Big Deal

Open skies don't mean lower fares

The skies between Canada and Europe are about to be declared wide open — giving airlines the freedom to launch new services where, when and at whatever pricing they want. In the long run, consumers may be rewarded through more flights and lower fares. But for the next year or longer, the freshly-inked Canada-European Union Open Skies agreement will probably mean diddly-squat.

For starters, it won’t come into effect until it is translated into 22 European languages. So it could be months before even the first of four phases is introduced. Even then, it seems unlikely carriers will rush to inaugurate new routes before the economic outlook brightens.

Under the first phase, Canadian and European airlines can start transatlantic flights linking any cities in the two jurisdictions. Theoretically LOT Polish Airlines would be able to fly between London, England, and London, Ont., should it wish to do so. Before Open Skies, Canada had separate bilateral agreements with individual European countries. That meant only British and Canadian airlines could fly between the United Kingdom and Canada, and no foreign airline could fly to London, Ont., unless that city was specifically named in the bilateral agreement.

British Airways was fast to take advantage of a U.S.- Europe Open Skies agreement that came into effect last March. It created a new subsidiary called Open Skies that offers premium seats to business travellers on flights linking New York with Paris and Amsterdam. With the world facing a recession, that business plan now seems a little risky. So it’s not surprising that British Airways says it has no plans to bring Open Skies service to Canada.

There will be some new flights between Canada and Europe in 2009, but the routes were already planned under the old bilateral system. KLM will restart its Calgary-Amsterdam routing, Air Canada will launch flights from Toronto and Montreal to Geneva, and Air Transat will have new routes to Venice, Milan, Rome, Barcelona and Madrid. Otherwise, Canadian and European airlines say they are in no rush to take advantage of the new rules.

As for small Canadian airports, any payoff is probably a long way off. “My impression is there will be no immediate benefit or effect,” says Jim Hunter, president and CEO of Regina International. “But certainly in the long-term, maybe some sort of arcane airline might want to fly out of here.”

Later phases of the agreement — which might not be introduced for years, if ever– could allow Canadian and European airlines the right to carry passengers beyond the two jurisdictions and permit Europeans to own up to 49.9 per cent of a Canadian airline. Scotia Capital analyst David Tyerman has suggested that Lufthansa, Air France/ KLM or British Airways might be interested in a slice of Air Canada.

One immediate effect of the agreement could come at European airports. The International Air Transport has been pushing for one-stop security – meaning that passengers who clear security at one airport won’t be checked again at a connecting airport. Canadians flying through Europe could be among the first to benefit, if Canada requests such procedures under the Open Skies agreement.