Open skies agreements aim to loosen restrictions placed on airlines flying between different countries. The EU-US pact would replace a patchwork of bilateral agreements between some EU countries and Washington - ruled illegal by the European Court of Justice - with an overall pact that covers the whole 27-nation bloc.
It would allow any EU carrier to fly to any US city from any European city and vice versa. That means Germany's Lufthansa, for example, could fly directly to New York from Paris or Madrid instead of from a German city such as Frankfurt.
Significantly, it would also open London's Heathrow airport to transatlantic flights from any US or EU carrier. Currently only British Airways, Virgin Atlantic, United Airlines and American Airlines fly such routes.
Benefits of a deal
The executive European Commission, which negotiated the deal on behalf of the EU, says the open skies pact would generate more than 25 million additional passengers between the US and the EU over the next five years. It would create up to €12 billion in consumer benefits and 80,000 new jobs on both sides of the Atlantic, the Commission says, and the increased competition for transatlantic flights would lower the cost of tickets.
Ownership rules
The EU has long sought a change in US rules that limit foreign ownership of US carriers to 25 per cent voting rights. The Bush administration withdrew a proposal to loosen the restrictions in December after facing resistance in Congress.
Under the current deal, EU companies may buy more than 50 per cent of a US airline's total equity, but voting share restrictions remain. The EU would also have the right to limit US investment in EU carriers to 25 per cent of voting-rights, down from 49 per cent at present. The agreement allows airlines in some non-EU countries that are owned by EU carriers to benefit from the open skies pact.
Market access
The deal allows EU and US carriers to fly to destinations in Europe or the US and then on to another country without returning home.
This is known as "fifth freedom" rights. So-called "seventh freedom" rights would also be granted to EU cargo carriers, allowing them to establish a US base and fly to any other country from there.
Other elements include "wet lease" opportunities where EU airlines provide the crew for a US carrier on international routes. Branding and franchising possibilities are enhanced.
Competition and safety
The deal has provisions to foster co-operation on safety and competition issues, establishing a body where both sides can raise concerns about subsidies. It would also tackle issues such as the possibility of a fuel tax on intra-EU flights.
Suspension and stage 2
The deal is considered a first phase agreement. Talks on a second stage must start within 60 days of the deal's application. If progress on a second stage is insufficient by mid 2010, rights under the pact may be suspended. The EU sees that as a lever to force greater loosening of US ownership restrictions in a second-stage pact.
For and against
British Airways, facing a loss of its monopoly at Heathrow, has raised the biggest objections to the deal. Virgin Atlantic has said it may start new US-EU routes if it goes through. Other EU and US carriers are broadly in favour of the pact.