Signed on 23 July 1977, the Bermuda II Agreement, a renegotiation of the 1946 Bermuda Agreement, allows four airlines to operate direct flights from London's Heathrow airport to the United States, and bars any other carriers from operating such flights. The designated airlines are:
- British Airways
- Virgin Atlantic (added in 1991)
- American Airlines (replaced Pan American World Airways in 1991)
- United Airlines (replaced Trans World Airlines in 1991)
Other airports in Britain, including Gatwick Airport, are fair game for other airlines.
While this was all fine and dandy back in the days of airline regulation, many are now vehemently opposed to the agreement, arguing that an open skies plan would be better for both Britain and America. American officials particularly hate the arrangement, because the British airlines get a higher passenger share than the American airlines (which use smaller aircraft). US Airways chairman Stephen Wolf put it thusly, in a 2000 testimony to members of Congress at Pittsburgh International Airport:
Flexible service options and vigorous competition were, and remain, the requisite ingredients for survival in this new era of deregulated domestic travel. Many U.S. carriers thereafter extended their services into the international arena, bringing the rigors and lessons of the deregulated domestic marketplace to international air services. Bermuda II, however, has withstood these unrelenting attacks and permitted the British Government, and British Airways in particular, to restrict access to London and to control capacity and pricing. ... I find it extraordinary that two political and economic allies, with similar views on the rule of law and free trade, still retain an anti-competitive, regressive agreement to govern their aviation relationship.
Several airlines, most notably bmi british midland, made attempts to overturn Bermuda II in an effort to start transatlantic service from Heathrow. The European Court of Justice threw out Bermuda II in November 2002, telling the United Kingdom that it was discriminating against other airlines in the European Union by barring them from serving Heathrow from the US.
There are currently (Nov. 2005) non-finalized plans to scrap Bermuda II as part of a US-EU open skies agreement effective by the end of 2006.