- The Washington Times - Tuesday, December 5, 2006

The U.S. Department of Transportation yesterday withdrew a proposal to relax rules for foreign ownership of U.S. airlines after the plan received withering criticism from Congress.

“It was clear from reviewing the comments that the department needs to do more to inform the public, labor groups and Congress about the benefits of allowing more international investment,” Transportation Secretary Mary E. Peters said. “We need a stronger national consensus about the best means of achieving that objective.”

The agency intended to increase the limit of foreign stock ownership in U.S. airlines from 25 percent to 49 percent.

The controversy centered on a long-standing requirement that U.S. citizens maintain “actual control” of domestic airlines. Under the proposal introduced last year, Americans would need to control only certain aspects of a U.S. airline, such as safety and security measures. Commercial decisions, such as purchasing aircraft and determining which cities they serve, could be foreign controlled.

The proposal was a key part of a planned “open skies” agreement between the European Union and the United States, which would liberalize rules for international aviation and allow more flights to Europe by U.S. airlines.

Mrs. Peters yesterday called Jacques Barrot, the EU vice president for transportation, to inform him of her decision.

“Vice President Barrot expressed disappointment and regretted this decision,” an EU statement said.

Mrs. Peters agreed to hold talks with EU officials in early 2007 in Brussels to review the situation and find a way forward, the EU said.

“Nobody doubts the benefits to travelers, airlines and our economy of making it easier to fly to and from Europe,” she said.

A bipartisan group of members of the House Transportation and Infrastructure Committee, which last week sent a letter to the White House warning it faced legal action if the new ownership rules were implemented, praised Mrs. Peters’ decision.

“I am very pleased at today’s news,” said Rep. James L. Oberstar of Minnesota, the committee’s ranking Democrat who is expected to become chairman in January. “I commend Transportation Secretary Mary Peters for choosing to do the right thing in the face of strong pressure within the [Bush] administration and the European Union.”

Opponents of the proposal worried that giving foreign investors — including foreign governments — greater control over the nation’s airlines would compromise security.

“It is a homeland security risk that we should not take,” said Rep. Ted Poe, Texas Republican and a member of the House Transportation and Infrastructure aviation subcommittee.

Members of Congress also objected to the Transportation Department bypassing Congress’ legislative authority. The proposal wouldn’t require congressional approval because it reinterprets, rather than alters, a decades-old aviation law, the agency said.

“Forcing this decision on the Congress and the American people would have set the wrong tone heading into next year,” said Rep. Jerry F. Costello, an Illinois Democrat who is in line to assume the chairmanship of the House aviation subcommittee in January.

The issue of foreign ownership created an uproar in Congress earlier this year when a Dubai company, DP World, acquired six U.S. ports from British-owned P&O; Ports North America. DP World quickly agreed to find an American buyer for its ports in Baltimore, New York, Philadelphia, Miami, New Orleans and Newark, N.J.

But foreign investment would help strengthen an ailing airline industry that has seen four bankruptcies in four years — US Airways, Delta Air Lines, Northwest Airlines and United Airlines.

Saying that withdrawing the proposal “in no way deters us from our goal of giving U.S. airlines complete access to the world’s capital markets,” Mrs. Peters said her agency was eager to work with Congress and the aviation industry to find new ways to make it easier for airlines to raise money from global investors.

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