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Second Stage EU–US "Open Skies" agreement - guide

24 June 2010
by eub2 -- last modified 24 June 2010

The 'second stage' Open Skies aviation agreement was signed by the European Union and the United States in Luxembourg today. The full implementation of the first and second stage agreements is expected to give the economy a EUR 12 billion boost as well as create up to 80,000 new jobs.


The second stage agreement builds on the benefits of the ground-breaking EU–US Open Skies agreement signed in 2007. It generates new commercial opportunities and strengthens the framework of cooperation on issues such as the environment, social protection, competition, and security. Furthermore, it creates the prospect of additional investment and market access opportunities in the future.

Second-stage negotiations started in May 2008 with a view of further regulatory cooperation and additional market opportunities. The negotiators have now fulfilled the mandate given in the EU–US summit in November 2009.

The Agreement provides clear commercial advantages, including greater access for EU airlines to the "Fly America" programme. The United States and Europe have committed to the goal of removing remaining access barriers and will review progress towards this objective on an annual basis. Additional commercial rights will be exchanged in the future subject to following legislative change. See below:

* Reciprocal liberalisation of airline ownership and control. Currently, foreign ownership in US airlines is limited to 25% of voting rights. Upon legislative change in the US, the EU will reciprocally allow majority ownership of EU airlines by US nationals.

* Airport noise-based restrictions. Subject to legislative changes in the EU concerning the process for introducing noise-based airport restrictions, EU airlines will gain additional rights to fly between the US and a number of non-European countries. Furthermore, a number of obstacles for EU investment in third country-airlines will be removed. Similar rights will be available for US airlines when the US laws allow EU majority ownership of US airlines.

The negotiators also achieved significant improvements in terms of regulatory cooperation:

* The agreement will strengthen cooperation on environmental matters by requiring the compatibility and interaction of market-based measures (such as emission trading schemes) to avoid duplication; by promoting greater transparency for noise-based airport measures; and by enhancing green technologies, fuels and air traffic management. This cooperation is key to making international aviation more sustainable.

* For the first time in aviation history, the agreement includes a dedicated article on the social dimension of EU-US aviation relations. This will not only ensure that the existing legal rights of airline employees are preserved, but that the implementation of the agreement will contribute to high labour standards.

* The agreement will raise the already high level of cooperation on security to better allocate resources at threats to the aviation system by promoting maximum mutual reliance on each other's security measures as well as swift and coordinated responses to new threats.

* The agreement further extends the role of the EU–US Joint Committee, the body that monitors the implementation of the Agreement and coordinates the various work streams of regulatory cooperation. The new rules will reduce red tape (e.g. by mutual recognition of each other's regulatory decisions) and avoid the wasteful duplication of resources (e.g. joint safety initiatives, one-stop security, facilitation of passengers' travel).

The European Union and the United States' markets are the largest aviation markets in the world. Together, they represent approximately 60% of global aviation. The economic benefits associated with the implementation of this second stage agreement have been independently estimated to be equivalent to the transatlantic benefits to be expected from a successful conclusion of the Doha round of trade. Following signature of the agreement, the consent of the European Parliament and ratification by all Member States will be necessary for its formal entry into force.

The potential economic benefits of removing the barriers to the EU–US transatlantic market are very significant (Booz Allen Hamilton, January 2007):

* In economic terms, it could be worth up to €12 billion in economic benefits and up to 80,000 new jobs (spread more or less equally between the US and the EU).

* It would create the possibility of an additional 26 million extra passengers on transatlantic flights over a period of five years This compares with current annual traffic of just under 50 million (2007). At the end of the five years, this will mean that the market will be 34% bigger with the agreement than without the agreement.

* By eliminating the bilateral agreements and their restrictions on traffic rights, we could envisage a reduction in the cost of tickets for companies and private customers, with consolidated economic benefits of between EUR 6.4 and 12 billion over a period of five years.

The cargo market would see growth of between one and two percent.

Source: European Commission