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2 Air L. 82 (1977)
Status Report on the Renegotiation of the U.S.-U.K. Bilateral Air Transport Agreement (Bermuda Agreement)

handle is hein.kluwer/airlaw0002 and id is 84 raw text is: Paul B. Larsen* Status Report on the Renegotiation of the U.S.-U.K. Bilateral Air Transport Agreement (Bermuda Agreement) Introduction Denunciation of the Bermuda Agreement by the United Kingdom on 22 June 1976 left the air transport relationship between the United States and the United Kingdom in a precarious state. Airlines of the two countries became unable to make definite plans for the future, and the two governments immediately began to maneuver for advantageous positions for the start of the negotiations of the new agreement thereby affecting the remaining one year of the existing agreement.' Rippling effects on the air transport relationships with other coun- tries quickly appeared.2 The negotiations appearto be significantly unsettling the market place. I. The Creation of the Bermuda Agreement Disagreement on international economic policy strikingly similar to the present policy difference between the two countries led to the failure of the 1944 Chicago Conference to establish economic regulation of air transportation. At the end of World War I the United States had heavy aircraft well suited for air carriage anywhere in the world. U.S. air carriers were well developed and better able to compete for the world market than were the U.K. carriers after the crippling effects of the war, or any other carriers. The United States favored freedom to compete in the world market. A series of policy statements have not changed the basic U.S. tenet advanced at the Chicago Conference that competition in the market place will result in the best service at lowest cost. Motivated by desires to develop its post-war air carriage capability the United Kingdom be- came an ardent proponent of market control. At the same time the British also felt the need to show the British flag and to have their carriers operate where service was not economically rewarding. They believed that uncontrolled competition would lead to excess capacity and constant pressure for fares so low that their air carriers could not survive the competition. They also realized that countries other than the United States intended to impose market controls and could reduce or exclude carriage by U.K. carriers.3 Despite changing circumstances the United Kingdom has not changed its basic economic philosophy.4 * Adjunct Professor of Law, Georgetown University Law School. Office of the General Counsel, De- partment of Transportation. This paper reflects the opinions of the author and does not necessarily represent the views ofthe Department of Transportation orthe U.S. Government. 1. The U.K. Government gave notice to National Airlines to curtail service on the Miami- London route and to TWA to reduce frequencies on the Chicago- London route. The CAB in turn invoked its authority under 14 C.F.R. 213 and ordered B.A. to file its traffic schedules for approval by the Board. 2. Other European countries, particularly those whose carriers carry substantial fifth freedom traffic from the United States could be affected if a trend towards limiting beyond carriage were set in the U.S.-U.K. relationship. 3. ICAO Doc. A4-WP/118.EC/14 (1950). For full discussion see Cheng, The Law of International Air Transport (London-New York, 1962), 18-28. 4. The Bermuda Agreement reflects U.K.'s 1946 position when it had important possessions in many parts of the world. 82

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