U.S. Said to Offer U.K. Worse `Open Skies' Deal After Brexit

(Bloomberg) -- The U.S. has offered the U.K. a more limited “Open Skies” aviation deal after Brexit than it has as a member of the European Union, but participants expressed confidence that the lucrative transatlantic market would continue unimpeded.

The main stumbling block in the negotiations is that the U.S. is using its standard template for aviation agreements, which has less generous terms than its deal with the EU, according to people familiar with the matter, who asked not to be named discussing private talks. Those terms could affect transatlantic flights operated by companies such as British Airways and Virgin Atlantic.

In spite of the potential hang-up, a U.S. trade group representing airlines doesn’t see any major hurdles to reaching an Open Skies agreement with the U.K. and believes it can be finalized soon.

“For the airline industry, discussions with the U.K. are making significant progress,” Sean Kennedy, senior vice president for global government affairs at Airlines for America, said in an interview. "We are pleased with the leadership of both countries in reaching a new agreement as soon as possible."

Kennedy and other airline representatives have met in recent days with U.K. officials and were assured that talks were going well. U.S. negotiators have said the same thing, Kennedy said.

"We are highly confident in their desire to reach a deal," he said.

British and U.S. officials aim to resolve the difficulties and reach an accord soon so that transatlantic airlines continue to operate with ease after the U.K.’s scheduled departure from the EU in March next year, said the people familiar with the discussions.

The talks “have been positive and we have made significant progress,” the U.K. Department for Transport said in a statement on Monday, adding that both sides want to conclude the discussions “soon.”

“All parties have a shared interest in ensuring that existing rights will continue under the new bilateral arrangements, allowing airlines on both sides of the Atlantic to continue to operate existing services as well as to seek to develop new ones,” the department said.

The potential sticking point is a standard requirement imposed by the U.S. that foreign airlines be majority owned by citizens of the country in which they are based. If imposed, that may restrict the kind of flights to the U.S. by several U.K. carriers, which either have non-U.K. ownership or are contemplating a sale to citizens of other countries. The issue was first reported in the Financial Times on Monday.

However, carriers have been assured that that there would be some agreement allowing them to continue flying to the U.S. as they do now, said an industry official familiar with the talks who asked not to be identified because he wasn’t authorized to speak on the issue.

A State Department official said that the January talks began with the model Open Skies text and included numerous industry stakeholders. The official, who was speaking on the condition of anonymity, said the U.S. is confident a timely agreement can be reached.

To contact the reporters on this story: Tim Ross in London at tross54@bloomberg.net, Alan Levin in Washington at alevin24@bloomberg.net, Nick Wadhams in Washington at nwadhams@bloomberg.net.

To contact the editors responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net, Jon Morgan at jmorgan97@bloomberg.net, Alex Morales, Emma Ross-Thomas

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