Bermuda Agreement

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The Bermuda Agreement, reached in 1946 by American and British negotiators in Bermuda, was an early bilateral air transport agreement regulating civil air transport. It established a precedent for the signing of approximately 3,000 other such agreements between countries.

The Agreement was expanded in 1977.

Full titles:

Bermuda I

Agreement between the government of the United Kingdom and the government of the United States relating to Air Services between their respective Territories, Bermuda, 11 February 1946

Bermuda II

Agreement between the government of the United Kingdom of Great Britain and Northern Ireland and the government of the United States concerning Air Services, Bermuda, 23 July 1977

Bermuda I[edit]

In 1946, delegates from the United States and the United Kingdom met at Hamilton, Bermuda, to resolve issues remaining from the 1944 Chicago meeting. The Chicago meeting, which had involved some 52 countries, had been unable to reach agreement on any but the most fundamental points at issue in post-war international civil air transport. It had agreed the first two Freedoms of civil air transport

First Freedom: The right to fly over the territory of another country.

Second Freedom: The right to land for essential repairs, refuelling or to escape adverse weather conditions in another country.

The failure to agree more was largely due to the disagreements between the United States and Britain, then the two largest carriers of civilian traffic, internationally. At Bermuda the two countries agreed again on the two freedoms that had been accepted at Chicago, since that agreement was not yet in force, receiving its 26th ratification in time to operate from April 4, 1947. Britain also accepted the remaining three freedoms which had not been agreed at Chicago.

Third Freedom: The right to collect passengers or cargo in an airline's home country for flight to another country.

Fourth Freedom: The right to discharge passengers or cargo at another country's airport.

Fifth freedom: The right to collect passengers or cargo at a location outside its home country and fly them to a point father on, also outside the airline's home country.

The United States also agreed that the International Air Transport Association, an international body, would set fares, subject to the two governments' approval. This bilateral agreement became the model for a series of future bilateral agreements between the United States and other countries. The British continued to pursue much more restrictive agreements based on traffic sharing with agreed fares, set by the two governments concerned.

During World War II the United States and Britain operated a regular flying boat service across the Atlantic. The US operator was Pan American Airlines Corporation and the British operator the newly formed and government owned British Overseas Airways Corporation. The US terminal was at Baltimore and the British at Poole, in Dorset south-west England. Intermediate refuelling stops were at Botwood in Newfoundland, then a British colony and Foynes on the river Shannon in the Irish Republic. Flight schedules were for about 32 hours but could be considerably longer on the westbound route if strong westerly winds prevailed on the North Atlantic or weather conditions or mechanical problems interfered with departures. Both airlines flew Boeing 314s. Passenger traffic was exclusively military or governmental and both Mrs Eleanor Roosevelt, wife of the president and Sir Winston Churchill prime minister were amongst the passengers.

It was clear to aviation planners in both countries that there would be considerable post-war development of civilian air traffic across the Atlantic. Rapid wartime development of civil aircraft especially landplanes such as the Douglas DC-4 and DC-6, the Boeing Stratocruiser and Lockheed Constellation meant that future routes between the two countries would use runways, many developed during the war as refuelling points for USAAF Boeing Fortresses on delivery runs to operational bases in England and North Africa. The new airliners could carry substantially greater payloads than the flying boats, allowing for both more passengers and greater fuel loads providing longer range. But no civil transport aircraft at that time could fly the Atlantic without refuelling.

The British controlled several useful airports necessary for the development of American civil air transport in the 1940s. The most important was Gander in Newfoundland, still a British colony, used until the dawn of the jet age by virtually all transatlantic flights. Bermuda as well as being a destination in its own right was also useful as a staging point as was Prestwick near Glasgow, in Scotland, which had good weather conditions. A new airport at Heathrow near London was under construction which would be useful as a hub for airline traffic through to Continental Europe and the Middle East. On the Pacific routes, Hong Kong occupied a similarly strategic position on the routes between the USA and China, then undergoing a civil war between Chiang Kai-Shek's Nationalist government and the Communist insurgents of Mao Tse-tung.

The Bermuda meeting between the two wartime allies was arranged in order to facilitate the development of post-war air traffic across both the Atlantic and Pacific. There were no politicians present. It was simply a working meeting between British civil servants from the Ministry of Aviation and representatives of the State Department's Office of Transportation Policy. Both sides had a similar overall objective: to encourage the development of civil aviation internationally. But they differed greatly on how this should be done.

The American delegates were in favour of a very liberal regime under which several airlines could provide as much capacity as they wished on each designated route, charge what fares they considered commercially justified and operate with as little government interference as possible. The British were conscious that the US had a significant lead in the development of civil aircraft, that it already had a substantial internal air travel market and that its airlines dominated traffic within South America and between South and North America.

The British would have preferred a tightly regulated agreement as they later signed with Australia and New Zealand. This would limit the Atlantic routes to a single airline from each country operating similar frequencies at similar fares. Ideally they would have preferred an American airline to collaborate with the British carrier BOAC, sharing facilities and revenues. Such arrangements formed the basis of subsequent agreements established by the British with other countries. This view was also favoured by Pan American, then the US's chosen instrument for most international routes. However it was unacceptable to the State Department, which was well aware that unlike transatlantic sea traffic, then largely in the hands of the British line Cunard, American airlines were likely to win the largest share of the air traffic provided they were not unduly restricted by the agreement.

American Export Airlines, a subsidiary of an American shipping company and Trans World Airlines, which had been bought by Howard Hughes and had placed the first order for Lockheed Constellations were determined to join Pan American on the Atlantic, which held the promise of becoming the world's most lucrative international air route. Extensive lobbying of Congress by these airlines made it impossible for the American officials to concede to the narrow UK proposals.

The eventual agreement permitted each country to specify as many carriers as it wished on a series of designated routes. In the event the British restricted their allocation to BOAC whilst the Americans allowed three carriers to compete, Pan American, American Export and Trans World. Fares were to be agreed by an international body and there would be a procedure to investigate them if either country thought that they were too low to be commercially viable.

On the Atlantic routes, the designated US airports were Baltimore, the existing flying boat base, New York, Chicago, Detroit, Philadelphia, Washington and Boston.

The UK airports were London and Prestwick in Scotland, as well as intermediate stops on British colonial territory at Bermuda or Gander and certain other islands. Onward traffic was permitted to New Orleans and Jamaica and various specified points in Latin America. In the other direction it was permitted to continue to most major Continental European airports and also through British colonial territories in the Middle East and India as far as China. A New York-Bermuda route was also agreed, which the American delegation used when it left the conference in a landplane – a sign of things to come.

The Pacific terminals were San Francisco and Los Angeles in the US and the British colonies of Hong Kong and Singapore. This could be linked into a round the world service as Pan American subsequently did. Most Caribbean islands in British possession including Jamaica, Trinidad and the Bahamas were permitted as destinations from Miami and New York with some routes also from Houston, Palm Beach and New Orleans. Onward traffic was permitted to most of South America for airlines from both nations.

A further route through a variety of Atlantic islands was agreed to the British colonies of the Gold Coast (later Ghana) and Nigeria and onward to South Africa.

Members of both the United States Senate and the House of Lords criticised the negotiators. Both sides were concerned that the other country would exploit the agreement to take internal traffic for example from New York to New Orleans or in the British case from London to India. So a clause was inserted that permitted only as much traffic to be carried between intermediate points as was justified by spare space on the aircraft. It was specifically forbidden to introduce a larger aircraft on a segment such as New York-Mexico City or London-Paris. In the event little such traffic was attracted and the fears proved groundless. As was to be expected American airlines won the lion's share of the Atlantic route, over the next few years. But gradually BOAC also was able to build this into its most profitable route, largely by using American aircraft.

On May 31, 1946, Lockheed Constellations operated by Pan American Airways and American Overseas Airlines (the new name for American Export) landed within 20 minutes of each other at a storm-torn Heathrow from New York's La Guardia. Passengers disembarked through army tents, as the control tower was the only brick building on site, to be greeted by W. Averell Harriman, the U.S. ambassador. This inauspiocious beginning inaugurated what would soon become the most important international air route for both airlines.

Bermuda II[edit]

Main article: Bermuda II Agreement

In October 1976 the British Labour Government of Harold Wilson unilaterally terminated the Bermuda I agreement announcing that a new version of the agreement should be put in place by June 1977. This was widely criticised in the United States, where it was seen as an attempt to return to the more restrictive ideas which the British had favoured thirty years earlier and in Britain, where it was felt that it would upset the American Government and damage the attempts to obtain landing rights for the Concorde which British Airways was proposing to fly into New York and Washington. The timing was certainly poor as it preceded an US Presidential election and US negotiators might not be in a position to reach any agreements for several months.

The British move was prompted by the relatively low share of British airlines on the transatlantic route, which in most years since 1947 had varied between one third and two fifths. However most of the passengers were also American nationals so perhaps this should not have been a surprise. By this time Pan American had absorbed American Overseas Airlines and been joined by Trans World Airlines on the routes into London Heathrow, which was by far the most important European hub for American flights. TWA, in particular was able to exploit its network of US domestic routes to feed passengers through its New York gateway on to the transatlantic route to London. Pan American had also developed arrangements with other US carriers which developed further when it bought the domestic carrier National Airlines, the following year. All three airlines operated routes between London Heathrow and the Bermuda I gateway airports with Boeing 747 jumbo jets. Whilst many Americans enjoyed "English service" British Airways was unable to win a major share of the traffic on routes, where it competed with both US carriers.

The Bermuda II agreement which came into force in 1978 was much less liberal than Bermuda I. Its most significant change was that it replaced the airlines right to set their own fares, subject only to a complex protest procedure by either government with a new system in which fares were agreed by the two governments directly. It restricted the number of airport gateways in the United States to be served directly from London Heathrow. At the same time, it permitted non-scheduled airlines to operate between the two countries, using other airports, particularly the relatively new airport at Gatwick. There was a complicated system of controlling capacity on routes between the UK and the US. The British aim was certainly to provide a system under which airlines from each country could compete on more equal terms.

Unlike Bermuda I, which was a rigid agreement set for all time, Bermuda II was a framework agreement which would permit changes whenever circumstances changed. In 1990 Manchester was added as a British gateway airport for transatlantic flights which was extended to certain other regional airports in October 1994. By 1996 access to all UK airports other than Heathrow and Gatwick was permitted under third and fourth freedom rights, in other words without the right to carry passengers beyond the UK.

In 1991 the bankruptcy of Pan Am and TWA led to a major renegotiation which allowed American Airlines and United Airlines to take their places at Heathrow. Virgin Atlantic was also given rights as a second British carrier to operate services.

By now with British Airways proving more successful on the route, Margaret Thatcher's government was prepared to be more liberal. Routes were opened up to further US gateways and fifth freedom rights were again extended for flights to Asia, Australia and Central and South America.

The negotiators also proposed that seventh freedom rights would again allow British or American airlines to carry passengers between Continental European airports and Britain or the United States, which had been permitted under Bermuda I. US and British airlines were also permitted to code share, which had previously been banned by the Sherman Act on anti-trust grounds.

The provisions of Bermuda II certainly had the desired effect from the British viewpoint. By 1999, 13 airlines were operating the transatlantic route from British airports. Of these, British Airways carried 40.2% and Virgin Atlantic 17.5% of the traffic. American Airlines with 13.9% and United Airlines with 12.1% were the leading US carriers. Continental with 6% Delta with 4.3% cent, Northwest with 2.2% USAir with 1.7% and TWA with 0.9% were handicapped by lack of access to Heathrow. Air India, Aer Lingus, Air New Zealand and Kuwait Airways operated under Fifth Freedom rights but together flew only 1.3% of passengers. By that year 18m passengers from or to the US used London airports, up from 3m in the last year of Bermuda I. Just over 40% of all US traffic to European Union countries flew into or through London.

Fifth Freedom rights which had been widely available under Bermuda I were much restricted under Bermuda II. British airlines were permitted to carry American passengers only to Belgium, France, Germany, the Netherlands, Luxembourg and Ireland. American airlines were allowed to carry passengers from Shannon to Prestwick and Glasgow. They could also embark passengers at UK airports for Berlin, Frankfurt, Hamburg, Munich and Oslo. This was far more restrictive than Bermuda I which had permitted a large number of Fifth Freedom routes. Pan American made use of these rights for its Berlin and West German services during the time that German airlines were not permitted to fly to the city and these were later also used by United Airlines which acquired Pan American's rights. But otherwise there was little interest in such services from the airlines. The approval of other European Governments which would have been necessary for instance to permit TWA to carry passengers between London and a European city or British Airways to embark passengers in a Continental city for carriage to the US was simply not forthcoming in most cases. Only the Irish Government, perhaps more interested in tourism than supporting Aer Lingus, played the game.

European Union – United States air agreement[edit]

The Bermuda agreements were replaced in two stages on March 30, 2008, and June 24, 2010, by the EU–US Open Skies Agreement between the European Union (representing 25 European countries) and the United States. This provides for an Open Skies regime, which is more liberal even than Bermuda I.

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