TRANSATLANTIC AVIATION: Effects of Easing Restrictions on U.S.-European Markets

Abstract : Starting in 1992 with the signing of the first of 15 Open Skies agreements between the United States and EU nations, both consumers and airlines have benefited from the removal of government restrictions on international aviation. With one notable exception, the United States has Open Skies agreements with the EU countries to which most transatlantic passenger traffic flows. The exception is the nation that is the single largest transatlantic market in terms of passengers and flights-the United Kingdom (UK). Under the U.S.-UK agreement, only two U.S. airlines have access to London's Heathrow airport, the major gateway to the United Kingdom and the largest EU airport for transatlantic passengers. Available research indicates that U.S. airlines profited from Open Skies agreements by establishing more integrated alliances with EU airlines. Consumers benefited from Open Skies agreements because they allowed airlines and alliances to provide on-line service to more locations at cheaper fares. Our analysis of scheduled service for May 2004 showed that the majority of possible U. S.-EU markets were served with no worse than two-stop flights. Moreover, travelers had a choice of competitors, with the majority of markets being served by three or more airlines (or alliances).