Gathering storm over US-EU "open skies" agreement

Washington DC, USA: Even as supporters on both sides of the Atlantic were hailing the newly arrived at agreement for "open skies" between the US and Europe, fresh trouble has erupted on one side of the Atlantic with some US lawmakers in Washington questioning the basis on which the agreement has been arrived at. The trouble comes even as European transport ministers are set to vote on the agreement a week from now.

A group of US legislators, led by James Oberstar, the influential head of the House transportation committee, in a letter to Mary Peters, the US transportation secretary, has questioned what US negotiators had offered to their EU counterparts. The intervention is in line with earlier successful efforts by Oberstar to block US efforts to ease the foreign investment restrictions in US carriers.

In arriving at the deal, US negotiators sought to circumvent potential opposition at home by offering EU investors access to the US domestic market through franchise agreements. This, in turn, prompted calls by US airline unions for the Congress to intervene and block the deal. The unions voiced concerns over the proposed franchise agreements and so-called seventh freedom rights to fly on from the US to third countries.

Airline executives, however, played down the impact of the letter sent by the three congressmen to Mary Peters, pointing out that it contained no immediate threat to introduce blocking legislation. Oberstar and fellow congressmen said the draft agreement was "ambiguous" about the potential for changes to legal restrictions on foreign ownership of US-based airlines.

Oberstar's letter called for reassurances from the US administration about the implementation of current policy, and said that the Congress would examine any "case-by-case" review of inward investment to the industry. New legislation, the letter said, could be introduced to enforce the policy requiring "actual control" of US airlines to be in the hands of US investors.

The US department of transport meanwhile clarified on Wednesday that the tentative deal was "deliberately crafted to strictly adhere to all existing laws, regulations and rules regarding the control and ownership of US airlines".

US opposition comes just a day after the UK, so far a lonely hold-out against the agreement, had indicated that it was likely to support the first-stage agreement. The UK wishes to maintain its hold over the business generated by Heathrow airport where, under current agreements, only four airlines are allowed to operate direct trans-Atlantic services - British Airways and Virgin Atlantic from the UK and American Airlines and United Airlines from the US.

Meanwhile the EU indicated this week that it was prepared to suspend the proposed "open skies" deal with the US if Washington does not open its domestic market by mid-2010. According to Jacques Barrot, EU transport commissioner, the US had agreed to further liberalisation in a second stage.