UK may hold fresh talks with US on air services
UK Ministers will come under pressure this week to seek fresh talks with the US aimed at liberalising air services across the Atlantic.
Several government departments, most importantly the Treasury, the Department of Transport, and the Department of Trade and Industry disagree, however, on the best way to approach Washington over an issue that has long soured relations.
Officials have failed to reconcile differing views within the government. It is expected that Tony Blair will be forced to intervene to seek a compromise, triggering another round of heavy lobbying by British Airways and Virgin Atlantic.
The Treasury is understood to favour an early move to a so-called “open skies” deal with the US in the belief that this would do most to foster competition and so lower fares.
The transport department believes such an approach would make too many concessions to the US. It would undermine the UK aviation industry and deal a blow to British Airways and Virgin Atlantic, when BA is already shedding 13,000 jobs and faces competition from a US industry propped up by a $15bn package from Washington.
This week Fred Smith, chairman and chief executive of FedEx of the US, the world’s largest express air freight group, is to meet John Spellar, UK transport minister, to press for fewer restrictions.
Recently, Sir Michael Bishop, chairman of BMI British Midland, has held talks with Downing Street officials as part of his long-standing efforts to break into the lucrative market across the Atlantic.
Under the present highly restrictive bilateral treaty, known as Bermuda II, the so-called “Heathrow Four” airlines – BA, Virgin Atlantic, American Airlines and United Airlines – enjoy exclusive rights to operate direct services between Heathrow, the world’s busiest international airport, and the US.
Both London and Washington regard Bermuda II as an anomaly. But interventions by the prime minister and successive US presidents, Bill Clinton and George W. Bush, have failed to break the impasse.
UK policy has been in disarray since February, when BA and American Airlines were forced to abandon an attempt to gain antitrust immunity for a joint venture, which the UK had backed. Further, the government’s attempt at a fresh approach has been complicated by the conflicting ambitions of BA and BMI.
Rod Eddington, BA chief executive, has called for the European Commission to negotiate on behalf of the European Union. But Sir Michael bitterly attacked the initiative, saying it would exclude BMI.
