Flying high over the Atlantic

On March 30, the most ambitious trans-Atlantic air service deal ever took effect. For the first time, European airlines can fly without restrictions from any point in the EU to any point in the U.S. — and vice versa. The new EU-U.S. Air Transport Agreement will bring more competition and cheaper flights to the biggest international air transport market.

European Commissioner for Transport Jacques Barrot anticipates a 20 percent increase in flights between just London-Heathrow and the United States over the next few months versus 2007. The agreement establishes a closer cooperation between the EU and the U.S. to tackle new challenges, such as security or environmental issues in air travel, and is an important first step towards a normalization of the international aviation industry.

The ultimate objective of the European Union is to create a trans-Atlantic Open Aviation Area: a single air transport market between the EU and the U.S. Under this agreement, restrictions on the ability of European companies to invest in American airlines, for example, would be lifted.

The European Commission will continue to negotiate with the United States on this issue next month. EU officials are optimistic that Open Skies will create jobs and lead to significantly lower ticket prices, even with the recent price increases due to higher crude oil costs.

But there are critics of the agreement. Streamlining passenger security checks and encouraging greater regulatory cooperation promise to be tricky matters to resolve. Washington’s insistence on requiring armed sky marshals on board all flights from the EU to the U.S. is particularly contentious.

The European Commission has resisted the idea, but it will likely give in before allowing an agreement to fail.

The issue of climate change could also complicate talks. If air transportation increases as a result of an Open Skies Agreement, so too will carbon dioxide emissions. A flight from Frankfurt, Germany, to Washington, D.C. generates 4,300 kilograms of carbon dioxide per passenger — the equivalent of two years of driving. Some environmental groups would therefore like to scrap the agreement entirely. EU officials want to combat the problem by integrating airline emissions into the larger greenhouse gas trading market. The U.S., meanwhile, has yet to mandate emissions cuts.

But encouraging more passenger travel between European and American airports is considered just the first step of a broader effort to create a common trans-Atlantic air travel and cargo market. The EU is expected to push the United States to take further steps toward opening up its domestic market and loosening its rules on investment and ownership by European firms by mid-2010.

American airlines may resist the new competition, but studies show a freer market will create thousands of new jobs. The European Commission estimates about 80,000 new jobs would be created. A new American study actually assumes that this will provide for 117,000 new jobs. Airlines like Delta and Northwest, which just announced plans to merge, could benefit from the new freedom and lucrative trans-Atlantic business by having increased access to European airports.

In any case, the negotiations have just begun. The agreement sets a framework in which details will have to be haggled over in a second, third and probably fourth round of talks.

Geiger is founder and managing partner of Alber & Geiger, a leading EU government relations law firm with offices in Brussels and Berlin. Before that, Geiger was head of the EU Law Center of Ernst & Young, and president and CEO of Cassidy & Associates Europe. He has written a handbook on lobbying the EU.