‘Open skies’ faces bipartisan US opposition

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Efforts to forge a new transatlantic aviation pact suffered a new blow on Wednesday with the emergence of bipartisan opposition in the US Congress to the current form of the deal agreed last month.

The opposition revives the furore over foreign investment in US carriers which sank a similar proposal last year, and comes just a week before European transport ministers are due to vote on the controversial plan.

The group led by James Oberstar, the influential head of the House transportation committee, questioned what US negotiators had offered to their EU counterparts after successfully blocking earlier efforts to ease the investment restrictions.

The intervention surprised many US airline executives, some of whom had reversed earlier opposition to the first stage of the so-called Open Skies pact. Carriers had felt more confident about securing access to London’s congested Heathrow airport, but had been encouraged by US officials to restrain their relative enthusiasm.

However, some executives played down the impact of the letter sent by the three congressmen to Mary Peters, the US transportation secretary, as it contains no immediate threat to introduce blocking legislation.

One executive said the politicians were motivated by calls last week from airline unions for Congress to intervene and block the EU deal, citing concerns over proposed franchise agreements and so-called seventh freedom rights to fly on from the US to third countries.

”Unions don’t like the franchise arrangement,” said the executive. ”They see it as the camel’s nose under the tent.”

Mr Oberstar and his fellow critics said the draft agreement was “ambiguous” about the potential for changes to legal restrictions on foreign ownership of US-based airlines.

US negotiators sought to circumvent opposition by offering EU investors access to the US domestic market through franchise agreements.

The letter called for reassurances about the implementation of current policy, and said Congress would examine any “case-by-case” review of inward investment to the industry. New legislation could be introduced to enforce the policy requiring “actual control” of US airlines to be in the hands of US investors.

The DoT on Wednesday said that the tentative deal was ”deliberately crafted to strictly adhere to all existing laws, regulations and rules regarding the control and ownership of US airlines”.

However, any further flare-up of political opposition in the US will be closely watched by European officials hoping to take a fragile consensus of support for the pact into next week’s vote.

The potential roadblock comes just a day after the UK – viewed as the principal opponent to the pact among EU members – signaled it was likely to back the first-stage agreement.

Douglas Alexander, transport secretary, warned parliament of ”serious consequences” for the UK if it refused to ratify the liberalised air-services accord.

The disquiet in the UK reflects the importance of Heathrow – which is rich in profitable business traffic. Under the present UK/US treaty only four airlines - British Airways and Virgin Atlantic from the UK and American Airlines and United Airlines from the US - are allowed to fly direct services between Heathrow and the US.

The EU this week said it could suspend a proposed ”open skies” deal with the US if Washington does not open its domestic market by mid-2010.

Jacques Barrot, transport commissioner, who drafted a deal last month, said the US had agreed to further liberalisation in a second stage.

”Some people who don’t like the agreement…say we’ll never get to this second stage because the US would have won out on the first stage. But that’s not right,” he told the European parliament in Strasbourg.

”People are right when they call for a mechanism that will inevitably lead to a second stage and I’ve got that. We’re going to start negotiations for phase two in January next year. If there’s no second-stage agreement between now and mid-2010, we can suspend our side of the deal,” Mr Barrot said.

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