KAI RYSSDAL: Travelers to Europe might be seeing lower airfares early next year. European Union transportation ministers approved something called an Open Skies agreement
this morning, which will in theory lead to more flights and so those lower ticket prices. It's set to take effect at the end of March 2008, if all goes as planned.
Marketplace's Stephen Beard is at our European Desk. Hello Stephen.
STEPHEN BEARD: Hello, Kai.
RYSSDAL: Nifty name, Open Skies. What does it really mean? What was the deal that was agreed to today?
BEARD: Well, this is designed to open up the heavily-restricted trans-Atlantic air travel market. To create a lot more competition, to bring airfares down. The E.U. says this deal, when it's implemented, will generate 26 million more airline passengers over the next five years and create over 80,000 new jobs in the E.U. and the U.S. I mean, the total value could be as high as $16 billion. So, it's a big deal.
RYSSDAL: All right. Well, what's going to change? WHat's it going to look like when this deal goes into effect?
BEARD: The nub of this is that any E.U.-based airline will be allowed to fly from any E.U. city to any city within the U.S., and vice versa. This means there's gonna be a lot more different airlines flying a lot more different routes across the Atlantic. And it has really big implications for London's Heathrow. Currently, under the existing 30-year-old treaty, only four airlines are permitted to use Heathrow's trans-Atlantic routes — that's United and American in the States and here in the U.K., British Airways and Virgin. Now, these guys are gonna face a lot more competition as a result of this Open Skies deal.
RYSSDAL: I guess the theory is that more competition, whether it be Heathrow or Paris or Frankford or anything, would eventually drive prices down for you and me.
BEARD: That's the thinking. Of course, these carriers are going to have to get the take-off and landing slots at these airports. And in the case of Heathrow, these are extremely valuable assets. British Airways, sitting on something like 40 percent of the take-off and landing slots at Heathrow, is not going to give them up without a struggle. But yes, in theory, this deal agreed today should open up the whole market and should bring airfares down.
RYSSDAL: Is the British government eager to have more traffic in and out of Heathrow? It's already ridiculously crowded.
BEARD: Well, the British government has been a little bit dubious about this deal. I mean, British Airways and Virgin, not surprisingly, don't like it. And they have lobbied the British government like mad. They argue — and the British government went along with this for awhile — they argue that this deal isn't fair. It gives the U.S. much more than the E.U. U.S. airlines will be able to fly between European cities, but European airlines won't be able to fly between American cities. And also, the very restrictive laws on foreign ownership of U.S. airlines remain in tact. And on these grounds, the British government was reluctant about this deal and only agreed to it when it was agreed that it would come into effect next year.
RYSSDAL: Let me make sure I have this straight: the Europeans gave up a lot, the Americans gave up nothing.
BEARD: Oh no, the Americans have certainly given up quite a bit. Because negotiations on these issues of foreign ownership of American airlines and access to American routes — that is, European carriers being able to fly into Washington, pick up passengers and fly them to LA — all those issues are gonna be up for negotiation. The negotiations begin next January. And the U.S. has been told if it doesn't deliver much more liberalization by the year 2010, then the E.U. will withdrawal the concessions that it's agreed today.
RYSSDAL: From the Marketplace European desk in London, Stephen Beard. Thank you, Stephen.
BEARD: OK. Thank you, Kai.