U.S. Holds on Foreign Ownership, Delaying Open Skies

Though unrelated to the controversy over the DP World acquisition of P&O Ports, certain provisions of U.S. laws governing airline ownership and management appear to be stuck at a point European Union (EU) negotiators had found unacceptable in the past.

In a revised notice of proposed rulemaking (NPRM), the U.S. Department of Transportation (DOT) let stand the requirements that no more than 25% of the voting stock of a U.S. airline could be held by foreign nationals and two-thirds of the company’s board and senior officers must be U.S. citizens.

DOT did say the rules would remain but would be interpreted differently. U.S. citizens would retain control over safety, security and anti-terrorism measures while foreign nationals could manage commercial aspects of the business.

The lack of progress in negotiations means the two parties will miss the June deadline for an agreement and, as a consequence, the hoped-for open skies agreement won’t be in place by March 25, 2007, ahead of the next peak travel season.

Part of the negotiations centers on a nationality clause which limits European airlines to flying from airports in their home country. British Airways, therefore, could not fly from Paris to New York. More troubling for the EU companies is the potential they would lose landing rights due to consolidation. The Air France acquisition of KLM Royal Dutch Airlines could have cost the airline its landing rights on lanes between Amsterdam (KLM’s home airport) and U.S. cities if KLM had merely become part of Air France, based in Paris.

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