UK/US air liberalisation in disarray

UK efforts to secure a limited liberalisation of air services with the US were in disarray on Wednesday night as Alistair Darling, UK transport secretary, bowed to heavy pressure from UK and European passenger and cargo interests opposed to any deal.

The UK transport department said the US had been told “not to expect further proposals for a few weeks.”

It said it had embarked on further analysis of the consequences for UK aviation of agreeing to a so-called “open skies” deal for air cargo services, which has been sought by the US.

The UK government had believed that there could be scope for negotiating a limited liberalisation deal, that would satisfy the main demands for change from BMI British Midland in the UK and FedEx, the world’s leading express air freight group in the US.

BMI has been pushing hard to gain its first entry into the lucrative transatlantic passenger market between London Heathrow airport and the US, while FedEx has sought rights to pick up cargo in the UK for delivery in a third country.

Mr Darling has faced a concerted rearguard action by other UK airlines, led by British Airways and Virgin Atlantic and by UK-based cargo carriers led by DHL and TNT, that are opposed to any deal that does not give UK interests reciprocal rights in the US.

British and European air cargo operators in particular have warned about the loss of jobs and investment that would result from a one-sided opening of the UK cargo market with the only gain being limited access for BMI to some Heathrow/US passenger services.

The cargo carriers have told Mr Darling that an “open skies” deal for cargo would not bring any benefits to UK consumers or shippers but would destroy “thousands of British jobs.”

European groups such as TNT and DHL claim that FedEx and UPS of the US already operate full international networks of delivery systems from the UK at prices which are consistent with those on offer anywhere else in Europe.

They have warned the UK government that the US groups would not introduce any new services as a result of “open skies.” Instead European aircraft currently contracted to provide intra-European capacity would be replaced by US aircraft operated by US crews to US maintenance standards.

British and European airlines would lose business, and British and European jobs would be lost in airlines as well as in aircraft maintenance organisations.

The UK government said on Wednesday that there was “no timetable for getting back in touch with the US.”

A transport department spokesman said “ministers would like a more thorough assessment. We will not be rushed into signing an agreement without a more thorough analysis of the consequences.”