State Dept.: Airline Foreign Control Rule Might Be Delayed

At issue is a DOT proposed rule that would allow foreign investors to enter into deals with U.S. airlines giving them power to make operational decisions concerning, for example, rates and the routes a carrier serves.


The U.S. Department of Transportation (DOT) might delay adoption of a final rule on foreign ownership of U.S. airlines in response to concerns expressed by some members of Congress and other parties, Under Secretary of Transportation Jeffrey Shane says.

"DOT is exploring whether a further period of review might be justified," Shane told an aviation law conference in The Hague, Netherlands, on April 24.

He added, however, that Transportation Secretary Norman Mineta remains "committed to completing this important rulemaking proceeding."

At issue is a DOT proposed rule that would allow foreign investors to enter into deals with U.S. airlines giving them power to make operational decisions concerning, for example, rates and the routes a carrier serves.

The DOT rule would apply only to international investors from countries that have open-skies agreements with the United States. It would allow similar investments by U.S. citizens in those countries' domestic airlines. The United States has open skies agreements with more than 70 countries and territories. Bilateral open skies agreements give airlines in both countries the right to operate air services from any point in one country to any point in the other, as well as to and from third countries.

The regulation at issue would continue to preclude foreign control over security, safety and defense issues related to airlines.

Shane said the proposed rule "has been the focus of far more controversy in the U.S., frankly, than we had anticipated."

Some members of Congress have expressed concern that increasing the power of foreign nationals to influence airlines' managerial decisions could pose a risk to national defense and security.

Earlier in April, the Senate approved an amendment in its version of the emergency supplemental funding bill that effectively would block DOT from adopting and implementing a final rule.

In March, a nonbinding measure asking DOT to delay implementation of such a rule was included in a committee report attached to the House version of the emergency supplemental bill.

The two versions of the bill must be reconciled and both chambers must approve a final bill before the president can sign it into law.

OPTIONS UNDER DISCUSSION

Shane said Mineta met recently with Senate leaders to discuss "options for facilitating a better understanding of the proposal and its implications."

"If we pursue such an option, it means that the final outcome might be postponed for a number of weeks," he said.

Shane said the rule change would influence a decision by the European Union (EU) transport ministers on a U.S.-EU open skies agreement reached in November 2005.

The EU long has sought an open-skies agreement between the two parties conditioned on adoption of the rule changes, according to U.S. officials. (See related article: http://usinfo.state.gov/eur/Archive/2006/Feb/09-211270.html.)

In light of a possible delay in rule-making, Shane suggested that the EU ministers "might wish to postpone" until October their consideration of the open skies pact. That consideration originally was scheduled for June.

The public comment period on the November 7, 2005, proposed rule-making closed January 6. Approximately 150 comments have been submitted to DOT on the proposal. The proposal and the comments are available for review on DOT's docket management Web page.


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