EU, US Open-Skies Talks Resume

BRUSSELS (AFX) - Protracted negotiations between EU and US authorities on a transatlantic liberalisation pact resume today in Washington, but with legal experts and analysts split over whether the retraction of key US concessions on foreign ownership will scupper any potential accord.

The three-day talks between the 27-member state bloc and US delegations, the former headed by the European Commission and the latter by transportation secretary Mary Peters, will seek to update proposals made in November 2005.

If realised, the 'open skies' accord could pave the way for fully competitive air travel covering 60 pct of the worldwide market. It would allow airlines of whatever nationality to fly without restrictions between the two regions and pave the way at a later stage for mergers between US and EU carriers.

However last December, the US administration, following opposition by congress and unions, withdrew its plan to give foreign investors more management control in US airlines.

It stopped short of amending current rules which prevent European companies from having more than a 25 pct stake in US carriers. The EU's higher ceiling for its airlines is currently 49 pct.

US measures also stipulate that the president, two-thirds of the directors and managing officers of carriers must be US citizens.

Chris Avery at JP Morgan said that without concessions on ownership there was 'no deal to be done'.

'Nothing has happened since May,' he said -- when US opposition was voiced over relaxation of the ownership rules.

He warned that US' lack of adaptability on foreign control could be the deal-breaker, with EU authorities set to become increasingly reluctant to move towards an accord if concessions are not reciprocated.

'If the US won't change the ownership rules, why should the (EU) give greater freedom?' he said. 'I don't think we are on the verge of a...deal'.

However, legal experts said that optimism remained for an accord.

'In the past they were close to an agreement. There must be some feeling that there could be a breakthrough now,' said Romano Subiotto at Cleary Gottlieb.

'I don't know why the US is so resistant to the idea of foreign capital. Open skies deals are increasingly being signed. (These are) artificial barriers that have to come down'.

For the US to remove its reservations would be a 'very positive step and would help and sustain consolidation (in the industry) where needed'.

Last month, commission said EU and US authorities agreed to identify areas where its stalled deal could be improved. The claim followed talks in Brussels that were held in a 'friendly and constructive atmosphere,' the EU executive said.

A US government Brussels-based representative, John Byerly, assistant-secretary to the US state department for transport, said then that he hoped to broker a deal during Germany's presidency of the EU which concludes at the end of June -- despite the retraction of ownership criteria from its proposals.

However, while the commission said they remained open to dialogue, EU transport commissioner Jacques Barrot in December called the scrapped measures 'an essential element' to concluding a new aviation agreement.

For the US, those in favour of an accord hope such a deal would increase air travel, lower air fares, create jobs and boost investment in domestic carriers.

Labour unions, some airlines and their allies in congress fear it would cost US jobs and allow foreign investors, even foreign governments, control over an industry critical to national security.

Currently, bilateral agreements exist between individual EU member states and the US, restricting access to the US for the bloc as a whole.

Europe's highest court, the European Court of Justice, ruled in 2002 that such bilateral arrangements constituted discrimination and were unlawful.

Decade-long talks on an accord stalled in June 2004 when the US declined to offer concessions on EU requests for greater market access.

However, in November 2005, the deal was resuscitated, with US and EU negotiators agreeing to allow competition on transatlantic airline routes by permitting unrestricted intra flights for US carriers within EU territory and for EU carriers within the US.

The issue of so-called 'cabotage' rights for airlines wanting to fly to wherever they choose had been one of the biggest stumbling blocks in the US-EU negotiations,

The EU however stressed then that a complete agreement depended on the US agreeing to lift ownership caps in US airlines.

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