Aug 8 1976
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(New page: A new political-economic battle between the U.S. and Britain was expected as bilateral talks were scheduled in London for Sept. on renegotiation of the "Bermuda Agreement" of 1946 regulati...)
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A new political-economic battle between the U.S. and Britain was expected as bilateral talks were scheduled in London for Sept. on renegotiation of the "Bermuda Agreement" of 1946 regulating airline operations between the U.S. and Britain, in the Caribbean, and in and out of Hong Kong. Britain had announced 22 June it would withdraw from the agreement. The pact (which originally settled wrangling between wartime allies over peaCETIme air commerce, and served as model for more than 60 bilateral air-travel agreements between the U.S. and other nations) specified the routes the two countries' airlines could fly and prevented competition on prices. At the time, U.S. carriers had the advantage of new equipment to fly the North Atlantic, and Britain and other war-poor European countries were looking to tourism to bolster their economies.
Britain's objectives in renegotiation would be an equal share of traffic instead of the present 65 to 35% split in favor of the U.S., as well as a cutback in the number of North Atlantic flights. Constantine Menges, director of the international division of the U.S. Civil Aeronautics Board, said the British were interested in equality of results rather than equality of competition, and warned that encouraging airlines to equalize their shares of the market would endanger consumer interests by allowing the airlines to neglect measures that would increase their markets. Political factors would govern any decision: most non-American airlines (including Britain's) were state-owned and symbols of national prestige. On many international air routes, competing airlines pooled operations and shared revenues and expenses. This cartel philosophy had not applied to North Atlantic routes because of the Bermuda principles; however, Britain now wanted to reduce the number of flights (now involving 28 airlines) that had became destructively competitive, with an estimated equivalent of 8 jumbo jets flying empty between the U.S. and Britain every day. The British view was that restricting the number of flights would enable each nation's airlines to fly more profitably, eventually benefitting the consumer by easing the pressure for higher fares.
On the other hand, U.S. legislation that created the CAB in 1938 had exempted international routes from regulation by subjecting CAB decisions affecting them to presidential review, leaving room for political influences. Whereas the U.S. airlines would be sympathetic to restrictions on flight numbers, the U.S. ideological commitment would uphold free enterprise and unrestricted competition. However, renegotiation might offer the U.S. some advantages: changes on other transatlantic routes where it was now at a disadvantage against European national carriers, increasing the use of charter groups to fill empty seats on scheduled flights, and securing greater equality in so-called fifth and sixth freedoms that permitted European carriers to lure transatlantic passengers with cheap stopovers in and transport to and from other cities besides the basic destinations. Dr. Menges suggested that the U.S. might best negotiate with the European Common Market as a whole, instead of with any one nation; the British rejected this idea as an affront to national sovereignty. (NYT, 8 Aug 76, 3-1)
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