The European Union and United States have agreed a second Open Skies aviation agreement, significantly liberalising transatlantic aviation regulations.

Coming into force in March 2008, the first Open Skies deal allowed unlimited access to and from European and US cities for international carriers. The second stage augments this arrangement; seeking to allow European and American airlines to take major stakes in competitors.

Foreign control of US carriers is currently capped at 25 per cent, while US airlines can gain ownership of EU carriers above the current 49.9 per cent.

Any effort to boost European ownership of an American airline past this threshold would require the content of the US Congress.

Siim Kallas, European commission vice-president responsible for transport, welcomed as “a major step forwards”, the preliminary agreement reached by EU and US

“A process has been agreed towards the further expansion and consolidation of the transatlantic aviation market,” he added.

“Both sides have agreed to increase regulatory co-operation, and remove the barriers to market access that have been holding back the development of the world’s most important aviation markets.

“Building on the success of the 2007 EU-US Open Skies Agreement, this draft deal represents a significant breakthrough in the process of normalising the global airline industry.”

The provisional agreement reached includes a commitment to engage in a process towards reform of airline ownership and control rules.

The European Union, based on the positive experience of the EU internal market, has long pressed for such an outcome, arguing that it would represent a key step towards liberating the airline industry from the outdated regulatory constraints in the area of foreign investment that prevent it from acting like any other industry.

The provisional agreement sets out a number of incentives to encourage reform: When the United States changes its legislation to allow EU investors majority ownership of US airlines, the EU will reciprocally allow majority ownership of EU airlines by US investors and US airlines will benefit from additional market access rights to and from the EU.

Progress towards this outcome will be reviewed regularly, the EU confirmed.

American Stance

However, progress in the negotiations in far from assured, with John Byerly, the chief US negotiator, insisting the US had made no commitments to change its ownership limits.

“There is no requirement. There is no timetable. There’s a process for co-operation,” Mr Byerly said.

British Airways has previously urged the EU to scrap the original Open Skies deal, if America proved unwilling to remove restrictions on European ownership of US businesses.

In a statement the British flag-carrier said: “We had hoped that the conclusion of the second stage negotiations would have resulted in the immediate removal of restrictions on ownership and control of US airlines.

“We call on both sides to honour the firm commitments they have made in this agreement to further liberalisation, and to redouble their efforts going forward.”

The International Air Transport Association (IATA) has also poured cold water on the deal.

A statement from IATA chief Giovanni Bisignani read: “It is disappointing that, at this critical time, we did not make significant progress on the issue of ownership.

“The agreement was not a step backwards, but it did not move us forward. The long-term financial sustainability of the industry is dependant on normal commercial freedoms.

“I urge both governments to keep this on the radar screen for urgent follow-up,” he concluded.