The head of Air France-KLM on Wednesday warned that European governments would turn down revised plans by the US to ease restrictions on foreign investment in US carriers, endangering plans for a landmark transatlantic aviation pact.

Jean-Cyril Spinetta, chairman and chief executive of the world’s largest airline by revenues, said that the failure to secure an open-skies deal after three attempts would be “a disaster” for the industry.

The European Union and the US reached a tentative deal on a new aviation treaty last November, but this hinges on the US Department of Transportation coming up with a change in the control rules deemed “acceptable” by European transport ministers. The proposed changes unleashed a storm of criticism from US unions and Continental Airlines, which claimed they would export jobs from the US and posed a threat to national security because foreign investors might be more reluctant to transport US troops on their aircraft.

Mr Spinetta suggested that US efforts to address domestic opposition had backfired, resulting in a revised plan that was confusing and would leave potential investors unclear about their rights. “I doubt the language in the supplemental proposal will be acceptable to the European side in its present form,” he said in a speech in New York.

His remarks echo concerns expressed privately by European politicians in the wake of the DoT’s changes last month. The department hopes to finalise its plan by the end of the summer, in time to present it to EU transport ministers in October. However, the administration still has to overcome some domestic hurdles, notably lingering opposition in Congress. The House last night passed an amendment blocking the rule change until the end of fiscal year 2007.

Continental, which is a member of the SkyTeam alliance alongside Air France-KLM, Northwest and Delta, has been the leader of opposition on Capitol Hill, and Mr Spinetta’s speech was watched by Larry Kellner, Continental’s chairman and chief executive.

Mr Spinetta told the FT afterwards that Continental’s position had not created tension in the alliance, but said it could help dilute its concern over lack of access to slots at Heathrow, the world’s busiest international airport.

An open-skies deal would not guarantee carriers suitable access to Heathrow unless they bought the slots on a grey market. Air France has already made an informal offer to help Delta access the airport, and Mr Spinetta said this could be extended to Continental. “Why not? We could consider it,” he told the FT.

However, he said any re-allocation of slots was likely to hinge on what British Airways and its partner, American Airlines, opted to do in the event of an open-skies deal.

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