David Field / Washington and Colin Baker / Edinburgh
The opening of the transatlantic skies will probably have to wait until late this year or next as the Bush administration, stung by objections from Congress, is left with no choice but to explain and possibly revise its approach.
Capitol Hill is aiming at a White House proposal for a liberal interpretation of long-standing limits on foreign investment in and management of US-flag carriers. While the cap of 25% that Congress reaffirmed as recently as 2003 would stand, the Department of Transportation (DoT) would allow some direct management control and participation by non-US citizens. This was meant to appease Europe’s desire to link the Open Skies deal to liberalisation of the rules governing foreign investment, but has sparked objections on the US side. Citing national security and job concerns, members of Congress, labour unions, and some airlines have denounced the proposals as illegal and ineffective.
Continental Airlines, one of the most vocal objectors, made it clear it could block the DoT regulatory policy in courts. In May, the DoT responded by amending its proposal, specifying that US citizens who are members of a US airline board or its voting shareholders would “retain the authority to revoke decision-making authority that international investors may acquire”. This effectively gives veto power to US shareholders, who would also have a greater say in safety and security matters.
Opponents remain far from placated, with Continental protesting that “the DoT has abdicated its responsibility to ensure actual control by US citizens, relying instead on the unreasonable hope that US shareholders and directors might reassert the very control DoT is unwilling to require”.
The continuing struggle to delay or kill the proposal leaves Brussels with a difficult choice: de-link an Open Skies deal from liberalising investment, or allow a further delay. Given the stance of the carriers, the first option is unlikely. Association of European Airlines head Ulrich Schulte-Strathaus says: “Only clear, meaningful, and robust DoT rules will enhance the likelihood of a balanced EU/US aviation agreement.”
The European Commission (EC) and US had hoped that the new regime would come into effect in time for the 2006-7 winter season, but that is now all but impossible. In theory, the October meeting of the European Council of Ministers will be in a position to vote on a deal after the DoT and Congress thrash out a compromise, but few are holding their breath.
US officials, like chief State Department negotiator John Byerly, express continued optimism of a deal before year-end, but with public posturing already well under way for the November Congressional elections, Brussels is left playing a waiting game against a less than promising political backdrop. A Brussels insider says the EC could move to abrogate individual bilaterals, which are now based on questionable legal grounds, although that would be a “nuclear option you only use once”. ■
Source: Airline Business
