Air deal falls victim to Democrats’ victory

The US has scrapped efforts to give foreign investors in American-based airlines a bigger say in their management, in an early indication that the Democratic Party’s victory in last month’s Congressional elections could intensify protectionist pressures in Washington.

Mary Peters, the recently appointed US transportation secretary, acknowledged that the decision would be a setback for the preliminary transatlantic aviation agreement reached last year and for efforts to reach agreement on a comprehensive air services deal.

The spokesperson for Transport Commissioner Jacques Barrot described the current legal situation on transatlantic airline business as "fragile". The European Court of Justice has ruled that the series of bilateral ‘open skies’ agreements between the US and EU member states are discriminatory and therefore illegal. But, the spokesperson added, a high-level meeting of EU-US officials would meet in January to see whether there was enough political will to begin exploring other avenues which could produce a solution.

The EU has been pressing for greater access to the US aviation market. To satisfy EU demands the Bush administration had been hoping to push through changes in the rules which allow EU airlines to own 49% of the shares of a US airline but only 25% of voting rights. Initially it sought to increase the voting cap to 49% too. When this was blocked earlier this year the White House reverted to proposing a rule change which would allow EU airlines greater managerial influence, but retain control of safety and security issues in the hands of US citizens. This option has now been dropped.

A succession of security-related issues has been hampering progress in the aviation talks this year.

The US has scrapped efforts to give foreign investors in American-based airlines a bigger say in their management, in an early indication that the Democratic Party’s victory in last month’s Congressional elections could intensify protectionist pressures in Washington.