The Demise of "Open Skies"

An agreement on transatlantic airline competition is in doubt after the U.S. withdraws a proposed law to relax the rules for foreign control of its carriers

A deal between the EU and the US on opening up transatlantic airline competition has been cast back into doubt after Washington said it will scrap a proposed law that would loosen rules for foreign control of its airlines - a key part of the EU-US aviation deal.

EU transport commissioner Jacques Barrot expressed "disappointment and regretted this decision noting that for the EU, this was an essential element" in the "open skies" deal, a commission statement said on Tuesday (5 December).

Brussels had made the softer investor rules a condition for completing a so-called open skies treaty with the US. The agreement would allow airlines based in Europe or the US to fly with little or no restrictions to each other's territories.

At the moment, cross-Atlantic flights are often subject to government-to-government negotiations, with the EU and the US now set to hold talks "on an urgent basis" early next year to review the situation.

US transport secretary Mary Peters said the decision to withdraw the planned law was taken after protests from industry and from Congress.

Under current US rules, foreign investment in its airlines are limited to 25 percent of the voting stock, which constrains the ability of European airlines to participate in managing those airlines in which they invest. The EU has a higher ceiling of 49 percent.

Ms Peters did however point out that the US government remains committed to an agreement with the EU to liberalise transatlantic air traffic.

The "announcement in no way deters us from our goal of giving US airlines complete access to the world's capital markets," Ms Peters said, according to the International Herald Tribune.

EU-US negotiations on the issue began in 2003, with the EU and the US last year agreeing to allow unrestricted competition for airlines flying across the Atlantic, opening the prospect of cheaper tickets and more choice for passengers.