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. Last Updated: 07/27/2016

Europe: Airline Deals With America Illegal

BRUSSELS, Belgium -- The European Court of Justice ruled Tuesday that eight EU states acted illegally when they signed bilateral air deals with the United States offering advantages to their national flag carriers.

The decision was sought by the EU's executive, the European Commission, which says striking down the bilateral deals would ultimately increase competition on lucrative trans-Atlantic routes, bring down air fares and make it easier for European carriers to merge.

The decision could have far-reaching implications for trans-Atlantic air traffic by allowing European airlines greater freedom to fly to the United States from EU nations other than their own.

In its judgment, the Luxembourg-based court said the bilateral "open skies" accords with Washington violated EU law since they infringed on the power of the EU head office to regulate and negotiate air transport accords with non-EU nations.

The court said the bilateral agreements also discriminated against airlines in EU countries that signed no such deals with the United States.

The ruling means the eight member nations -- Denmark, Sweden, Finland, Belgium, Luxembourg, Austria, Britain and Germany -- must renegotiate their bilateral airline accords with Washington to bring them into line with EU law.

The EU high court ruling gives the European Commission crucial legal backing in its battle to replace national governments in negotiating air traffic agreements with the United States and other nations.

The commission sued the eight nations in 1998, accusing them of violating the EU's founding treaty by discriminating against airlines from other EU nations. The commission said that treaty gave it exclusive powers to negotiate trade agreements on behalf of the 15 EU states.

The open skies agreements let U.S. airlines fly into EU countries from anywhere in the United States but let European carriers only fly to the United States from their home bases. For instance, KLM Royal Dutch Airlines can fly to American airports only from Amsterdam, not Madrid or Rome, thereby protecting its home base at the expense of other EU carriers.

Also, by negotiating individually, the commission argued, Washington was able to play one EU country off against another. It argued that by negotiating on behalf of all 15 EU states -- as granted through the EU treaty -- it can strike a better, fairer deal for European airlines, notably by securing rights to fly on domestic U.S. routes.

In its complaint, the commission also said that the open skies deals kept the EU market fragmented, making it difficult for European airlines to merge. This left a legacy of several financially ailing national carriers in Western Europe, while enabling the U.S. air industry to consolidate.