EU Revives Plans to End Limits on Foreign Airline Stakes

The European Commission said it will revive plans to weaken restrictions on airline acquisitions and mergers, especially between carriers in Europe and the U.S.

Rules that bar foreign ownership above certain levels are limiting access to investors and capital markets, the Europe Union’s regulatory arm said in a statement, adding that cross- border consolidation could make the industry more sustainable.

While outside ownership is capped at 49 percent in the EU, with member states keen to ease the limit further, the U.S. has a 25 percent ceiling. President Barack Obama’s administration agreed in 2010 to engage in a process paving the way for foreign control after the issue was separated from an “open-skies” treaty that deregulated trans-Atlantic flights in 2008.

“Current ownership and control restrictions, applied by most countries, deny carriers access to important sources of new capital,” the commission said. “It is now time to address this issue more vigorously and to take the additional steps envisaged in the EU-U.S. air transport agreement.”

The EC said it will also seek to ensure the openness of airline markets, including the adoption of more effective instruments to prevent unfair practices. It plans to negotiate aviation agreements with countries including Russia, China and India to help bolster the market share of European carriers.

“Faced with the dramatic changes in global aviation, Europe must respond and adapt rapidly or be left behind,” Transport Commissioner Siim Kallas said in the statement.

Europe is also being hurt by under-investment in airports, the commission said. Bottlenecks should be identified at an early stage and removed or limited “by using all means available to use scarce airport capacity more efficiently,” it said.

The EC plans to consult with ministers from member states in December and propose its priorities for negotiating mandates early in 2013. Ownership caps will also be discussed at an International Civil Aviation Organization conference in March.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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