^ Don't throw in all your chips yet.
EU Opens Skies: With U.S. Approval To Come, Way Is Clear For First Phase To Begin Next Year
By Jay Boehmer
APRIL 02, 2007 -- European Union transportation officials last month unanimously approved an Open Skies agreement that sets the course to liberalize transatlantic air travel. Aviation experts expect U.S. approval of the agreement to send ripples through the industry for years, prodding European airline consolidation, lowering transatlantic fares, expanding antitrust immunity among airline alliances and opening more routes and frequencies between Europe and the United States.
The agreement, to be signed later this month and go into effect in March 2008, gives carriers greater access to foreign money and markets, and promises to increase competition. However, the treaty could crumble yet as some of the most contentious issues between the United States and the European Union remain up in the air until later-stage negotiations.
While analysts said benefits to corporate travel buyers likely won't come into play until at least next year when the deal is implemented, lower fares and increased transatlantic air services are in the pipeline, Standard & Poor's managing director of ratings services Phillip Baggaley told corporate travel buyers last week during the National Business Travel Association Financial Forum in New York.
The deal would spark lower fares "across the Atlantic," he said, as new services take to the skies. "You'll see a period where some big airlines will try some new routes, and there will be a shaking-out period of lower fares," Baggaley said.
Director of Ohio State University's Aviation Institute Darryl Jenkins said downward pressure on fares would affect leisure and business class fares disproportionately, causing a greater decrease on the leisure side.
The endorsement of the agreement immediately set airlines on the path toward new services. Continental, for example, wasted little time in announcing plans to inaugurate flights between Houston and Heathrow before summer 2008, subject to approval. On the other side of the Atlantic, Ireland-based Aer Lingus said it plans this year to launch new long-haul service to San Francisco, Orlando and Washington Dulles in light of the new agreement. More carriers are likely to embark on similar expansion plans afforded by the agreement, analysts said.
"This Open Skies agreement paves the way for much-desired increased service between the United States and Europe," Air Transportation Association president James May said in a statement. "It has the potential to provide enormous benefits to our respective customers and economies."
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