Eight European governments acted illegally when they signed bilateral air agreements - known as "open skies" deals - with the United States, the European Court of Justice has ruled.

The ruling by the EU's high court represents a victory for the European Commission, which is keen that Europe should negotiate aviation agreements together.

In theory, the court decision could help deregulate the European air transport market, by allowing airlines greater freedom to fly to the US from EU nations other than their own.

This may, the Commission says, bring down fares on transatlantic routes, and make it easier for European airlines to merge.

Breach of law

The case was brought against Austria, Belgium, Denmark, Finland, Germany, Luxembourg, Sweden and the UK in 1998.

Bilateral "open skies" agreements, Brussels has argued, effectively discriminate against airlines from other EU countries.

This is a breach of European law on freedom of commerce.

Under the present system, US airlines can fly freely into EU countries from anywhere in the US, but European airlines can only fly the other way from their home countries.

The Commission also argues that, by negotiating aviation rights as a bloc, Europe can squeeze greater concessions from Washington than can individual countries.

Airlines cheer

The Commission said it was proposing talks between EU member states on the formation of a common aviation area, which will handle all talks with third parties - including countries other than the US.

Transport Commissioner Loyola de Palacio said it may mean that not all 12 of Europe's "flag carrier" national airlines may survive.

"The logical trend in the market will be that there will have to be a reduction in the number of airlines with a global vocation," she said.

The move should prove popular with some airlines, which have long argued for greater freedom within Europe.

"We have always lobbied for true 'open skies' but only if that means full liberalisation of all regulations governing air services within and between Europe and the US," said a spokesman for Virgin Atlantic.