House Approves Moratorium on Airline Foreign Ownership Rule

The following information was released by the State Department:

Legislation that would delay the implementation of a rule change on foreign ownership of U.S. airlines has been approved by the U.S. House of Representatives. The measure could impair an already agreed-to open skies agreement between the United States and the European Union.

The airline provision was approved as part of the $92 billion supplemental spending bill that would fund military operations in Iraq and Afghanistan, hurricane relief in the U.S. Gulf region and some foreign aid.

The Senate Appropriations Committee is expected to act on its spending legislation in April. If the Senate and House versions of the spending plan differ, they must be reconciled and both chambers must approve a final bill before the president can sign it into law.

The provision in the House bill would direct the Department of Transportation (DOT) to delay for 120 days implementation of any final rule on foreign control of U.S. airlines.

U.S. officials have urged Congress not to block the rule, which the department is expected to adopt this spring, because the moratorium likely would scuttle a long-sought open-skies agreement with the EU. (See related article.)

RULE WOULD EXPAND POWERS OF FOREIGN INVESTORS IN U.S. AIRLINES

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. (See related article.)

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.

At the same time, the regulation would continue to preclude foreign control over security, safety and defense issues related to airlines.

In the U.S. regulatory system, proposed changes to existing rules generally must be offered for public comments before they become final and are implemented. The DOT proposed the foreign ownership rule change in early November 2005 and the comment period closed 60 days after the proposal was published in the Federal Register. DOT officials now are reviewing the comments. (See related article.)

Members of a House transportation subcommittee have expressed concern that increasing the power of foreign nationals to influence airlines' managerial decisions could pose a risk to national defense and security.

DOT spokesman Brian Turmail said the only thing the proposed rule attempts to achieve is "to allow airlines more flexibility to raise money."

"The department is not proposing any changes to the current legal limits on international ownership of or investment in the nation's air carriers," he said in an April 16 e-mail.

Some U.S. airlines support the rule, while other airlines and labor unions oppose it.

PORT MANAGEMENT

Another security-related provision in the House bill would bar DP World, owned by the Dubai government, from managing seaport operations in the United States. The House acted even though DP World already had announced it would sell its U.S. operations to a yet unnamed U.S. entity.

DP World took over a British company that manages terminals at several major U.S. ports. The Bush administration's decision to allow the deal to go through created a furor in Congress over security concerns.

Republican Representative Jim Kolbe opposed the provision during House debate as diverting attention from the "real issue" of port security and damaging U.S. relations with the United Arab Emirates, which includes Dubai.

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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