U.S., EU sign historic aviation pact

U.S., EU sign historic aviation pact High-level officials from the United States and the European Union on Monday signed an open skies air transport agreement that sharply deregulates the transatlantic aviation market for U.S. and European carriers.
      The trade deal, which goes into effect in March 2008, will eliminate restrictions on prices, frequencies, routes, type of aircraft and other services, making it easier for airlines to serve all cities in each market and opening up competition that is expected to benefit consumers. The agreement also binds both sides to higher security and safety standards.
   The open market agreement was finalized by negotiators on March 2 and approved by EU transport ministers three weeks later. The agreement will replace existing bilateral agreements between the United States and EU member states.
   Both sides are expected to begin negotiations on a second-stage air transport agreement within the next year. European officials have expressed hope that an expanded deal would open up foreign investment opportunities in airlines on both sides of the Atlantic. The Bush administration in the past three years tried to increase the amount of voting stock in U.S. airlines allowed to be held by foreigners and alternatively to give foreign investors the ability to direct business decisions while leaving security and safety decisions in the hands of U.S. citizens. Both attempts failed in the face of strong opposition from Congress.
   Under the latest arrangement, U.S. investors can invest in European Community airlines as long as they are controlled or operated by member states or their nationals. The agreement maintains U.S. citizenship requirements that foreigners can hold up to 49.9 percent of the equity and 25 percent of the voting stock of a U.S. airline, although there is a loophole for a greater equity stake on a case-by-case basis.
   The chairman of the House Transportation and Infrastructure Committee, Rep. James Oberstar, D-Minn., pounced on that language in the deal and said his committee “will conduct thorough oversight to prevent any backsliding on the foreign control issue.”
   Department of Transportation officials have said they did not compromise on U.S. citizenship rules at all to win EU acceptance of the agreement.
   Oberstar also said he would try to block any attempts in the second round of negotiations to expand foreign control of U.S. airlines. Many Democrats and labor unions believe that European airlines would cut jobs and replace workers with cheaper European counterparts in a takeover of a U.S. airline.
   The grant of new traffic rights to EU carriers also opens the door to cross-border airline mergers and acquisitions within the EU, which is possible today only if airlines are prepared to place their international operating rights in legal jeopardy.
   The deal also lifts restrictions on U.S-U.K service to Heathrow Airport in London, which has been limited to two U.S. and two British airlines. It also allows EU airline transport of cargo between the United States and all third countries without first having to return to the home country.
   EU Transport Minister Jacques Barrot called the agreement a “big step forward in international aviation,” because it covers 60 percent of world traffic and could serve as a model for other regional or global agreements.
   “By allowing new services to be launched from airports right across Europe, it will shake up both the transatlantic market and the European airline industry itself. Already, the European airline industry is feeling its effects in a positive way, with plans for new services and signs of a much more flexible and dynamic approach to airline investment among European carriers,” Barrot said.