EU-US Open Skies Agreement: what is changed in the north transatlantic skies

This paper presents an analysis of air service and competition dynamics in the north transatlantic market since the EU-US Open Skies Agreement (OSA) in 2008. By comparing the schedules of nonstop and two-step flights in a typical off-peak week of 2007 and 2010, we investigate whether the EU-US OSA has led to more choices for transatlantic travelers and greater exploitation of commercial agreements. We examine the impact of the EU-US OSA on competition between carriers, alliances, and airports in hubbing operations. The results show unexpected changes in the service level and competition. The number of direct transatlantic connections and served airport pairs decreased and the competition rate increased only in indirect traffic. In particular, the percentage decreases in the number of direct flights and offered seats are 8% and 5.5%, respectively. A decrease of 8.1% in airport pairs connected by direct flights and of 10.8% in airport pairs linked by one-stop flights are experienced. The concentration ratio CR5 in the direct segment increases from 49.4% to 58.2%. So, competition on direct flights decreased whilst the percentage of monopolized routes served by one-stop flight lowers from 70.06% to 66.63%. Yet, the impact varies across European countries but not in accordance with the previous regulatory regime.