Move by US hurts odds for 'open skies' treaty
By Bloomberg News, Boston Globe, 12/6/2006
WASHINGTON -- The United States scuttled a plan to give foreign investors more control over domestic airlines, dimming prospects for an "open skies" treaty with the European Union to increase trans-Atlantic competition.
Yesterday's decision by the Transportation Department ends a 13-month struggle with labor unions and Congress over whether foreigners should have more say in airline decisions such as marketing and flight schedules. Foreigners still would have been limited to 25 percent of U S airline voting equity.
The action is a setback for Bush administration efforts to boost U S airline capital and spur more service. Europeans had made the investor rule a condition for an "open skies" treaty.
The "open skies" treaty would let EU-based airlines fly across the Atlantic from anywhere in the 25-nation bloc, not just their home countries. It also would end the exclusivity of British Airways Plc, Virgin Atlantic Airways Ltd., AMR Corp.'s American Airlines, and UAL Corp.'s United Airlines on routes between the United States and London's Heathrow airport.
The United States "remains committed" to reaching an "open skies" agreement, Transportation Secretary Mary Peters said in a statement announcing the withdrawal of the investor rule.
Most European airlines favored the rule as a way to speed "open skies" talks and help compete with U S carriers. While U S airlines can fly between most European nations, European carriers can't offer service between U S states.
Opponents included U S unions, which feared job losses, and Continental Airlines Inc., which was concerned it couldn't get access at Heathrow, Europe's busiest airport, to compete in a deregulated market.
The Transportation Department had argued that giving foreign investors authority over issues such as whether to buy new planes would have boosted available capital for U S carriers.