"EU official says air treaties with US at risk"

Monday, May 10, 2004

EU official says air treaties with US at risk
By John Crawley 


WASHINGTON, (Reuters) - The United States must show a willingness now to
grant foreign airlines and overseas investors much greater access or
risk action by the European Union to cancel crucial aviation treaties,
EU Transport Commissioner Loyola de Palacio said on Monday. 

"You can't remain like this indefinitely," de Palacio told reporters as
EU and U.S. negotiators began a fifth round of talks on a landmark
trans-Atlantic aviation pact with election-year politics increasing
pressure for a deal this summer. 

The negotiations have snagged over the Bush administration's refusal to
embrace European proposals that foreign investors be allowed to hold
majority equity stakes in American carriers and that European airlines
be given access to U.S. domestic routes. 

Current regulations allow foreign investors to hold 25 percent voting
stock in an American airline. The Bush administration has offered to
raise that to 49 percent but has refused to consider letting overseas
airlines operate a domestic U.S. service. 

Both changes, which would require congressional action, are fiercely
opposed by labor unions and some airlines. Some lawmakers are also
reluctant to expand foreign ownership and operating rights for security
reasons. 

De Palacio said she would tell Transportation Secretary Norman Mineta on
Tuesday that her patience was thin. 

She said Europe would likely accept a limited deal on security, safety
and other issues advanced by the State and Transportation Departments,
if there was a firm commitment to explore the more contentious matters
in future talks. 

"If this fails, I am ready to ask the member states to denounce the
actual agreements, the 'open skies' agreements. I am ready to ask them
if they don't think that the proposed agreement is enough or a balanced
one," de Palacio said. 

The United States has "open skies" treaties with 15 of the 25 nations in
the EU, including France, Germany, and Italy. These permit a full range
of reciprocal trans-Atlantic passenger and cargo services. 

The other 10 EU countries, including Britain, have limited aviation
agreements. 

Jeffrey Shane, a Transportation Department undersecretary, said
scrapping aviation treaties would be a mistake partly because it would
undo the airline alliances that had become the backbone of transatlantic
service. 

"To sacrifice a package over the concessions that de Palacio is looking
for is regrettable," Shane said. "It's just bad policy." 

Shane said the Bush administration had offered a groundbreaking deal,
including a proposal to improve access for European airlines by lifting
a restriction that permits them to offer transatlantic service only from
their home country. 

"There is a very important package on the table right now which would
represent an enormous ramp-up in the quality of competition in the
trans-Atlantic market," Shane said.


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