Britain has signalled to its European Union partners it will accept a landmark pact with the United States to open transatlantic flights to greater competition, diplomats said on Tuesday.
They said London had indicated it would not obstruct the "open skies" agreement when EU transport ministers meet to approve it on Thursday, but would seek a delay in implementing it at London's Heathrow Airport. "My assumption is that we will get a positive outcome on this issue on Thursday," one EU diplomat said.
Britain also wants an EU commitment to automatically withdraw concessions made under the pact if Washington does not agree by mid-2010 to allow European airlines to buy control of US carriers, the diplomats said, saying the Union would declare a second-phase accord to be "of paramount importance".
Shares in European airlines rose across the board, with Spain's Iberia up 8 percent amid speculation the pact would trigger a take-over bid by British Airways (BA). Prime Minister Tony Blair's office and the Department of Transport declined comment on the open skies negotiations. However an industry source in London said: "That's what he's (Blair's) proposing, that there is an automatic termination."
Blair is due to talk to US President George W. Bush by telephone before Thursday's EU meeting, but his office would not confirm that "open skies" would be on the agenda. BA and Virgin Atlantic, the only European airlines that can fly transatlantic routes from Heathrow under the current arrangements, initially attacked the accord negotiated this month by the European Commission.
They said the United States achieved its goal of opening up access to Heathrow without giving ground on the EU's key demand to loosen ownership restrictions on US carriers. But diplomats said Britain was isolated within the EU, and while it could theoretically veto the pact, it had indicated it would not do so.
The issue tests Britain's commitment to open markets and protect the interests of other British airlines and airports that would benefit from the open skies pact. One such outsider, British airline bmi, said it would look to add two or three transatlantic routes a year if open skies supplants restrictions dating back to World War Two.
"We're taking the positive approach of encouraging the government to sign up to it," bmi Deputy Chief Executive Tim Bye told Reuters, adding it would benefit British consumers. A European industry source said: "It's increasingly difficult for the UK on the one side being one of the biggest backers of liberalisation and on the other being as protective as it would be perceived to be if it tried to reject (this) on the grounds of the Heathrow question."
Virgin Atlantic has also said it is looking at launching US-bound flights from continental Europe if a deal is agreed. The European Commission says the deal covers 60 percent of international air traffic and would generate more than 25 million extra transatlantic passengers in the next five years, as much as 12 billion euros in consumer benefits, and the creation of 80,000 new jobs on both sides of the Atlantic.
Environmentalists say it would cause more emissions of greenhouse gases that heat the planet, and one key clause would hamper the possibility of applying a fuel tax to kerosene. Diplomats said London wanted to delay opening transatlantic routes from Heathrow to competition until a fifth terminal is opened at the congested airport in 2008.
The pact, due to take effect in October this year, gives the EU the right to withdraw concessions to US airlines in mid-2010 if a second-phase deal is not concluded by then. Britain's main long-term demand is that Washington allow foreign airlines to buy control of US carriers, establish airlines in the United States, and fly on domestic US routes.
However, the US House of Representatives Transportation Committee warned the Bush administration last week against any concession on foreign ownership, threatening tighter legislation to prevent it if Washington yielded to EU demands.