Air Transport World

Will E.C. burst the bilateral bubble? (European Commission)

The recent U.S.-U.K. Heathrow imbroglio contained no surprises. Everyone knew that the U.S. would have to pay to reverse the Bermuda 11 amendment that gave U.S. Heathrow rights to Pan Am and TWA only ATW, 12/90). The only mystery was how much it would give up to be able to name their replacements.

The deal's longterm aspects are more tantalizing: What comes next in the two countries' relationship and what is the impact on the European Community's aviation policy?

Going into the negotiations, ever-confident Transportation Secretary Sam Skinner believed he was going to be the one to tame the Brits. He had befriended Cecil Parkinson, the U.K. Transport Minister, during Skinner's first! 20 months at the helm. The two had discussed liberalizing Bermuda II.

But reality intervened. First, there were demands to increase service to Manchester. American's desire to fly TWA's Chicago-London route, ostensibly held up because of opposition by Sen. John Danforth (R-Mo.), continued to fester. American would have liked to fly to Heathrow, as TWA did, but because of the two-U.S.-airline limit, it had to settle for Gatwick. Then Pan Am, in a bid for quick cash, said it would sell most of its London routes to United. TWA followed soon thereafter with more London-route sales to American. Liberalization was put on hold; Heathrow took over.

Skinner had reason to think he might wriggle out of the Heathrow mess without too much trouble. Parkinson was such a friend that the U.K. hired U.S. lawyers to research ways to avoid a brouhaha.

Then disaster. Former Prime Minister Margaret Thatcher lost the Conservative Party leadership to John Major. He dumped Parkinson for Malcolm Rifkind, a rising party star. Rifkind saw a way to get his name in lights fast.

Many in the U.S. hoped Skinner would wait for a long-term solution rather than accede to Pan Am's need for quick cash. They felt that Heathrow was not worth the expected price: Too much power for United and American and too many goodies for the U.K. in exchange for replacing -one U.S. duopoly with another.

Besides everyone knew the cash infusion from the sale of Heathrow routes was only a short-term transfusion for a hemorrhaging Pan Am. That way, it was a good way for crafty United to acquire still more Pan Am assets without taking on its labor and debt problems. …

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