The Bermuda Agreement of 1946 was the first bilateral air transport agreement between the United States and United Kingdom that regulated civil air transport and established precedents for future agreements. It was expanded in 1977 in the Bermuda II agreement to be less liberal and give governments more control over fares and routes. The European Union and United States replaced the Bermuda agreements in 2008 and 2010 with a more liberal Open Skies air transport agreement.

1. 1
Bermuda Agreement
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
In 1946, delegates from the United States and Great Britain 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

2. 2
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 farther on, also outside the airline's
home country.
The United States also agreed that the International Air Transport
Association (IATA), 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 11 the United States and Britain operated a regular flying
boat service across the Atlantic. The US operator was Pan American World
Airlines and the British operator the newly formed and government owned
British Overseas Airways Corporation (BOAC). 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 Ireland. 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
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 DC4 and DC6 the Boeing Stratocruiser and Lockheed

3. 3
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.

4. 4
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 Briish carrier British Overseas Airways Corporation, sharing
facilities and revenues. Such arrangements formed the basis of subsequent
agreements established by the British with other countries. This view awas
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

5. 5
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 Senate and the House of Lords criticised the
negotiators - surely a sign that it was a fair deal. 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
World 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 Averill Harriman the US ambassador. This inauspiocious
beginning inaugurated what would soon become the most important
international air route for both airlines.

6. 6
Bermuda II
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 1. 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

7. 7
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 American 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

8. 8
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
The Bermuda agreements were replaced in two stages on March 30, 2008
and June 24, 2010 by an Air Transport Agreement between the European
Union, representing 25 European countries and thre United Sates. This
provides for an Open Skies regime, which is more liberal even than
Bermuda I.