U.S. surprises EU with global airline ownership plan

BRUSSELS (Reuters) - The United States proposed a deal on Tuesday to sweep away a global "spider's web" of airline ownership rules, taking the EU by surprise as it seeks a transatlantic deal for its airlines to buy their U.S. rivals.

U.S. Deputy Assistant Secretary of State for Transportation Affairs John Byerly said Washington had an open mind on Europe's long-standing demand to ease American restrictions on foreign ownership of U.S. airlines.

But Byerly, the chief U.S. negotiator in the "open skies" talks with the EU, said Washington would seek a far wider deal by pledging to forgo access restrictions on airlines from more than 60 nations, based on the nationality of their owners, a deal which could be expanded to other countries in the future.

Such a move would involve "dismantling the sticky spider's web of restrictions in bilateral aviation agreement that form a huge impediment to expanded cross-border investment in, and management of, airlines around the world," he said in a speech.

Under those rules, which are starting to be relaxed, a country allows access to airlines from third countries only if they are owned and controlled by nationals of that same country, something that has impeded cross-border airline takeovers.

The United States and the EU will open talks on Thursday in Slovenia on a second phase of the liberalization of the transatlantic aviation market, known as "open skies".

DIFFERENT EU FOCUS

The EU's chief negotiator said he was surprised by the U.S. proposal to broaden the liberalization talks.

"The EU's priority is more on a transatlantic area and then to move forward after that," Daniel Calleja told reporters.

Brussels wants to do away with U.S. federal laws that cap foreign control at 25 percent of the voting stock.

Britain has threatened to exercise its right to tear up the first-stage agreement, which forced it to open lucrative routes from London's Heathrow Airport to more competition, unless the EU wins the right for Europeans to own or control U.S. airlines.

But many U.S. lawmakers oppose scrapping the limit.

Washington acknowledged that letting Europeans own U.S. carriers could boost investment and competitiveness in the U.S. sector which has been hit by a wave of bankruptcies, Byerly said in a speech to the European Aviation Club.

But the EU would have to convince a skeptical U.S. Congress and trade unions of the benefits.

"We approach with an open mind the expected European proposal to change U.S. laws that limit foreign ownership of U.S. carriers," Byerly said.

He also reaffirmed Washington's rejection of EU plans to include civil aircraft flying into and out of Europe in its system for trading carbon dioxide emissions based on legally binding limits.

Byerly said the United States did not rule out "the possibility of environmental constraints on traffic freedoms" figuring in the talks but they must be consistent with International Civil Aviation Organization (ICAO) principles.

The ICAO last year opposed the EU plan to include foreign airlines in its Emission Trading Scheme, but EU ministers voted in December to go ahead nevertheless.

(Writing by Paul Taylor; Editing by Dale Hudson/Elizabeth Fullerton)