Hopes are fading that the US and the European Union can reach a landmark deal this year to liberalise the transatlantic airline market, though an accord could still be reached in early 2006, according to airline and government officials.

Negotiators from both sides start a fresh week of talks in Washington today, but industry officials believe the momentum to reach a deal this year has drained since the US outlined plans two weeks ago to ease restrictions on foreign participation in US carriers.

The US said the plan would promote investment and foster better co-operation between airline alliance partners, but it has had a mixed reception on both sides of the Atlantic.

US officials will brief their European counterparts on the plan on Tuesday, but an official 60-day comment period runs into January, and some US airline officials believe the proposal could face a legal challenge.

EU and US negotiators held a week of talks in Brussels in October, having painstakingly rebuilt trust after the EU Council of Ministers unexpectedly vetoed a deal agreed last year.

The two sides made progress on a range of technical and regulatory issues, such as competition policy and safety and security matters.

However, the thornier issues of market access – notably to London Heathrow, the busiest transatlantic gateway – and ownership and control restrictions remain unresolved.

Jacques Barrot, the EU transport commissioner, remained hopeful that a deal could be reached “by the end of the year or early next year”, his spokesman said. He feels Washington’s offer to ease investment restrictions on US airlines was “a major step” but that legal clarification was needed.

Andrew Cahn, British Airways government affairs director, said yesterday he did not expect any deal to be finalised in Washington this week. He said the talks could make progress this week on regulatory convergence in areas such as safety, security and competition, but the substantive negotiations were likely to be delayed until next spring.

The two sides have spent almost a decade trying to replace the patchwork of agreements on airline access between the US and member states with a single “open skies” pact. This would allow unrestricted access between any point in the EU and the US, which advocates believe will boost both traffic and competition.

The EU has long sought an end to the US law limiting overseas investment to 25 per cent of an airline’s voting rights, compared with 49 per cent in the EU.

US negotiators, recognising longstanding opposition from labour groups and within Congress, had succeeded in carving the issue from the current round of talks with the promise of a parallel movement to ease restrictions.

Further delays will heighten the frustration among airlines supporting a deal.

Members of the SkyTeam alliance, which includes Air France-KLM, Delta Air Lines and Northwest, could also face further delay in their quest for antitrust immunity.

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