EU strikes new Open Skies aviation understanding with U.S.

Pete Harrison BRUSSELS Thu Mar 25, 2010 1:44pm EDT Related News UPDATE 2-EU strikes new "Open Skies" aviation deal with U.S.1:41pm EDTEU reaches deal with U.S. on airline ownership11:47am EDT

BRUSSELS (Reuters) - European airlines might soon be able to take majority control of U.S. airlines and get access to lucrative U.S. government business in a deal struck on Thursday -- but real change will hinge on approval by the U.S. Congress, a far from certain prospect.

Deals

The deal in "Open Skies" talks followed a 2007 agreement allowing airlines to fly for the first time between any EU city and any U.S. city, uniting two markets that account for nearly two thirds of global aviation.

"This draft deal represents a significant breakthrough in the process of normalizing the global airline industry," European Transport Commissioner Siim Kallas said.

"Both sides have agreed to increase regulatory cooperation, and remove the barriers to market access that have been holding back the development of the world"s most important aviation markets," he added.

Current laws in the United States limit foreign ownership of U.S. airlines to 25 percent, but that will be loosened if Congress approves the measures agreed on Thursday.

European carriers will also have fresh access to U.S. government business under the "Fly America" programme.

In return, U.S. airlines will gain improved market access in the EU and increased share ownership rights from above the current 49.9 percent.

EU transport ministers will be asked to approve the deal at a meeting in June, but Congress has in the past rejected efforts to relax airline ownership restrictions even though some U.S. airlines support more foreign investment.

"We had hoped that the conclusion of the second stage negotiations would have resulted in the immediate removal of restrictions on ownership and control, Fly America and cabotage," a British Airways spokesman said. Cabotage is the right to transport of goods or passengers within the borders of another country.

"We call on both sides to honor the firm commitments they have made in this agreement to further liberalization," he added.

There has been no indication in the current U.S. Congress that it would act to change the law that limits foreign ownership to 25 percent of voting stock in a U.S. airline.

Creating a full EU-U.S. "Open Aviation Area" might generate up to 80,000 new jobs, the European Commission said.

(Additional reporting by John Crawley; Editing by Dale Hudson)

Deals