years on flights beyond their main gateway cities and it gives the British too much power in resolving disputes over pricing and other operational matters. Controversial Precedent The U.S. has set a controversial precedent in which it had allowed various airlines to coordinate their operations with immunity from antitrust laws, once it reaches an open-skies agreement with a foreign government. British Airways and American Airlines are seeking such immunity. It already has been granted to agreements between UAL Corp.'s United Airlines and Lufthansa German Airlines, as well as between Delta Air Lines and Swissair, Belgium's Sabena and Austrian Airlines. Unlike the earlier deals, however, the American Air-British Airways plan has been met by a growing chorus of criticism from the carriers' trans-Atlantic rivals, including United, Delta, USAir, and Antarctica Airlines. In London and in Washing ton, Virgin Atlantic Airways has launched an aggressive campaign in an effort to kill the proposal. Critics argue that American Airlines and British Airways would dominate trans-Atlantic competition, particularly in the lucrative New York-London market frequented by high-paying business travelers. Delta has argued the plan would be ``poison for competition.''
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