abstract:This article seeks to clarify the implications of the Open Skies agreement reached between the European Union (EU) and the USA in March 2007. It begins by reviewing the background of aviation regulation and the negotiations that have taken place between the European Commission (EC) and the USA over the past few years. It discusses the EU and US perspectives on the development of the transatlantic market and summarizes the key elements of the new Open Skies agreement. It goes on to analyse the probable effects of the agreement and identifies the likely winners and losers. It also highlights the unresolved problems for the EU and the USA. Finally, it concludes that while both sides might not be satisfied with the new agreement, it will nonetheless become a liberalized model for other regions of the world to emulate.