US-EU Airline Pact Possibly Hampered by Economic Tumult | Business| Economy and finance news from a German perspective | DW | 26.03.2008
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US-EU Airline Pact Possibly Hampered by Economic Tumult

The open skies agreement between the US and the European Union goes into effect this weekend. But more choices and cheaper fares for travelers may be a little ways off, analysts say.

Plane silhouetted against moon

The sky's the limit, analysts say about the pact

The agreement between the United States and the European Union is to take effect on Sunday, March 31, and will end most restrictions on US and EU airlines' ability to fly between the two continents. Different air carriers will be allowed to depart or land at various locations on both continents.

The concept of the open market dictating flight routes between the Europe and the US originally held the promise of cheaper airfares and more choices for travelers, but analysts say the turmoil in the US economy and the airline industry may prevent immediate benefits.

Lufthansa plane taking off

Competition could cause a cut in fares

Air carriers are hurting from record-high fuel costs and increased economic uncertainty, industry observers pointed out.

"I think [the agreement] would mean a lot more if the industry were not in the dire straits they are in now," Terry Trippler, an aviation consultant and founder of, told AFP news agency.

"The industry is more concerned about cutting flights than expanding," he said. "Eventually this will be fantastic when this industry shakes itself out. Right now, the celebration is muted."

Mixed views

George Hamlin, managing director of the consulting firm ACA Associates, told AFP that, on the contrary, some new flights were being scheduled, with Air France offering service from London to Los Angeles and US carriers getting some coveted slots at London's Heathrow Airport.

"In the longer term there may be some overexpansion, followed by some contraction," Hamlin said.

Hamlin said airlines would have to plan ahead for good times and bad by ordering aircraft and securing landing rights even if conditions were not ideal.

"We don't even begin to get a glimmer of the possibilities of open-market competition yet," Jerry Chandler,'s travel blogger, told the New York Times. "There could be a lot of flourishing of routes in markets that currently don't exist, especially from smaller US cities to European hubs."

Computer simulation of a salon in planning in the Airbus A380

Such comforts may be out of reach for travelers, but cheaper fares could be on the horizon

Stuart Klaskin of the aviation consultancy KKC agreed, pointing out that the gradually opening up market will lead to competition that will benefit smaller cities on both sides of the Atlantic.

"I think in the next 18 months you will be able to travel at a steep discount to Europe," he told AFP, and predicted more low-cost, business-class options and other carriers serving an expanded trans-Atlantic route network.

Klaskin agreed that airlines must prepare for the changes, despite their worries concerning the economic climate and soaring fuel costs.

Given the circumstances, "[the airlines] can't afford to make a mistake," he told AFP.

Pact opens up options

The pact allows airlines more freedom. Formerly, individual European countries and the US maintained separate agreements for trans-Atlantic flight. Airlines had to depart from or land in their native countries and were limited in which airports they could serve. British Airways flights, for instance, had to take off from Britain. Only American Airlines and United Airlines were permitted to land at Heathrow Airport.

Lufthansa plane taking off from Frankfurt

Lufthansa could broaden its network of hubs and not just rely on Frankfurt

As of next week, Northwest, Delta and Continental will be able to serve Heathrow or other European airports for the first time.

European carriers may also begin to compete more aggressively with one another. German airline company Lufthansa could feasibly install a hub in Paris, or Air France could make Frankfurt a hub.

Despite the new open skies agreement, the US and Europe are gearing up for a second round of negotiations in September on opening airline companies to foreign investors. It's a contentious issue in the US, which bans foreigners from owning more than 25 percent of a domestic airline.

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