U.S. welcomes agreement with EU to open air market

By John Crawley

WASHINGTON (Reuters) - U.S. officials and airlines welcomed a draft U.S.-European Union agreement on Friday to liberalize transatlantic aviation that continues to prohibit overseas control of domestic carriers.

Transportation Secretary Mary Peters said in a statement the deal struck in Brussels will "offer more choice and convenience to American consumers" and "promote new growth in our aviation industry."

Major U.S. airlines represented by the Air Transport Association were more cautious since the deal could affect its individual members differently. The group said the agreement, which will be reviewed by European transport ministers on March 22, has the potential for creating new avenues of economic development for passenger and cargo traffic.

Transportation and State Department officials were not available to discuss details of how the accord would affect U.S. airlines. But several aviation sources said key parts of the agreement clarified or built on existing policies and smoothed over what has been the biggest obstacle - the issue of foreign investment in American carriers.

European negotiators were insistent in past talks that the United States ease barriers to investment. The Bush Administration agreed with its European counterparts but the U.S. Congress refused as late as 2006 to change the law that limits overseas equity to 25 percent voting stock and denies foreign investors a say in how an airline is run.

The law does not limit equity in non-voting stock. There is little if any foreign investment in U.S. airlines. Marketing alliances that permit some cooperation on scheduling and other operations are the primary way U.S. and foreign airlines jointly generate revenue.

The tentative agreement complies with U.S. requirements that ensure U.S. citizens maintain control of domestic airlines, according to Rep. John Mica of Florida and the top Republican on the committee that oversees aviation issues in the House of Representatives.

Mica also said the agreement continues long-standing protections to prevent international airlines from stopping in more than one American city on transatlantic flights to pickup passengers. U.S. airlines want the sole right to fly passengers on domestic routes.

"The text explains but does not alter U.S. law," Mica said.

American negotiators conceded to their European counterparts for the first time that U.S.-based investment in European airlines also be limited to 25 percent. Currently there is no limit.