Washington's move also damps the hopes of several U.S. passenger airlines, including Delta, Continental, US Airways and Northwest, of launching trans-Atlantic services to London Heathrow, the world's busiest international airport.

The current Bermuda Two agreement limits access to Heathrow to two carriers from each country - British Airways and Virgin Atlantic and American Airlines and United Airlines.

The failure of the latest talks also marked a serous setback for Britain's BMI which had acquired long-range Airbus jets to operate passenger and cargo services from Heathrow. BMI Chairman Michael Bishop said he was not surprised. "The [British] government must stop insisting on access to the U.S. internal market for British and other European carriers and instead focus on UK-U.S. routes."

Britain's offer included so-called "fifth freedom" rights for U.S. cargo airlines, which would have allowed them to pick up cargo in England and fly on to other European hubs. Fred Smith, chairman of FedEx, has lobbied UK ministers for the carrier to load cargo at its London Stansted hub and service third countries but agreement has been blocked by a lack of an "open skies" deal for passenger services.

Great Britain made the concession to U.S. cargo carriers, over objections by British all-cargo airlines that claimed they couldn’t operate freely in the U.S. domestic market, in a bid to win an open-skies deal for passenger services.

Washington has said it is ready to negotiate a separate cargo agreement improving services for FedEx, United Parcel Service, Atlas Air and other freight haulers, but the UK does not favour a deal unless the U.S. agrees to open up its domestic market to British cargo airlines.

The collapse of the talks also raises the prospect that the European Union will take over Britain's negotiations with Washington. The European Court of Justice is expected soon to support a legal recommendation that individual EU states should not negotiate their own bilateral aviation accords.

reproduce with premission from www.eyesfortransport.com