Last year, nearly 3 million people flew between British and U.S. points on scheduled airlines - 56 per cent of them on American air carriers.
If the British have their way in negotiations which resume tomorrow in London, exactly half of the passengers traveling between the two countries and their territories will fly on British carriers and half will fly on American carriers, despite the fact that almost two-thirds of the passengers are Americans.
It's doubtful that any agreement which results from the negotiations will give the British exactly what they want - dividing up the market, any market, into arbitrary shares is inimical to American economic philosophy both at home and abroad - but whatever does emerge probably will set the standard for negotiations with other countries.
The talks, which began last September, are designed to produce a new bilateral accord governing air transportation between the two countries by June 22, the termination date for the Bermuda Agreement, which has governed air relationships between the two countries since 1946. Under the agreement, the date of termination is one year after either country gives notice.
U.S. officials privately express dismay that British aviation officials are seeking to enlarge their share of the traffic on the airlines although the overall balance is in their favor and it is in their economic interest to encourage as many Americans as possible to come to their country and spend money. Last year, the U.K. earned $1.4 billion in revenues from aviation and tourism combined - 55 per cent of the total between the two countries.
Although Transportation Secretary Brock Adams said last month there was a realistic possibility that air services between the U.S. and the U.K. could be disrupted after that, Ambassador Alan S. Boyd, who leads the U.S. delegation, said in an interview before leaving for London that he can't "quantify" that possibility.
"We're not down to the wire and you don't really know until you get to the wire whether you're going to have an agreement or whether you aren't," he said. Although Boyd admitted that progress since he joined the talks in February has been "most intangible" - a lot of progress has been made only on the noncontroversial articles such as customs, security, and the words of the preamble - he left the country Friday optimistic that an agreement will be reached.
"We're two civilized countries, we've been allies for a long time, and we have a great community of interest and we're going to have to reach an agreement," he said. "The way you reach agreements is both sides give, and you wind up with something that's perceived to be fair for both sides."
It's not going to be easy. So far, what the British feels is fair is in diametric opposition to the United States' long-time basic philisophy in international aviation. "I'll give you a very succint summary of our differences," Boyd says. "The United States wants equal opportunity for all carriers, the British want equal benefits."
The British are known to favor an agreement under which the two governments actually set in advance the exact number of airplane seats which would be flown on each route, dividing them equally between the two countries' carriers. Boyd says that it is unacceptable to the U.S. government.
"We're not going to agree to a government veto on the capacity to be offered by our airlines," he says. "One of our basic beliefs is that we're in a growing market and that to some degree the growth of the market is going to depend on the innovation and creativity of the air carriers, and we're trying to create an environment where they can be innovative.
"At the same time, we're going to try to meet what we consider to be the legitimate concerns of the British about excessive capacity having been offered at times in the past," Boyd says.
While he declined to be specific, other sources say this involves a proposal outlining procedures by which the two countries would establish mutually agreed on load factor standards for markets so that airlines wouldn't add more airplanes until a certain amount of seats already being offered were filled.
Generally, economists believe that circumscribing the size of the market and shares in it tends to inhibit efficiency and discourage innovation. It surely removes the incentive of offering lower prices to consumers as a spur to gaining a larger share of the market. Through support of legislation to reduce federal regulation of the domestic air industry, the official policy of the U.S. government recently has been to encourage competition on the grounds that it would increase the airlines' efficiency and innovation and produce the lowest air fares possible.
In recent policy statement, President Carter extended that same policy to international aviation, although most U.S. carriers participate in the International Air Transport Association, a rate-setting cartel whose agreements member carriers take to the Civil Aeronautics Board for approval. "While special circumstances sometimes exist with respect to the international aviation environment, encouraging such competition is also an important element of our foreign economic policy," Carter told the CAB last month in a letter outlining his views.
The specific case that prompted the letter involved cargo rate reductions proposed by Trans World Airlines - reductions suspended by the CAB. Although Carter said he would accept the board's decision this time - under the law, the President is responsible for reviewing board decisions involving foreign rates or routes - he served notice that he would take a dim view of future attempts by them to prevent airlines from putting into effect lower international air fares or cargo rates. Although the President didn't mention it, one of the foreign air matters the board will be making a decision on some time soon will be the application of Britain's Laker Airways to offer low-cost "Skytrain" flights between New York and London.
The final six weeks of the negotiations take place against this backdrop. The U.S. continues to move to a view that more - not less - competition in both domestic and international aviation is in its national interest; at the same time, the rest of the world is moving to a more protective posture. The Japanese are waiting in the wings with their own set of similar demands.
In fact, the British philosophy is shared by most of the countries of the world. While the U.S. views international aviation policy as part of its overall foreign policy, most other countries place aviation relationships with other countries on a different scale. State Department officials, who along with representatives of the CAB and the Department of Transportation negotiate air agreements so the nation's privately owned airlines may fly into and out of foreign lands, find themselves facing across the table only the aviation officials of a country who are negotiating for their one carrier which is either publicly owned or publicly supported and who are interested solely in increasing their carrier's share of the passengers. The British negotiations are a case in point: "There has been little evidence of the British Foreign Office in the negotiations," Boyd admits.
No bilateral negotiations involving basic philosophical differences are easy, and the U.S.-U.K. talks are complicated by the Concorde and the Port of New York's refusal to allow landings at New York's John F. Kennedy Airport. The British feel they are entitled under the existing bilateral agreement to have whatever airplane they operate land at Kennedy. Even though they expect an appeal on the recent court decision ruling the Port Authority's action illegal, the court action "should improve the atmosphere of the negotiations," Boyd thinks.
If the atmosphere is not improved, and no agreement is reached by June of things could happen after that including both of us agreeing that we'll continue the status quo," Boyd says.