Branson wary of US ‘open skies’ sensitivity

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Sir Richard Branson still plans to attend next month’s launch of Virgin America, despite suggestions that the media-loving entrepreneur would be forced to stay away amid renewed sensitivity about overseas involvement in the US airline industry.

Virgin America, a San Francisco-based start-up, provided a lightning rod for the bipartisan opposition in Congress and among US unions to reforming the strict investment laws governing the sector, which this week resurfaced and threatened to undermine the “open skies” treaty agreed in April with the European Union.

Sir Richard was forced to scale back his involvement in Virgin America to win regulatory approval following a 16-month battle with the authorities, only receiving the green light after the transatlantic treaty was signed in April.

However, long-standing opponents of liberalisation such as James Oberstar – head of the House transportation committee – have re-emerged to fire a warning shot at both Sir Richard’s pet project and the broader goal of open skies. Mr Oberstar and his allies have opposed reform on grounds ranging from the potential threat to US jobs, to national security. While they stepped back from grounding the open skies deal, Mr Oberstar said he would closely monitor its implementation, and included a provision in a recent House aviation finance bill that challenged some of the transatlantic pact’s longer-term goals.

The committee is proposing to limit further the discretion of the US transportation department in determining when a US airline is under the “actual control” of US citizens, thereby limiting the scope of activities that can be undertaken by foreign airlines and investors.

The committee proposal says US citizens would have to exercise control in a US carrier of “all matters pertaining to the business and structure of the air carrier”.

This would appear to rule out the franchise operations for European airlines agreed in the April treaty and confirm UK fears that little or no progress can be made in a stage two negotiation.

Washington is divided as to whether Mr Oberstar’s move could threaten the second stage of talks dealing with ownership reform but the language has sparked concern on both sides of the Atlantic. The promise of a second stage deal was vital in persuading the UK to accept a first stage that made concessions to the US.

Airlines are gearing up to use the liberalisation to launch new services, and the FT revealed this week that EU officials had asked their US counterparts for assurances that the process would not be derailed.

“I would be grateful if you could confirm that it is not the intention of the House committee to prevent the implementation of the EU-US agreement,” said Jacques Barrot, the EU transport commissioner in a letter to Mr Oberstar and Mary Peters, transportation secretary.

Mr Oberstar insisted the language merely clarified US law and in reply to Mr Barrot said it “should not prevent” the open skies deal.

However, some observers viewed the response as a tacit admission that the US “concession” on branding was, in effect, worthless, an interpretation that could inflame the EU.

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