Oct. 1 (Bloomberg) -- Carriers have been left in an ``impossible situation'' after the European Union and the U.S. yesterday failed to salvage an agreement on the exchange of passenger data, said the Association of European Airlines.

The two sides broke off talks on an anti-terrorism accord that would have enabled European airlines such as Air France-KLM Group to give U.S. authorities details about trans-Atlantic passengers, such as their addresses and ticket-payment methods, without violating EU privacy rules. The lack of agreement by yesterday's deadline leaves carriers in a legal limbo.

``We hope that an agreement will be reached very, very soon because airlines are in an impossible situation if they have to choose which rules to break,'' Francoise Humbert, a spokeswoman for the Association of European Airlines in Brussels, said by telephone today. ``We shouldn't have this uncertainty.''

Without a new agreement, airlines that transfer information to the U.S. face the threat of lawsuits in Europe for breaching EU data-privacy rules, while carriers that refuse to give the information risk losing permission from the U.S. to land there.

The original 2004 agreement stemmed from U.S. efforts to fight terrorism after the Sept. 11, 2001, attacks. European airlines transfer to U.S. authorities as many as 34 types of information about trans-Atlantic passengers.

The EU's top court earlier this year struck down the data- exchange arrangement, giving authorities until Sept. 30 to comply with EU law. Negotiators had planned a quick fix by changing the legal basis rather than the substance of the accord.

Minimizing Risks

The U.S. made additional demands that the EU needs to discuss further, said Jonathan Todd, spokesman for the European Commission, the 25-nation EU's regulatory arm. The situation leaves us with a ``legal vacuum,'' he said by telephone yesterday.

Until an accord is reached, the commission urges the U.S. to continue to apply the safeguards set down in the now-lapsed 2004 agreement ``so as to minimize the risk of legal uncertainty and disruption to EU-U.S. flights,'' it said in a statement today.

Homeland Security Secretary Michael Chertoff has sent the EU a draft agreement that may be discussed by justice and home affairs ministers on Oct. 6 ``in the hope of having an agreement the same day,'' the commission said in its statement.

``The negotiators had to return to Europe and we await to see what their response back would be,'' Jarrod Agen, a spokesman for the U.S. Department of Homeland Security, said yesterday.

To contact the reporter on this story: Anna Jenkinson in Brussels at Or ajenkinson@bloomberg.net

Last Updated: October 1, 2006 11:53 EDT