KRALEV: U.S. has ‘no desire’ to ease airline ownership rules

American carriers can relax — their freedom to fly anywhere in the European Union is no longer threatened by Washington’s refusal to allow foreign control of U.S. airlines. That was the biggest news from last week’s agreement to expand the 2007 U.S.-EU Open Skies accord.

When the deal was first negotiated, carriers from both sides of the Atlantic were permitted to fly between any two cities without the previous government restrictions. However, those rights could have been lost next year, unless European companies could own controlling shares in U.S. airlines. Although that hasn’t happened, the EU agreed on Thursday to extend Open Skies indefinitely.

“It’s a big win for us,” said John R. Byerly, the top U.S. negotiator and deputy assistant secretary of state for transportation affairs. “There was a cloud hanging over the stability in the trans-Atlantic market, and now it’s gone. It was not an easy agreement. It took us eight rounds, beginning in the late spring of 2008.”

Had the second stage of the negotiations not been completed this year, the “suspension of rights” of carriers would have “wreaked havoc,” because the EU would have been able to “pick and choose” which airlines and routes to target, Mr. Byerly said in an interview.

As for the current U.S. legal restrictions, which limit foreign-owned airline shares to 25 percent, he predicted that they will be around for some time. “U.S. laws are what they are, and there is no desire in Congress to change them or in the [Obama] administration to propose changes,” he said.

So why did the EU blink? First, because European carriers also benefit significantly from the freedoms granted in 2007. The EU said on Thursday that those freedoms have resulted in an estimated $16 billion “in economic benefits and up to 80,000 new jobs.”

Second, European airlines will receive greater access to U.S. government contracts. Currently, under the so-called Fly America Act, government employees must fly on U.S. carriers wherever such services exist except when that would significantly prolong the journey by adding too many connections, or when a flight operated by a foreign airline can be booked as a code-share number of a U.S. partner-carrier.

Third, the European Commission, the union’s executive body, understands that the administration’s hands are tied absent new U.S. legislation — and that President Obama is unlikely to spend any political capital on this issue given his battle with Congress over health care reform.

Siim Kallas, the commission’s vice president responsible for transport, said on Thursday that “a process has been agreed toward the further expansion and consolidation of the trans-Atlantic aviation market.”

That “process,” of course, is entirely contingent on congressional action, but its inclusion in the new agreement helped the EU save face. According to the draft, which was “initialed” by Mr. Byerly and chief EU negotiator Daniel Calleja in Brussels and is expected to be signed by the end of June, once U.S. ownership rules change, American carriers will be allowed to fly directly from Europe to five countries — yet to be named — beyond the EU borders.

A similar carrot — the prospect for European airlines to fly directly from the U.S. to five countries outside American territory — was used by Washington to encourage legal changes in EU noise requirements. Those limits have resulted in night curfews negatively affecting U.S. cargo carriers, such as United Parcel Service and Federal Express.

The curfews are imposed arbitrarily, “without a rigorous process,” and the new agreement commits the EU to “more transparency and consistency,” Mr. Byerly said. According to the draft, “operating restrictions shall be non-discriminatory, not more restrictive than necessary in order to achieve the environmental objective established for a specific airport, and non-arbitrary.”

For airline workers, the main issue with Open Skies is their fear that it could erode labor standards — and they say they have their first example.

On Sunday, United Airlines and Ireland’s Aer Lingus began their first joint venture between Washington and Madrid, made possible by the U.S.-EU agreement. It’s unprecedented and goes beyond any code-sharing or alliance partnership involving a U.S. airline.

The daily flight is operated by Aer Lingus, which normally would mean that it’s flown on Aer Lingus aircraft by Aer Lingus cockpit and cabin crew, and that Aer Lingus controls the inventory. In reality, United is selling the flight as if it were its own, the planes are supplied by the Irish carrier, as are the pilots — but only because they agreed to take a pay cut on that route. Its flight attendants, however, rejected those terms, and management decided to hire 125 new ones in the U.S. with lower salaries.

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