Memorandum by the Air Transport Users
Council (AS 24)
AIR SERVICE AGREEMENTS BETWEEN THE UNITED
KINGDOM AND UNITED STATES
In its written evidence to this enquiry (document
AS 13A, paragraph 8) Virgin Atlantic ascribes certain views to
the Air Transport Users Council. These might be taken to imply
that the Council supports Virgin Atlantic's position that liberalisation
of the transatlantic market should be made conditional on relaxation
of the US ownership and control rules. That is not the case. The
position of the Council on the current negotiations between the
two Governments is summarised below.
POLICY POSITION OF THE AUC
1. Consumers would benefit from opening
up the transatlantic market to more competition.
2. There would be some additional benefit
to UK consumers from opening up the US domestic market to competition
from European carriers. However, the desire to realise that benefit
should not be allowed to stand in the way of securing the greater
gains from transatlantic liberalisation.
3. The Council was not opposed to the BA/AA
alliance but to the reduction in transatlantic competition that
would result. We therefore argued in favour of measures to recreate
competition (through slot surrender and by opening up the market
to more carriers).
4. We acknowledge that the Government has
responsibility to take account of the interests of the industry
as well as of consumers. We also accept that opening up the market
to US carriers could damage the commercial interests of the incumbent
airlines. The interests of consumers andof these airlines are
therefore opposed, with consumers standing to benefit from immediate
liberalisation and Virgin and BA seeking some commercial compensation
for the loss in revenue that would result from increased competition
from US airlines.
5. British Midland's interest in entering
this market has substantially changed the dynamics by shifting
the net balance of interests of UK airlines toward that of UK
consumers—in favour of opening up the market. It also slightly
lessens the undesirable consequences of a merger between BA and
AA by strengthening the competitive position of the Star Alliance
at Heathrow.
6. For the above reasons, we:
(a) remain in favour of bilateral liberalisation
of the transatlantic market, even if that follows the US Open
Skies model;
(b) do not oppose an alliance between and
BA and AA or between BMA and United provided approval is made
subject to regulatory action designed to reinstate competition
on routes where the new alliance partners previously competed.
Ian Hamer
Chairman
13 June 2000
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