U.S.-EU Air Transport Agreement

On April 30, 2007, the United States and European Union signed a comprehensive, first-stage Air Transport Agreement that will have significant economic benefits for the United States and Europe. The Agreement will replace existing bilateral agreements between the United States and EU Member States with an Open-Skies Plus framework valid between the United States and the entire EU.

Valuable Open Skies Benefits: The Agreement will authorize every U.S. and every EU airline to:

• fly between every city in the European Union and every city in the United States;
• operate without restriction on the number of flights, aircraft, and routes;
• set fares according to market demand; and
• enter into cooperative arrangements, including codesharing, franchising, and leasing.

In addition, the Agreement will foster enhanced regulatory cooperation in areas as diverse as competition law, government subsidies, the environment, consumer protection, and security. It establishes a consultative Joint Committee through which the U.S. and the EU can resolve questions and further develop areas of cooperation.

Investment Measures: Under the Agreement:

• U.S. investors are allowed to invest in a European Community airline, as long as the airline is majority owned and effectively controlled by a Member State and/or nationals of Member States.
• The Agreement makes clear that, under U.S. law, EU investors may hold up to 49.9% of the total equity in a U.S. airline and, on a case-by-case basis, even more, provided that foreign nationals do not own more than 25% of the voting stock and the airline is under the actual control of U.S. citizens.
• The Agreement also opens the possibility for EU investors to own or control airlines from Switzerland, Liechtenstein, members of the European Common Aviation Area (ECAA), Kenya, and U.S. Open Skies partners in Africa without putting at risk such airlines’ rights to operate to the United States.
• Finally, the grant of new traffic rights to EU carriers opens the door to cross-border airline mergers and acquisitions within the EU, which is possible today only if airlines are prepared to place their international operating rights in legal jeopardy.

Other Benefits: The Agreement erects a pro-growth, pro-competitive, pro-consumer framework that:

• eliminates outmoded restrictive arrangements affecting London Heathrow airport, where U.S.-UK service is now limited to four airlines;
• allows EU airlines to transport non-DOD USG passengers (employees and civilian-agency-funded contractors) and cargo on scheduled and charter flights between two foreign points and on all U.S.-EU routes not covered by a GSA “city pair” contract; and
• allows EU airlines to transport cargo between the United States and all third (non-EU) countries, as well as passengers between the United States and members of the ECAA, as of the date of signature of the Agreement.

The EU Transport Council approved the Agreement March 22, 2007. The Agreement will be provisionally applied starting March 30, 2008, and calls for U.S.-EU negotiations on a second stage of aviation liberalization to commence within two months of that date.