What Is an Open Skies Agreement and How Does It Work?

An Open Skies agreement is a bilateral or multilateral aviation treaty that removes government control over the routes, fares, capacity, and flight frequencies airlines can offer between the signatory countries. Airlines decide where to fly, how often, and what to charge; the governments step back from those commercial calls and keep their role in safety, security, and ownership rules. The United States maintains Open Skies agreements with more than 130 partners, the largest such network in the world.¹

What the Agreement Actually Removes

Older aviation treaties gave governments a heavy hand in commercial decisions. Regulators approved fares before tickets could be sold, capped how many flights an airline could operate, and locked carriers into specific city pairs. Open Skies replaces that framework with a standard template built around a few core commercial principles.²

Any airline from a signatory country can fly between any pair of cities connecting the two nations. There is no government-imposed limit on how often flights operate, how large the aircraft can be, or how many carriers can serve a route. Airlines also get the right to continue onward to third countries, which lets them build multi-stop networks instead of running only point-to-point service.³

Pricing works on a “double-disapproval” rule. A fare can only be blocked if both governments agree to reject it, and only to prevent predatory or monopolistic pricing. That standard is rarely met, so airlines in practice set their own prices.³

The agreements also cover the mundane pieces of running an airline overseas. Carriers can open sales offices in the partner country, convert their earnings to hard currency without restriction, and either handle their own ground operations or hire local providers. Airport user charges must be cost-based and applied equally to domestic and foreign carriers.³ Where self-handling is not physically possible at a given airport, ground services must be available to all airlines on equal terms.⁴

One legal right does not always translate into an actual flight. Airport slots and runway capacity can still constrain what carriers do with their access. A Government Accountability Office report identified London Heathrow as a case where physical constraints kept U.S. carriers from fully using their Open Skies rights for years after the legal barriers fell.⁵

What Airlines Can and Cannot Do: The Freedoms of the Air

International aviation law slots flight rights into a hierarchy of nine “freedoms” going back to the 1944 Chicago Convention. What an airline is actually allowed to do on a given route depends on which freedoms the treaty grants.

First freedom: Flying over a foreign country’s territory without landing.
Second freedom: Landing in a foreign country to refuel or for maintenance, without picking up or dropping off passengers.
Third freedom: Carrying passengers from the home country to a foreign country.
Fourth freedom: Carrying passengers from a foreign country back to the home country.
Fifth freedom: Picking up passengers in one foreign country and carrying them on to a second foreign country, on a flight that originates or ends in the home country.
Sixth freedom: Carrying passengers between two foreign countries by routing them through the home country.
Seventh freedom: Flying between two foreign countries on a route that does not touch the home country at all.
Eighth and ninth freedoms (cabotage): Operating flights entirely within a foreign country’s borders.

Open Skies agreements routinely include the first five. The third and fourth are the economic core; an airline needs both to sell round-trip tickets. Fifth-freedom rights let carriers build profitable multi-stop routes across regions, reaching destinations that would not fill a plane on their own.

The sixth through ninth freedoms are rare. Most countries, including the United States, prohibit foreign carriers from operating domestic routes. The U.S. statutory ban on cabotage stays in force even under the most ambitious Open Skies agreements, and no agreement has changed the rule that a foreign carrier cannot fly a domestic U.S. leg.

Cargo Carriers Get More

Cargo rights are one of the most commercially significant features of Open Skies agreements, and they often go further than passenger rights. Many agreements grant all-cargo carriers the right to fly routes that do not connect to their home country at all, a flexibility passenger airlines rarely receive. The Department of State describes these cargo provisions as “critical to creating and facilitating global air cargo supply chains.”⁶

International express delivery depends on this flexibility. Companies like FedEx and UPS route packages through hubs in multiple countries, and older bilateral agreements often blocked the connecting flights that make overnight delivery work. U.S. air freight services to the Middle East, South Asia, and Africa have contributed over $3 billion to the U.S. trade balance.⁶ Some agreements are cargo-only: Vietnam, for example, holds an Open Skies agreement with the United States that applies only to cargo operations.¹

Safety and Security Obligations

Open Skies agreements are commercial treaties, but each one carries binding safety and security requirements. Each country agrees to recognize the airworthiness certificates and crew licenses issued by the other, provided those credentials meet or exceed the minimum standards set by the International Civil Aviation Organization under the Chicago Convention.⁷ Either country can request consultations if it believes the other is falling short on safety standards.⁴

Security provisions have real enforcement teeth. If one country believes the other has departed from the security terms, it can demand consultations. If those talks fail to produce a resolution within 15 days, the complaining country can suspend, revoke, or restrict the operating rights of airlines from the non-compliant partner. In emergencies, a country can act immediately without waiting out the 15 days.⁴

On the U.S. side, the Transportation Security Administration assesses security conditions at roughly 300 foreign airports offering last-point-of-departure flights to the United States. TSA can inspect U.S. and foreign-flagged carriers on those routes but does not have authority to enforce security requirements at the foreign airports themselves, working instead through training, counseling, and joint assessments with partners such as the European Commission.⁸

Who Qualifies: Ownership and Control Rules

An Open Skies agreement benefits only airlines that genuinely belong to a signatory country. For a U.S. carrier to qualify as American, at least 75 percent of its voting interest must be owned or controlled by U.S. citizens, its president and at least two-thirds of its board must be citizens, and the airline must be under the “actual control” of U.S. citizens.⁹ Foreign investors can hold up to 49 percent of total equity but no more than 25 percent of voting shares.

The Department of Transportation applies a detailed “actual control” test that goes beyond share counting. Regulators examine board composition, veto rights, debt agreements, competitive relationships, and even who conceived the business and assembled the management team. That test prevents arrangements where a carrier is nominally American but effectively run by foreign interests. Most other countries apply similar requirements to their own airlines.

How the U.S. Administers Its Agreements

The State Department negotiates aviation treaties. The Department of Transportation handles the economic regulation of airlines operating under them. Federal law directs the DOT to place “maximum reliance on competitive market forces” when regulating air transportation.¹⁰

Before a foreign airline can operate to the United States, it must obtain a permit from the DOT. The Secretary of Transportation will issue that permit only after finding that the carrier is fit, willing, and able to comply with U.S. regulations, and that it has been designated by its home government under an applicable aviation agreement.¹¹

An Open Skies agreement is also a prerequisite for the DOT to grant antitrust immunity to airline alliances and joint ventures.¹² With immunity, partner airlines can coordinate schedules, share revenue, and set fares jointly on routes connecting two Open Skies countries. Without the underlying treaty, the DOT will not approve those arrangements, which is why the major global alliances concentrate their deepest integration on Open Skies corridors.

When Countries Disagree

Disputes under an Open Skies agreement move through two stages. The countries first try to resolve the issue through direct consultations and negotiations. If those talks fail, either side can submit the dispute to a binding arbitration tribunal. In practice, most disputes get settled informally, and the availability of arbitration functions mainly as leverage to keep both sides at the table.

What Passengers Have Gotten Out of It

Research on the U.S.–EU corridor found that fares on Open Skies routes fell roughly 20 percent in the years after liberalization, compared with about 10 percent on routes still governed by restrictive bilaterals. Routes where airline alliances received antitrust immunity saw steeper drops, with interline fares falling 18 to 20 percent below what they would have been without coordination.

Passenger growth has been substantial. Economists estimated that full transatlantic liberalization would generate between 4 and 11 million additional passengers on transatlantic routes alone, with network effects adding millions more on connecting flights within Europe. One study projected more than 70,000 long-term jobs from increased passenger traffic and another 20,000 from expanded cargo operations.²

The U.S.–EU Agreement as the Flagship Example

The 2007 U.S.–EU Air Transport Agreement is the largest Open Skies deal in force. Before it took effect, transatlantic flying operated under a tangle of individual bilateral agreements between the United States and each EU member state. The 2007 agreement replaced all of them with a single framework: any EU airline can fly from any point in Europe to any point in the United States, and vice versa, with no restrictions on pricing, frequency, or capacity.

The agreement created a Joint Committee to monitor implementation and resolve issues as they arise. A second-stage agreement signed in 2010 pushed further on remaining sticking points, including the long-running debate over foreign ownership restrictions. The U.S. cabotage ban remains untouched: foreign carriers still cannot fly domestic routes inside the United States, no matter how broad the Open Skies framework becomes.

1
US Department of Transportation. Open Skies Agreements Currently Being Applied
2
U.S. Department of State. Open Skies Agreements
3
U.S. Department of State. Elements of Open Skies Agreement
4
U.S. Department of State. Current Model Open Skies Agreement Text
5
U.S. Government Accountability Office (GAO). Transatlantic Aviation: Effects of Easing Restrictions on U.S.-European Markets
6
United States Department of State. Civil Air Transport Agreements
7
International Civil Aviation Organization. Convention on International Civil Aviation
8
U.S. Government Accountability Office. Aviation Security: TSA Strengthened Foreign Airport Assessments and Air Carrier Inspections
9
Office of the Law Revision Counsel. 49 U.S.C. 40102 – Definitions
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Office of the Law Revision Counsel. 49 U.S.C. 40101 – Policy
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Office of the Law Revision Counsel. 49 U.S.C. 41302 – Permits of Foreign Air Carriers
12
US Department of Transportation. DOT Aviation Antitrust Immunity Cases