Bermuda II
Encyclopedia
Bermuda II was a bilateral air transport agreement
between the governments of the United Kingdom
and the United States
signed on 23 July 1977 as a renegotiation of the original 1946 Bermuda air services agreement
. A new "open skies
" agreement was signed by the United States and the European Union
(EU) (of which the United Kingdom is part) on 30 April 2007 and came into effect on 30 March 2008, thus replacing Bermuda II.
The original 1946 Bermuda agreement took its name from the island where UK
and US
transport officials met to negotiate a new, inter-governmental air services agreement
between Britain
and the United States. That agreement, which was highly restrictive at the insistence of the British
negotiators who feared that "giving in" to US demands for a "free-for-all" would lead to the then financially and operationally superior US airlines' total domination of the global air transport industry, was the world's first bilateral air services agreement
. It became a blueprint
for all subsequent air services agreements.
Bermuda II was revised several times since its signing, most recently in 1995. Although Bermuda II was much less restrictive than the original Bermuda agreement it replaced, it was widely regarded as a highly restrictive agreement that contrasted with the principle of "open skies
" against the background of continuing liberalisation of the legal framework governing the air transport industry in various parts of the world.
, the then new UK Secretary of State for Trade, renounced the original Bermuda Agreement of 1946 and initiated bilateral negotiations with his US counterparts on a new air services agreement, which resulted in the Bermuda II treaty of 1977.
The reason for this was that there was no provision in the original 1946 Bermuda agreement that would have allowed British Caledonian
(BCal), then the UK's foremost wholly privately owned, independent international scheduled airline, to use the licences the UK Civil Aviation Authority (CAA) had awarded it in 1972 to begin daily scheduled services from its London Gatwick base to Houston and Atlanta. (These cities were not nominated as "gateway cities" in the original Bermuda agreement.) In addition, there was no provision in the original Bermuda agreement that would have allowed Laker Airways
to use the licence the UK's Air Transport Licensing Board (ATLB), the CAA's predecessor, had awarded it the same year to commence a daily "Skytrain" operation between London Stansted
and New York.
Under the new agreement, BCal had its licences to commence scheduled services from its Gatwick base to both Houston and Atlanta confirmed and was designated as the UK's exclusive flag carrier on both routes. It also obtained a licence and sole UK flag carrier status to commence scheduled services from Gatwick to Dallas/Fort Worth. In addition, BCal obtained a licence and sole UK flag carrier status to commence scheduled all cargo flights between Gatwick and Houston - including an optional stop-over at Manchester or Prestwick in either direction.
The UK Government chose to designate Laker Airways rather than BCal as the second UK flag carrier to New York to enable that airline to inaugurate its long-planned "Skytrain" operation on that route.
Moreover, both sides agreed to continue dual designation, i.e. designating two UK flag carriers as well as two US flag carriers, on the London-New York and London-Los Angeles routes. The principle of dual designation was extended to another two high-volume routes. The UK side chose to designate a second carrier on London-Miami, while the US side chose London-Boston
for the same purpose. This meant that a second British airline was permitted to commence scheduled services on the former route while another American carrier could do the same on the latter route. The UK Government chose to designate Laker Airways as the second UK flag carrier on the Los Angeles and Miami routes while the US Government decided to designate Northwest
as the second US flag carrier on London-Boston. (Pan Am and TWA continued in their role as the two designated US flag carriers between London and New York as well as London and Los Angeles respectively.)
During the Bermuda II negotiations, the UK side succeeded in having inserted into the new air services agreement a clause stating that Gatwick - rather than Heathrow - was to be nominated as the designated US flag carrier's London gateway airport whenever BCal was going to be the sole designated UK flag carrier on the same route. This clause was meant to support the growth of BCal's scheduled operation at Gatwick as well as to redress the competitive imbalance between it and its much bigger, more powerful rivals.
The UK side furthermore succeeded in negotiating a three-year "exclusivity" period for the incumbent operator on any new route with their US counterparts.
For Gatwick-based BCal this meant that it did not have to face any competitor that was using Heathrow, a more accessible airport with a bigger catchment area and a far greater number of passengers connecting between flights, on any of the new routes it was planning to launch to the US. It also meant that it had any new route to the US completely to itself for the first three years of operation, which most airline industry analysts reckon is sufficiently long for a brand-new scheduled air service to become profitable.
At British insistence Bermuda II furthermore contained clauses that made it illegal for any airline operating scheduled flights between the UK and the US to resort to predatory pricing
or capacity dumping. Air fares were only approved if they reflected the actual cost of providing these services. Similarly, capacity increases were sanctioned on a reciprocal basis only. The reason for insisting on the inclusion of these provisions in the Bermuda II agreement was to prevent the much bigger, better financed and commercially far more aggressive US carriers from undercutting BCal with "loss-leading" fares cross-subsidised with profits those carriers' vast domestic networks generated as well as to stop them from "marginalising" the UK carrier by adding capacity far in excess of what the market could sustain.
In 1981, in an annex to Bermuda II, both sides agreed to automatically nominate Gatwick as the gateway airport for London for any London-US route that did not already exist under the original 1946 Bermuda agreement.
When all available routes between London Heathrow/Gatwick and the US were taken, any carrier wishing to start a new route to a US gateway city currently not served from either of London's two main airports needed to drop another route. In addition, any such change could only become effective when there was unanimous agreement between both the UK and US government
s. Failure of both nations' governments to agree to such changes prevented the introduction of additional non-stop flights, including between London and Honolulu, Portland (OR)
, and Salt Lake City.
Bermuda II's access restrictions to Heathrow lasted 30 years. BA's access rights to Heathrow under Bermuda II derived from the fact that it was the legal heir to British Overseas Airways Corporation
(BOAC) on all routes that airline used to operate between Heathrow and various points in the US under the original Bermuda agreement. American
's and United
's access rights to Heathrow under Bermuda II derived from the fact that they were TWA's and Pan Am's respective legal heirs on all routes these airlines used to operate between various points in the US and Heathrow under the original Bermuda agreement. It was subsequently claimed that Bermuda II contained terms that US negotiators had overlooked. The agreement specifically mentioned Pan Am and TWA. When Pan Am sold its Heathrow traffic rights to United Airlines, British negotiators initially stated that they would not allow United to receive the transferred route authority citing the treaty's specific designation of Pan Am. They furthermore stated that United was not a successor airline because it was not assuming ownership of Pan Am. This may have been a negotiating ploy as the British later did allow transfer of route authority to United. Virgin Atlantic's access rights to Heathrow under Bermuda II derived from the fact that the UK was not using its entitlement to nominate a second carrier to match the two US carriers' presence at London's premier airport. The UK Government therefore took advantage of the abolition of the London [Air] Traffic Distribution Rules, which had confined Virgin's London operations to Gatwick, as well as of the US Government's intention to have American and United replace TWA and Pan Am as the designated US flag carriers at Heathrow to help Virgin establish a presence at that airport as well. These access restrictions were also the reason BA (as BCal's legal heir between London and Houston, Dallas, and Atlanta) and American (as Braniff's legal heir between Dallas and London) were compelled to continue using Gatwick as their UK gateway for all non-stop scheduled operations between London and Houston, Dallas, and Atlanta as long as Bermuda II remained in force.
Subsequently, matters were complicated by the European Court of Justice
's judgement to declare all bilateral agreements between individual EU
member states and the US illegal. Such agreements were deemed to violate the EU's Common Aviation Market.
The main sticking point that had prevented the conclusion of a new, transatlantic "Common Aviation Area" agreement between the EU and the US was that the UK and most other European countries viewed the US version of "open skies" as too restrictive. The US "open skies" template denied foreign airlines "cabotage
" rights, i.e. the right to operate wholly within the US domestic market without entering into a code-share agreement with a US carrier. It also denied foreign airlines the right to acquire stakes in their US counterparts with the intention of exercising boardroom control.
Another bone of contention preventing the conclusion of a "Common Aviation Area" agreement between the EU and the US was the US government's continuing insistence on its so-called "Fly America" policy for all employees and contractors of the federal government
. This policy compelled US government employees/contractors to make all their work-related, overseas air travel arrangements with US-based airlines only. (It also included a requirement for Federal employees to use international services operated by foreign airlines only if they were code-shared with a US carrier, in which case these services needed to be booked under the US carrier's flight number.)
On March 2, 2007 a draft agreement was reached by negotiators from the European Commission
and the US that proposed to drop Bermuda II's restrictions preventing US flag carriers, other than American and United, from flying to Heathrow. This new Air Transport Agreement between the EU and the US was approved unanimously by the EU Transport Council
on 22 March 2007 and replaced Bermuda II with effect from 30 March 2008. It also paved the way for either country to allow airlines headquartered in other EU countries to enter the UK-US air transport market. On 3 October 2007, Britain concluded its first fully liberal Open Skies Agreement with Singapore, allowing Singapore Airlines
to fly completely unrestricted from any point in the United Kingdom, including Heathrow, to any other destination, including the United States and domestic destinations, effective 30 March 2008.
Bilateral Air Transport Agreement
A bilateral air transport agreement is an agreement which two nations sign to allow international commercial air transport services between their territories....
between the governments of the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
and the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
signed on 23 July 1977 as a renegotiation of the original 1946 Bermuda air services agreement
Bermuda Agreement
The Bermuda Agreement, reached in 1946 by American and British negotiators in Bermuda, was an early bilateral air transport agreement regulating civil air transport...
. A new "open skies
EU-US Open Skies Agreement
The EU–US Open Skies Agreement is an air transport agreement between the European Union and the United States. The agreement allows any airline of the European Union and any airline of the United States to fly between any point in the European Union and any point in the United States. Airlines of...
" agreement was signed by the United States and the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
(EU) (of which the United Kingdom is part) on 30 April 2007 and came into effect on 30 March 2008, thus replacing Bermuda II.
The original 1946 Bermuda agreement took its name from the island where UK
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
and US
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
transport officials met to negotiate a new, inter-governmental air services agreement
Bilateral Air Transport Agreement
A bilateral air transport agreement is an agreement which two nations sign to allow international commercial air transport services between their territories....
between Britain
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
and the United States. That agreement, which was highly restrictive at the insistence of the British
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
negotiators who feared that "giving in" to US demands for a "free-for-all" would lead to the then financially and operationally superior US airlines' total domination of the global air transport industry, was the world's first bilateral air services agreement
Bilateral Air Transport Agreement
A bilateral air transport agreement is an agreement which two nations sign to allow international commercial air transport services between their territories....
. It became a blueprint
Blueprint
A blueprint is a type of paper-based reproduction usually of a technical drawing, documenting an architecture or an engineering design. More generally, the term "blueprint" has come to be used to refer to any detailed plan....
for all subsequent air services agreements.
Bermuda II was revised several times since its signing, most recently in 1995. Although Bermuda II was much less restrictive than the original Bermuda agreement it replaced, it was widely regarded as a highly restrictive agreement that contrasted with the principle of "open skies
EU-US Open Skies Agreement
The EU–US Open Skies Agreement is an air transport agreement between the European Union and the United States. The agreement allows any airline of the European Union and any airline of the United States to fly between any point in the European Union and any point in the United States. Airlines of...
" against the background of continuing liberalisation of the legal framework governing the air transport industry in various parts of the world.
Description of the Agreement
- Broadly speaking, only a combined four airlines from the UK and US were allowed to operate flights between London HeathrowLondon Heathrow AirportLondon Heathrow Airport or Heathrow , in the London Borough of Hillingdon, is the busiest airport in the United Kingdom and the third busiest airport in the world in terms of total passenger traffic, handling more international passengers than any other airport around the globe...
and the United States. The two British carriers were British AirwaysBritish AirwaysBritish Airways is the flag carrier airline of the United Kingdom, based in Waterside, near its main hub at London Heathrow Airport. British Airways is the largest airline in the UK based on fleet size, international flights and international destinations...
(BA) and Virgin AtlanticVirgin Atlantic AirwaysVirgin Atlantic Airways Limited is a British airline owned by Sir Richard Branson's Virgin Group and Singapore Airlines...
. The American carriers were American AirlinesAmerican AirlinesAmerican Airlines, Inc. is the world's fourth-largest airline in passenger miles transported and operating revenues. American Airlines is a subsidiary of the AMR Corporation and is headquartered in Fort Worth, Texas adjacent to its largest hub at Dallas/Fort Worth International Airport...
and United AirlinesUnited AirlinesUnited Air Lines, Inc., is the world's largest airline with 86,852 employees United Air Lines, Inc., is the world's largest airline with 86,852 employees United Air Lines, Inc., is the world's largest airline with 86,852 employees (which includes the entire holding company United Continental...
. The US also approved Continental AirlinesContinental AirlinesContinental Airlines was a major American airline now merged with United Airlines. On May 3, 2010, Continental Airlines, Inc. and UAL, Inc. announced a merger via a stock swap, and on October 1, 2010, the merger closed and UAL changed its name to United Continental Holdings, Inc...
to fly to London Heathrow. British refusal to endorse the US position prevented ContinentalContinental AirlinesContinental Airlines was a major American airline now merged with United Airlines. On May 3, 2010, Continental Airlines, Inc. and UAL, Inc. announced a merger via a stock swap, and on October 1, 2010, the merger closed and UAL changed its name to United Continental Holdings, Inc...
from exercising this route authority. However, Continental succeeded in obtaining UK permission to enter into a codeshare agreement with Virgin Atlantic, which placed Continental's flight numbers in addition to VirginVirgin Atlantic AirwaysVirgin Atlantic Airways Limited is a British airline owned by Sir Richard Branson's Virgin Group and Singapore Airlines...
's on some of the latter's HeathrowLondon Heathrow AirportLondon Heathrow Airport or Heathrow , in the London Borough of Hillingdon, is the busiest airport in the United Kingdom and the third busiest airport in the world in terms of total passenger traffic, handling more international passengers than any other airport around the globe...
and GatwickLondon Gatwick AirportGatwick Airport is located 3.1 miles north of the centre of Crawley, West Sussex, and south of Central London. Previously known as London Gatwick,In 2010, the name changed from London Gatwick Airport to Gatwick Airport...
flights. Air IndiaAir IndiaAir India is the flag carrier airline of India. It is part of the government of India owned Air India Limited . The airline operates a fleet of Airbus and Boeing aircraft serving Asia, Australia, Europe and North America. Its corporate office is located at the Air India Building at Nariman...
, El AlEl AlEl Al Israel Airlines Ltd , trading as El Al , is the flag carrier of Israel. It operates scheduled domestic and international services and cargo flights to Europe, North America, Africa and the Far East from its main base in Ben Gurion International Airport...
, Iran AirIran AirIran Air , formally Airline of the Islamic Republic of Iran is the flag carrier airline of Iran, operating services to 60 destinations, 35 international and 25 domestic. The cargo fleet operates services to 20 scheduled and 5 charter destinations...
and Kuwait AirwaysKuwait AirwaysKuwait Airways is the national airline of Kuwait, with its head office on the grounds of Kuwait International Airport, Al Farwaniyah Governorate. It operates scheduled international services throughout the Middle East, to the Indian subcontinent, Europe, Southeast Asia and North America, from its...
were permitted to continue exercising their so-called "fifth freedom" traffic rights from Heathrow to John F. Kennedy AirportJohn F. Kennedy International AirportJohn F. Kennedy International Airport is an international airport located in the borough of Queens in New York City, about southeast of Lower Manhattan. It is the busiest international air passenger gateway to the United States, handling more international traffic than any other airport in North...
(JFK), which they had already enjoyed under the original Bermuda agreement. (Both El Al and Iran Air stopped exercising these rights. The former decided that it made better economic sense to fly non-stop between Tel AvivTel AvivTel Aviv , officially Tel Aviv-Yafo , is the second most populous city in Israel, with a population of 404,400 on a land area of . The city is located on the Israeli Mediterranean coastline in west-central Israel. It is the largest and most populous city in the metropolitan area of Gush Dan, with...
and New YorkNew York CityNew York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
. The latter's US traffic rights were withdrawn in the aftermath of the 1979 Iranian hostage crisis.) Similarly, Air New ZealandAir New ZealandAir New Zealand Limited is the national airline and flag carrier of New Zealand. Based in Auckland, New Zealand, the airline operates scheduled passenger flights to 26 domestic destinations and 24 international destinations in 15 countries across Asia, Europe, North America and Oceania, and is...
was allowed to continue using its fifth freedom rights between LondonLondonLondon is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
and Los AngelesLos ÁngelesLos Ángeles is the capital of the province of Biobío, in the commune of the same name, in Region VIII , in the center-south of Chile. It is located between the Laja and Biobío rivers. The population is 123,445 inhabitants...
. - Bermuda II continued and expanded the principle of "dual designation", i.e. the right to designate two UK airlines as well as two US carriers as "flag carrierFlag carrierA flag carrier is a transportation company, such as an airline or shipping company, that, being locally registered in a given country, enjoys preferential rights or privileges, accorded by the government, for international operations. It may be a state-run, state-owned or private but...
s" on the same routes, which already existed on the London-New York and London-Los Angeles routes under the original Bermuda treaty. - The extensive fifth freedom rights US carriers used to enjoy from the UK to other EuropeEuropeEurope is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
an countries were restricted to a few routes from London Heathrow to what used to be West GermanyWest GermanyWest Germany is the common English, but not official, name for the Federal Republic of Germany or FRG in the period between its creation in May 1949 to German reunification on 3 October 1990....
(including West BerlinWest BerlinWest Berlin was a political exclave that existed between 1949 and 1990. It comprised the western regions of Berlin, which were bordered by East Berlin and parts of East Germany. West Berlin consisted of the American, British, and French occupation sectors, which had been established in 1945...
) in the days prior to German reunificationGerman reunificationGerman reunification was the process in 1990 in which the German Democratic Republic joined the Federal Republic of Germany , and when Berlin reunited into a single city, as provided by its then Grundgesetz constitution Article 23. The start of this process is commonly referred by Germans as die...
. In the early '90s, United Airlines used to fly between Heathrow, BerlinBerlinBerlin is the capital city of Germany and is one of the 16 states of Germany. With a population of 3.45 million people, Berlin is Germany's largest city. It is the second most populous city proper and the seventh most populous urban area in the European Union...
, HamburgHamburg-History:The first historic name for the city was, according to Claudius Ptolemy's reports, Treva.But the city takes its modern name, Hamburg, from the first permanent building on the site, a castle whose construction was ordered by the Emperor Charlemagne in AD 808...
and MunichMunichMunich The city's motto is "" . Before 2006, it was "Weltstadt mit Herz" . Its native name, , is derived from the Old High German Munichen, meaning "by the monks' place". The city's name derives from the monks of the Benedictine order who founded the city; hence the monk depicted on the city's coat...
(United had acquired these traffic rights along with Pan Am's transatlanticTransatlantic flightTransatlantic flight is the flight of an aircraft across the Atlantic Ocean. A transatlantic flight may proceed east-to-west, originating in Europe or Africa and terminating in North America or South America, or it may go in the reverse direction, west-to-east...
rights to/from Heathrow for US$United States dollarThe United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
1billion1000000000 (number)1,000,000,000 is the natural number following 999,999,999 and preceding 1,000,000,001.In scientific notation, it is written as 109....
in 1990). A few years earlier, TWATrans World AirlinesTrans World Airlines was an American airline that existed from 1925 until it was bought out by and merged with American Airlines in 2001. It was a major domestic airline in the United States and the main U.S.-based competitor of Pan American World Airways on intercontinental routes from 1946...
flew between London and BrusselsBrusselsBrussels , officially the Brussels Region or Brussels-Capital Region , is the capital of Belgium and the de facto capital of the European Union...
but, unlike United, did not have traffic rights to carry local traffic between the two cities. - AmericanUnited StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
and British regulatory authorities needed to approve every airline's capacity and pricing ahead of each operating season. - Each country could refuse traffic rights to a carrier it was not satisfied with, particularly with regard to ownership and/or control.
- Only a specified number of US "gateway cities" could be served by both UK and US carriers from London Heathrow as well as London GatwickLondon Gatwick AirportGatwick Airport is located 3.1 miles north of the centre of Crawley, West Sussex, and south of Central London. Previously known as London Gatwick,In 2010, the name changed from London Gatwick Airport to Gatwick Airport...
. - Only the following US gateway cities could be served non-stop from Heathrow: BaltimoreBaltimore-Washington International Thurgood Marshall AirportBaltimore/Washington International Thurgood Marshall Airport is an international airport serving the Baltimore-Washington Metropolitan Area in the United States. It is commonly called BWI, BWI Airport or BWI Marshall, BWI being an initialism for "Baltimore/Washington International" and the...
, BostonLogan International AirportGeneral Edward Lawrence Logan International Airport is located in the East Boston neighborhood of Boston, Massachusetts . It covers , has six runways, and employs an estimated 16,000 people. It is the 19th busiest airport in the United States.Boston serves as a focus city for JetBlue Airways...
, Chicago O'HareO'Hare International AirportChicago O'Hare International Airport , also known as O'Hare Airport, O'Hare Field, Chicago Airport, Chicago International Airport, or simply O'Hare, is a major airport located in the northwestern-most corner of Chicago, Illinois, United States, northwest of the Chicago Loop...
, DetroitDetroit Metropolitan Wayne County AirportDetroit Metropolitan Wayne County Airport , usually called Detroit Metro Airport, Metro Airport locally, or simply DTW, is a major international airport covering in Romulus, Michigan, a suburb of Detroit. It is Michigan's busiest airport....
, Los AngelesLos Angeles International AirportLos Angeles International Airport is the primary airport serving the Greater Los Angeles Area, the second-most populated metropolitan area in the United States. It is most often referred to by its IATA airport code LAX, with the letters pronounced individually...
, MiamiMiami International AirportMiami International Airport , also known as MIA and historically Wilcox Field, is the primary airport serving the South Florida area...
, New York JFK, NewarkNewark Liberty International AirportNewark Liberty International Airport , first named Newark Metropolitan Airport and later Newark International Airport, is an international airport within the city limits of both Newark and Elizabeth, New Jersey, United States...
, Anchorage, Minneapolis/St. PaulMinneapolis-Saint Paul International AirportMinneapolis-Saint Paul International Airport is the largest and busiest airport in the five-state upper Midwest region of Minnesota, Iowa, South Dakota, North Dakota, and Wisconsin.-Overview:...
, PhiladelphiaPhiladelphia International AirportPhiladelphia International Airport is a major airport in Philadelphia, Pennsylvania, United States, and is the largest airport in the Delaware Valley region and in Pennsylvania...
, San FranciscoSan Francisco International AirportSan Francisco International Airport is a major international airport located south of downtown San Francisco, California, United States, near the cities of Millbrae and San Bruno in unincorporated San Mateo County. It is often referred to as SFO...
, SeattleSeattle-Tacoma International AirportThe Seattle–Tacoma International Airport , also known as Sea–Tac Airport or Sea–Tac , is an American airport located in SeaTac, Washington, at the intersections of State Routes 99 and 509 and 518, about west of Interstate 5...
, and Washington-DullesWashington Dulles International AirportWashington Dulles International Airport is a public airport in Dulles, Virginia, 26 miles west of downtown Washington, D.C. The airport serves the Baltimore-Washington-Northern Virginia metropolitan area centered on the District of Columbia. It is named after John Foster Dulles, Secretary of...
. - Anchorage and Minneapolis/St. PaulMinneapolis-Saint Paul International AirportMinneapolis-Saint Paul International Airport is the largest and busiest airport in the five-state upper Midwest region of Minnesota, Iowa, South Dakota, North Dakota, and Wisconsin.-Overview:...
, held dormant authorities to use Heathrow as their LondonLondonLondon is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
terminal, grandfatherGrandfather clauseGrandfather clause is a legal term used to describe a situation in which an old rule continues to apply to some existing situations, while a new rule will apply to all future situations. It is often used as a verb: to grandfather means to grant such an exemption...
ed from use during the original Bermuda Agreement; but could only be operated non-stop by a British carrier. As such, Anchorage remained dormant during the latter years of Bermuda II, and Minneapolis featured service only to London Gatwick, as its operating carrier (Northwest AirlinesNorthwest AirlinesNorthwest Airlines, Inc. was a major United States airline founded in 1926 and absorbed into Delta Air Lines by a merger approved on October 29, 2008, making Delta the largest airline in the world...
) did not have the authority to operate into Heathrow. - A provision existed that allowed any Heathrow-authorised British carrier operating as the sole carrier between London Gatwick and any US city to switch that service to Heathrow as long as the incumbent airline had demonstrated its ability to carry a minimum of 300,000 non-stop passengers (both transfer and point-to-point) between that city and London, and vice versa, over a period of two consecutive calendar years. Using this method, BA was able to transfer DenverDenver International AirportDenver International Airport , often referred to as DIA, is an airport in Denver, Colorado. By land size, at , it is the largest international airport in the United States, and the third largest international airport in the world after King Fahd International Airport and Montréal-Mirabel...
, San DiegoSan Diego International AirportSan Diego International Airport , sometimes referred to as Lindbergh Field, is a public airport located northwest of the central business district of San Diego, California and from the Mexico – United States border at Tijuana, Mexico...
and PhoenixPhoenix, ArizonaPhoenix is the capital, and largest city, of the U.S. state of Arizona, as well as the sixth most populated city in the United States. Phoenix is home to 1,445,632 people according to the official 2010 U.S. Census Bureau data...
from Gatwick to Heathrow. - All non-stop flights between London and AtlantaHartsfield-Jackson Atlanta International AirportHartsfield–Jackson Atlanta International Airport , known locally as Atlanta Airport, Hartsfield Airport, and Hartsfield–Jackson, is located seven miles south of the central business district of Atlanta, Georgia, United States...
, CincinnatiCincinnati/Northern Kentucky International AirportCincinnati/Northern Kentucky International Airport , sometimes called the Greater Cincinnati Airport is located in Hebron, unincorporated Boone County, Kentucky, United States and serves the Greater Cincinnati metropolitan area. Despite being located in Boone County, the airport operations are...
, ClevelandCleveland Hopkins International AirportCleveland Hopkins International Airport is a public airport located nine miles southwest of the central business district of Cleveland, a city in Cuyahoga County, Ohio, United States. The airport lies just within the city limits of Cleveland...
, PittsburghPittsburgh International AirportPittsburgh International Airport , formerly Greater Pittsburgh Airport, Greater Pittsburgh International Airport and commonly referred to as Pittsburgh International, is a joint civil–military international airport located in the Pittsburgh suburb of Findlay Township, approximately west of...
, Dallas/Fort WorthDallas-Fort Worth International AirportDallas/Fort Worth International Airport is located between the cities of Dallas and Fort Worth, Texas, and is the busiest airport in the U.S. state of Texas...
, HoustonGeorge Bush Intercontinental AirportGeorge Bush Intercontinental Airport, is a Class B international airport in Houston, Texas, serving the Houston–Sugar Land–Baytown metropolitan area, the sixth-largest metropolitan area in the United States. Located north of Downtown Houston between Interstate 45 and U.S. Highway 59...
, Las VegasMcCarran International AirportMcCarran International Airport is the principal commercial airport serving Las Vegas and Clark County, Nevada, United States. The airport is located five miles south of the central business district of Las Vegas, in the unincorporated area of Paradise in Clark County. It covers an area of and...
, OrlandoOrlando International AirportOrlando International Airport is a major international airport located southeast of the central business district of Orlando. It is the second busiest airport in Florida, after Miami International Airport...
, TampaTampa International AirportTampa International Airport is a major public airport located six nautical miles west of the central business district of Tampa, in Hillsborough County, Florida, United States. This airport is publicly owned by Hillsborough County Aviation Authority...
, Raleigh/DurhamRaleigh-Durham International AirportRaleigh-Durham International Airport is a public international airport located 4.5 miles northeast of the town of Morrisville in suburban Wake County, North Carolina, United States. The airport covers and operates three runways, providing direct service to 40 domestic and international...
, St. LouisLambert-St. Louis International AirportLambert-St. Louis International Airport is a Class B international airport serving Greater St. Louis. It is located approximately northwest of downtown St. Louis in unincorporated St. Louis County between Berkeley and Bridgeton. It is the largest and busiest airport in the state with 250 daily...
, and CharlotteCharlotte/Douglas International AirportCharlotte Douglas International Airport is a joint civil-military public international airport located in Charlotte, North Carolina. Established in 1935 as Charlotte Municipal Airport, in 1954 the airport was renamed Douglas Municipal Airport after former Charlotte mayor Ben Elbert Douglas, Sr...
needed to use GatwickLondon Gatwick AirportGatwick Airport is located 3.1 miles north of the centre of Crawley, West Sussex, and south of Central London. Previously known as London Gatwick,In 2010, the name changed from London Gatwick Airport to Gatwick Airport...
as their UK departure/entry point rather than Heathrow. - In a 1995 annex to Bermuda II capacity, fare and route restrictions governing all scheduled air services serving airports other than London Heathrow or London Gatwick were lifted. (This partial liberalisation came about as a UK concession to the US to help BA gain approval for its code-share alliance with US AirUS AirwaysUS Airways, Inc. is a major airline based in the U.S. city of Tempe, Arizona. The airline is an operating unit of US Airways Group and is the sixth largest airline by traffic and eighth largest by market value in the country....
. As a result, access restrictions that originally covered all London airports were lifted at LutonLondon Luton AirportLondon Luton Airport is an international airport located east of the town centre in the Borough of Luton in Bedfordshire, England and is north of Central London. The airport is from Junction 10a of the M1 motorway...
and StanstedLondon Stansted Airport-Cargo:-Statistics:-Infrastructure:-Terminal and satellite buildings:Stansted is the newest passenger airport of all the main London airports. The terminal is an oblong glass building, and is separated in to three areas: Check-in concourse, arrivals and departures...
. This, in turn, enabled the now defunct "new generation", all-business classBusiness classBusiness class is a travel class available on many commercial airlines and rail lines, known by brand names which vary by airline or rail company. In the airline industry, it was originally intended as an intermediate level of service between economy class and first class, but many airlines now...
carriers such as EosEos AirlinesEos Airlines, Inc. was an American all-business class airline headquartered in Purchase, New York, with its flights from John F. Kennedy International Airport, New York...
, Maxjet and SilverjetSilverjetSilverjet was a British all-business class airline headquartered at London Luton Airport, Luton, Bedfordshire, England, that, prior to the suspension of operations on 30 May 2008, operated services to Newark Liberty International Airport and Dubai International Airport...
to enter the lucrative London-New York business travel market by choosing Stansted and Luton rather than Heathrow or Gatwick as their UK departure/arrival airports). Continental Airlines also took advantage of this liberalisation by starting service to a number of important regional UK airports, including BristolBristol International AirportBristol Airport , located at Lulsgate Bottom in North Somerset, is the commercial airport serving the city of Bristol, England and the surrounding area. At first it was named Bristol Lulsgate Airport and from March 1997 to March 2010 it was known as Bristol International Airport...
, Birmingham, Manchester, EdinburghEdinburgh AirportEdinburgh Airport is located at Turnhouse in the City of Edinburgh, Scotland, and was the busiest airport in Scotland in 2010, handling just under 8.6 million passengers in that year. It was also the sixth busiest airport in the UK by passengers and the fifth busiest by aircraft movements...
, GlasgowGlasgow International AirportGlasgow International Airport is an international airport in Scotland, located west of Glasgow city centre, near the towns of Paisley and Renfrew in Renfrewshire...
and BelfastBelfast International AirportBelfast International Airport is a major airport located northwest of Belfast in Northern Ireland. It was formerly known and is still referred to as Aldergrove Airport, after the village of the same name lying immediately to the west of the airport. Belfast International shares its runways with...
. Continental furthermore introduced non-stop service to Stansted from Newark in 2001, but this was withdrawn in the industry downturn after the September 11 terrorist attacksSeptember 11, 2001 attacksThe September 11 attacks The September 11 attacks The September 11 attacks (also referred to as September 11, September 11th or 9/119/11 is pronounced "nine eleven". The slash is not part of the pronunciation...
.
Historical background
In July 1976, Edmund DellEdmund Dell
Edmund Emanuel Dell was a British politician and businessman.Dell was born in London, the son of a Jewish manufacturer. In World War II he served in the Rifle Corps and the Royal Artillery, leaving as a first lieutenant...
, the then new UK Secretary of State for Trade, renounced the original Bermuda Agreement of 1946 and initiated bilateral negotiations with his US counterparts on a new air services agreement, which resulted in the Bermuda II treaty of 1977.
The reason for this was that there was no provision in the original 1946 Bermuda agreement that would have allowed British Caledonian
British Caledonian
British Caledonian was a private, British independentindependent from government-owned corporations airline, operating out of Gatwick Airport in the 1970s and 1980s...
(BCal), then the UK's foremost wholly privately owned, independent international scheduled airline, to use the licences the UK Civil Aviation Authority (CAA) had awarded it in 1972 to begin daily scheduled services from its London Gatwick base to Houston and Atlanta. (These cities were not nominated as "gateway cities" in the original Bermuda agreement.) In addition, there was no provision in the original Bermuda agreement that would have allowed Laker Airways
Laker Airways
Laker Airways was a wholly private, British independentindependent from government-owned corporations airline founded by Sir Freddie Laker in 1966. It originally was a charter airline flying passengers and cargo worldwide...
to use the licence the UK's Air Transport Licensing Board (ATLB), the CAA's predecessor, had awarded it the same year to commence a daily "Skytrain" operation between London Stansted
London Stansted Airport
-Cargo:-Statistics:-Infrastructure:-Terminal and satellite buildings:Stansted is the newest passenger airport of all the main London airports. The terminal is an oblong glass building, and is separated in to three areas: Check-in concourse, arrivals and departures...
and New York.
Under the new agreement, BCal had its licences to commence scheduled services from its Gatwick base to both Houston and Atlanta confirmed and was designated as the UK's exclusive flag carrier on both routes. It also obtained a licence and sole UK flag carrier status to commence scheduled services from Gatwick to Dallas/Fort Worth. In addition, BCal obtained a licence and sole UK flag carrier status to commence scheduled all cargo flights between Gatwick and Houston - including an optional stop-over at Manchester or Prestwick in either direction.
The UK Government chose to designate Laker Airways rather than BCal as the second UK flag carrier to New York to enable that airline to inaugurate its long-planned "Skytrain" operation on that route.
Moreover, both sides agreed to continue dual designation, i.e. designating two UK flag carriers as well as two US flag carriers, on the London-New York and London-Los Angeles routes. The principle of dual designation was extended to another two high-volume routes. The UK side chose to designate a second carrier on London-Miami, while the US side chose London-Boston
Boston
Boston is the capital of and largest city in Massachusetts, and is one of the oldest cities in the United States. The largest city in New England, Boston is regarded as the unofficial "Capital of New England" for its economic and cultural impact on the entire New England region. The city proper had...
for the same purpose. This meant that a second British airline was permitted to commence scheduled services on the former route while another American carrier could do the same on the latter route. The UK Government chose to designate Laker Airways as the second UK flag carrier on the Los Angeles and Miami routes while the US Government decided to designate Northwest
Northwest Airlines
Northwest Airlines, Inc. was a major United States airline founded in 1926 and absorbed into Delta Air Lines by a merger approved on October 29, 2008, making Delta the largest airline in the world...
as the second US flag carrier on London-Boston. (Pan Am and TWA continued in their role as the two designated US flag carriers between London and New York as well as London and Los Angeles respectively.)
During the Bermuda II negotiations, the UK side succeeded in having inserted into the new air services agreement a clause stating that Gatwick - rather than Heathrow - was to be nominated as the designated US flag carrier's London gateway airport whenever BCal was going to be the sole designated UK flag carrier on the same route. This clause was meant to support the growth of BCal's scheduled operation at Gatwick as well as to redress the competitive imbalance between it and its much bigger, more powerful rivals.
The UK side furthermore succeeded in negotiating a three-year "exclusivity" period for the incumbent operator on any new route with their US counterparts.
For Gatwick-based BCal this meant that it did not have to face any competitor that was using Heathrow, a more accessible airport with a bigger catchment area and a far greater number of passengers connecting between flights, on any of the new routes it was planning to launch to the US. It also meant that it had any new route to the US completely to itself for the first three years of operation, which most airline industry analysts reckon is sufficiently long for a brand-new scheduled air service to become profitable.
At British insistence Bermuda II furthermore contained clauses that made it illegal for any airline operating scheduled flights between the UK and the US to resort to predatory pricing
Predatory pricing
In business and economics, predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices...
or capacity dumping. Air fares were only approved if they reflected the actual cost of providing these services. Similarly, capacity increases were sanctioned on a reciprocal basis only. The reason for insisting on the inclusion of these provisions in the Bermuda II agreement was to prevent the much bigger, better financed and commercially far more aggressive US carriers from undercutting BCal with "loss-leading" fares cross-subsidised with profits those carriers' vast domestic networks generated as well as to stop them from "marginalising" the UK carrier by adding capacity far in excess of what the market could sustain.
In 1981, in an annex to Bermuda II, both sides agreed to automatically nominate Gatwick as the gateway airport for London for any London-US route that did not already exist under the original 1946 Bermuda agreement.
When all available routes between London Heathrow/Gatwick and the US were taken, any carrier wishing to start a new route to a US gateway city currently not served from either of London's two main airports needed to drop another route. In addition, any such change could only become effective when there was unanimous agreement between both the UK and US government
Federal government of the United States
The federal government of the United States is the national government of the constitutional republic of fifty states that is the United States of America. The federal government comprises three distinct branches of government: a legislative, an executive and a judiciary. These branches and...
s. Failure of both nations' governments to agree to such changes prevented the introduction of additional non-stop flights, including between London and Honolulu, Portland (OR)
Portland, Oregon
Portland is a city located in the Pacific Northwest, near the confluence of the Willamette and Columbia rivers in the U.S. state of Oregon. As of the 2010 Census, it had a population of 583,776, making it the 29th most populous city in the United States...
, and Salt Lake City.
Bermuda II's access restrictions to Heathrow lasted 30 years. BA's access rights to Heathrow under Bermuda II derived from the fact that it was the legal heir to British Overseas Airways Corporation
British Overseas Airways Corporation
The British Overseas Airways Corporation was the British state airline from 1939 until 1946 and the long-haul British state airline from 1946 to 1974. The company started life with a merger between Imperial Airways Ltd. and British Airways Ltd...
(BOAC) on all routes that airline used to operate between Heathrow and various points in the US under the original Bermuda agreement. American
American Airlines
American Airlines, Inc. is the world's fourth-largest airline in passenger miles transported and operating revenues. American Airlines is a subsidiary of the AMR Corporation and is headquartered in Fort Worth, Texas adjacent to its largest hub at Dallas/Fort Worth International Airport...
's and United
United Airlines
United Air Lines, Inc., is the world's largest airline with 86,852 employees United Air Lines, Inc., is the world's largest airline with 86,852 employees United Air Lines, Inc., is the world's largest airline with 86,852 employees (which includes the entire holding company United Continental...
's access rights to Heathrow under Bermuda II derived from the fact that they were TWA's and Pan Am's respective legal heirs on all routes these airlines used to operate between various points in the US and Heathrow under the original Bermuda agreement. It was subsequently claimed that Bermuda II contained terms that US negotiators had overlooked. The agreement specifically mentioned Pan Am and TWA. When Pan Am sold its Heathrow traffic rights to United Airlines, British negotiators initially stated that they would not allow United to receive the transferred route authority citing the treaty's specific designation of Pan Am. They furthermore stated that United was not a successor airline because it was not assuming ownership of Pan Am. This may have been a negotiating ploy as the British later did allow transfer of route authority to United. Virgin Atlantic's access rights to Heathrow under Bermuda II derived from the fact that the UK was not using its entitlement to nominate a second carrier to match the two US carriers' presence at London's premier airport. The UK Government therefore took advantage of the abolition of the London [Air] Traffic Distribution Rules, which had confined Virgin's London operations to Gatwick, as well as of the US Government's intention to have American and United replace TWA and Pan Am as the designated US flag carriers at Heathrow to help Virgin establish a presence at that airport as well. These access restrictions were also the reason BA (as BCal's legal heir between London and Houston, Dallas, and Atlanta) and American (as Braniff's legal heir between Dallas and London) were compelled to continue using Gatwick as their UK gateway for all non-stop scheduled operations between London and Houston, Dallas, and Atlanta as long as Bermuda II remained in force.
Aftermath
Liberalisation of the Bermuda II agreement was the declared intention of both countries since 1995. However, bilateral negotiations between the UK and the US were unsuccessful.Subsequently, matters were complicated by the European Court of Justice
European Court of Justice
The Court can sit in plenary session, as a Grand Chamber of 13 judges, or in chambers of three or five judges. Plenary sitting are now very rare, and the court mostly sits in chambers of three or five judges...
's judgement to declare all bilateral agreements between individual EU
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
member states and the US illegal. Such agreements were deemed to violate the EU's Common Aviation Market.
The main sticking point that had prevented the conclusion of a new, transatlantic "Common Aviation Area" agreement between the EU and the US was that the UK and most other European countries viewed the US version of "open skies" as too restrictive. The US "open skies" template denied foreign airlines "cabotage
Cabotage
Cabotage is the transport of goods or passengers between two points in the same country by a vessel or an aircraft registered in another country. Originally starting with shipping, cabotage now also covers aviation, railways and road transport...
" rights, i.e. the right to operate wholly within the US domestic market without entering into a code-share agreement with a US carrier. It also denied foreign airlines the right to acquire stakes in their US counterparts with the intention of exercising boardroom control.
Another bone of contention preventing the conclusion of a "Common Aviation Area" agreement between the EU and the US was the US government's continuing insistence on its so-called "Fly America" policy for all employees and contractors of the federal government
Federal government of the United States
The federal government of the United States is the national government of the constitutional republic of fifty states that is the United States of America. The federal government comprises three distinct branches of government: a legislative, an executive and a judiciary. These branches and...
. This policy compelled US government employees/contractors to make all their work-related, overseas air travel arrangements with US-based airlines only. (It also included a requirement for Federal employees to use international services operated by foreign airlines only if they were code-shared with a US carrier, in which case these services needed to be booked under the US carrier's flight number.)
On March 2, 2007 a draft agreement was reached by negotiators from the European Commission
European Commission
The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....
and the US that proposed to drop Bermuda II's restrictions preventing US flag carriers, other than American and United, from flying to Heathrow. This new Air Transport Agreement between the EU and the US was approved unanimously by the EU Transport Council
Council of the European Union
The Council of the European Union is the institution in the legislature of the European Union representing the executives of member states, the other legislative body being the European Parliament. The Council is composed of twenty-seven national ministers...
on 22 March 2007 and replaced Bermuda II with effect from 30 March 2008. It also paved the way for either country to allow airlines headquartered in other EU countries to enter the UK-US air transport market. On 3 October 2007, Britain concluded its first fully liberal Open Skies Agreement with Singapore, allowing Singapore Airlines
Singapore Airlines
Singapore Airlines Limited is the flag carrier airline of Singapore. Singapore Airlines operates a hub at Changi Airport and has a strong presence in the Southeast Asia, East Asia, South Asia, and "Kangaroo Route" markets...
to fly completely unrestricted from any point in the United Kingdom, including Heathrow, to any other destination, including the United States and domestic destinations, effective 30 March 2008.