Open Skies Agreement

Open Skies agreements transformed international aviation from a heavily regulated system of bilateral deals negotiated between governments into something closer to a genuinely international market. The concept, pioneered by the United States in the 1990s, has since spread to hundreds of bilateral and multilateral arrangements that govern who can fly where, at what price, and how often.

What Is an Open Skies Agreement?

An Open Skies Agreement is a bilateral or multilateral treaty between two or more countries that liberalizes international air transport by eliminating most government restrictions on routes, capacity, pricing, and airline ownership. Traditional bilateral air service agreements — the system that governed international aviation from the 1940s to the 1990s — specified exactly which airlines could fly between the two countries, on which routes, with how many weekly frequencies, and at what fare levels. Open Skies agreements replace most of these restrictions with a simpler framework: any airline of either country may fly between any city in country A and any city in country B, at any frequency, using any aircraft, at any fare. The United States signed its first Open Skies agreements in the early 1990s and the landmark US-EU Open Skies agreement in 2007, which opened transatlantic aviation to full competition for the first time.

How It Works in Practice

Despite the name, Open Skies agreements are not fully open. They typically still contain nationality restrictions — an airline must be "substantially owned and effectively controlled" by nationals of its home country to qualify for the agreement's benefits, preventing airlines from using third-country flags of convenience. Cabotage — the right to carry passengers between two domestic points of a foreign country — is almost universally excluded. A U.S. airline operating under the US-EU Open Skies agreement can fly from New York to London and from Paris to Chicago, but cannot carry passengers from London to Paris (that is an EU domestic matter). The most liberal agreements include Seventh Freedom rights (operating routes that don't touch either home country) and beyond rights (continuing to third countries), but these are negotiated case by case. In practice, the US-EU agreement was transformative: it allowed carriers such as Delta, United, and American to add new transatlantic routes without government permission and enabled joint ventures with European partners that would have been impossible under the old regulatory framework.

Why It Matters

Open Skies agreements have been directly linked to increased air traffic, lower fares, and greater route diversity between participating countries. Academic research examining the US bilateral Open Skies program found that fares fell by approximately 9 percent on average in markets that liberalized, with traffic growing roughly 12 percent. The agreements also enabled the deep cooperation between allied carriers — including antitrust immunity for joint ventures — that underpins the transatlantic business models of Delta/Air France-KLM/Virgin Atlantic, United/Lufthansa Group, and American/British Airways/Iberia. Without Open Skies as the legal foundation, these revenue-sharing partnerships would not be possible. The absence of Open Skies in some major markets — notably the US-China corridor — is directly reflected in the limited competition and higher fares on those routes.

Key Facts and Figures

• The United States has signed Open Skies agreements with over 130 countries, making its bilateral network the most extensive in the world.
• The US-EU Open Skies Agreement, signed in April 2007, opened the transatlantic market fully for the first time, ending the old Bermuda II agreement under which only specific carriers could serve transatlantic routes.
• Within two years of the US-EU agreement taking effect, the number of transatlantic flights operated by EU carriers to U.S. destinations increased by approximately 25 percent.
• The Association of Southeast Asian Nations (ASEAN) implemented an Open Skies Agreement across its 10 member states in 2015, creating a regional single aviation market of over 600 million people.
• The US-Japan Open Skies Agreement of 2010 ended JAL and ANA's special protected status on transpacific routes, opening the market to full competition.

Related Concepts

Bilateral Air Service Agreement, Airline Deregulation, Cabotage, Traffic Rights, Fifth Freedom