Brussels warns US over threat to 'open skies'
Brussels warns US over threat to 'open skies'
By Kevin Done in London and Doug Cameron in Chicago
Copyright The Financial Times Limited 2007
Published: July 17 2007 03:00 | Last updated: July 17 2007 03:00
The European Commission has warned the US that fresh protectionist moves in Congress are threatening to undermine the much-vaunted "open skies" deal signed in April to liberalise transatlantic aviation.
Both US and European airlines are already preparing to take advantage of the US/European Union treaty, which is due to come into force provisionally in March next year, although initial new services between Ireland and the US are already planned to begin at the end of October.
Jacques Barrot, European transport commissioner, has written to both Mary Peters, US transportation secretary, and James Oberstar, chairman of the House transportation and infrastructure committee, to express concern at the move by the Democratic-led committeeto tighten further the existing tough restrictions onthe presence of foreignairlines in domestic USaviation.
The committee is proposing to limit further thediscretion of the US transportation department in determining when a USairline is under the "actual control" of US citizens, thereby limiting the scope of activities that can be undertaken by foreign airlines and investors.
The crucial wording of the committee proposal says that US citizens would have to exercise control in a US carrier of "all matters pertaining to the business and structure of the air carrier, including operational matters such as marketing, branding, fleet composition, route selection, pricing, and labour relations".
This would appear to rule out the franchise operations for European airlines agreed in the April treaty and to confirm fears in the UK,that little or no progress can be made in a stage twonegotiation.
Mr Barrot told Ms Peters in a letter sent last week that any such limitation could have "a serious impact" on the EU/US air transport agreement, which was only signed at the end of April.
It could hit in particular the provisions in the agreement for franchising and branding activities by European airlines in the US.
Mr Barrot said the move by the House transportation committee could also "dangerously impair" the ability to enter into "a meaningful dialogue" during the second stage US/EU negotiations that are due to begin shortly.
Stage two is supposed to create additional foreign investment opportunities in the US and, in particular, the dismantling of US regulations, which limit foreign entities to controlling no more than 25 per cent of a US airline.
Such liberalising moves are fiercely opposed by US trades unions.
The promise of a second stage deal was key topersuading the UK to drop its longstanding objections and accept the much weaker first stage, which made important concessions to the US, led by the opening of London Heathrow airport to full competition.
The serious implications of the current dispute were underlined by the UK government only three weeks ago when it warned in a written parliamentary answer that if the timetable for a stage two deal was not met "a process will automatically be set in hand to suspend traffic rights for US carriers".
Mr Barrot said that the present formulation of the amendment proposed by the House committee would "constitute a major step back in the process of establishing a stronger and healthier financial climate for aviation".
He warned that it could be an "impediment" to both the US and the European Community and EU member states "to ratify and even provisionally apply the terms of the treaty".
By Kevin Done in London and Doug Cameron in Chicago
Copyright The Financial Times Limited 2007
Published: July 17 2007 03:00 | Last updated: July 17 2007 03:00
The European Commission has warned the US that fresh protectionist moves in Congress are threatening to undermine the much-vaunted "open skies" deal signed in April to liberalise transatlantic aviation.
Both US and European airlines are already preparing to take advantage of the US/European Union treaty, which is due to come into force provisionally in March next year, although initial new services between Ireland and the US are already planned to begin at the end of October.
Jacques Barrot, European transport commissioner, has written to both Mary Peters, US transportation secretary, and James Oberstar, chairman of the House transportation and infrastructure committee, to express concern at the move by the Democratic-led committeeto tighten further the existing tough restrictions onthe presence of foreignairlines in domestic USaviation.
The committee is proposing to limit further thediscretion of the US transportation department in determining when a USairline is under the "actual control" of US citizens, thereby limiting the scope of activities that can be undertaken by foreign airlines and investors.
The crucial wording of the committee proposal says that US citizens would have to exercise control in a US carrier of "all matters pertaining to the business and structure of the air carrier, including operational matters such as marketing, branding, fleet composition, route selection, pricing, and labour relations".
This would appear to rule out the franchise operations for European airlines agreed in the April treaty and to confirm fears in the UK,that little or no progress can be made in a stage twonegotiation.
Mr Barrot told Ms Peters in a letter sent last week that any such limitation could have "a serious impact" on the EU/US air transport agreement, which was only signed at the end of April.
It could hit in particular the provisions in the agreement for franchising and branding activities by European airlines in the US.
Mr Barrot said the move by the House transportation committee could also "dangerously impair" the ability to enter into "a meaningful dialogue" during the second stage US/EU negotiations that are due to begin shortly.
Stage two is supposed to create additional foreign investment opportunities in the US and, in particular, the dismantling of US regulations, which limit foreign entities to controlling no more than 25 per cent of a US airline.
Such liberalising moves are fiercely opposed by US trades unions.
The promise of a second stage deal was key topersuading the UK to drop its longstanding objections and accept the much weaker first stage, which made important concessions to the US, led by the opening of London Heathrow airport to full competition.
The serious implications of the current dispute were underlined by the UK government only three weeks ago when it warned in a written parliamentary answer that if the timetable for a stage two deal was not met "a process will automatically be set in hand to suspend traffic rights for US carriers".
Mr Barrot said that the present formulation of the amendment proposed by the House committee would "constitute a major step back in the process of establishing a stronger and healthier financial climate for aviation".
He warned that it could be an "impediment" to both the US and the European Community and EU member states "to ratify and even provisionally apply the terms of the treaty".
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