EU transport chief to offer US 'open skies' olive branch

By Raphael Minder and George Parker in Brussels, Caroline Daniel,in Chicago and Kevin Done in London
Financial Times

The European Union will this month attempt to kick-start its stalled "open skies" talks with the US, with a new drive to give European airlines the right to buy their struggling American counterparts.

Jacques Barrot, the EU's transport commissioner, told the Financial Times the US should respond more favourably to the EU's ownership demands, given the continued financial woes of US airlines.

However, he extended an olive branch to the US by describing the controversial issue of cabotage - a foreign airline's right to fly on another country's domestic routes - as no longer "a priority subject in the negotiations".

Mr Barrot is set to visit Washington on March 21-22 to try to revive the negotiations, which broke down last year when EU ministers rejected a proposal tabled by Washington.

Cabotage is one of the ways European airlines have been hoping to access more inland American destinations and west coast airports such as Los Angeles.

But buying into the US aviation sector or setting up local subsidiaries would be an alternative approach. EU ministers last year dismissed as insufficient a US offer to raise the foreign control threshold from 25 per cent to 49 per cent.

Mr Barrot said in an interview: "The Americans need to have investment in their companies, which are struggling, and because of their rules they are depriving themselves of capital." He added: "Questions like cabotage, which have perhaps monopolised too much attention, are not the major priority."

His comments came as chief executives of European and US airlines met yesterday in Washington to discuss the industry's structural problems.

However, American Airlines is understood to have blocked efforts to put the EU-US aviation negotiations on the agenda of the meeting between chief executives from the ATA, the US trade body, and the Association of European Airlines.

In spite of reluctance among US passenger airlines to revive the negotiations, the US is eager to gain greater access to the EU's internal freight market and Mr Barrot said he had been heartened by two recent meetings with Fred Smith, the founder of Federal Express.

"We feel there are still a lot of possibilities in the transatlantic relationship," Mr Barrot said. He added that he was also keen to rekindle the US talks on market access and regulatory convergence before embarking on similar negotiations with China and Russia later this year. However, he will have to tread carefully to mollify countries such as the UK, which opposed the deal proposed by the US last June.