EU, US move to allow foreign ownership of airlines

The European Union and the United States on Thursday took a "major step forward" in aviation liberalisation, paving the way for foreign ownership of their airlines after lengthy talks, Brussels said.

However the International Air Transport Association (IATA) said the results of the deal were disappointing as they did not go far enough on the sensitive issue of EU and US airlines owning controlling stakes in each other.

Under the draft deal to move towards EU-US "open skies" in the airline industry, European airlines would be able to take majority stakes in US companies, and eventually, US firms would be able to reciprocate.

A passenger plane is seen shortly after takeoff

But the accord calls for legislative changes both in European nations and the United States, and needs to be signed off by the US Congress, an uncertain and lengthy prospect.

"Both sides have agreed to increase regulatory co-operation, and remove the barriers to market access that have been holding back the development of the world's most important aviation markets," EU Transport Commissioner Siim Kallas said in a statement hailing the deal.

The draft accord represents "a significant breakthrough in the process of normalising the global airline industry," the statement added.

"The new agreement affirms that the terms of the 2007 agreement will remain in place indefinitely," a US Department of State spokesman said in a statement.

The 2007 deal, which took four years to thrash out and went into effect early 2008, eliminated air service restrictions between the United States and Europe, allowing airlines from both sides to select routes and destinations based on consumer demand for both passenger and cargo services.

The new accord "deepens US-EU cooperation in aviation security, safety, competition, and ease of travel," the US Department of State spokesman said.

Yet IATA remained decidedly underwhelmed.

"It is disappointing that, at this critical time, we did not make significant progress on the issue of ownership," IATA director general Giovanni Bisignani said in a statement.

"The agreement was not a step backwards, but it did not move us forward. The long-term financial sustainability of the industry is dependant on normal commercial freedoms. I urge both governments to keep this on the radar screen for urgent follow-up," he added.

EU companies currently can hold no more than a 25 percent stake in US counterparts.

US operators on the other hand are already allowed to control 49 percent of European carriers, a difference which has long rankled with Virgin Atlantic and others.

The draft text says "the European Union and its member states shall allow majority ownership of their airlines by the United States or its nationals on the basis of reciprocity."

Airlines would also later get the right to fly passengers from a US airport to five non-EU countries, which have yet to be decided. This would be the first time European planes could fly in and out of the United States without landing or taking off in the EU.

Thursday's deal also sought to harmonize environmental rules on aircraft emissions, fuel and noise.

It would also, the US side said, provide greater protection for US carriers from "arbitrary restrictions" on night flights at European airports.

"The new agreement underscores the importance of close transatlantic cooperation on aviation environmental matters in order to advance a global approach to global challenges," the US spokesman said.

A full EU-US Open Aviation Area has been estimated to be worth up to 12 billion euros in economic benefits and up to 80,000 new jobs.

This week's closed door talks on the issue, which had been taking place in Brussels since Tuesday, were preceded by seven much less successful rounds of talks.

"This is really significant" an EU official said, "at the first round of talks it wasn't even possible to broach the issue of ownership."

source AFP

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