Foreign affairs, postponed?

Faced with growing congressional opposition, the Transportation Department (DoT) might delay adoption of its crucial proposed final rule on foreign ownership of and investment in US airlines. Under Secretary of Transportation Jeff Shane says "DOT is exploring whether a further period of review might be justified."

Shane told an aviation law conference in The Hague, Netherlands, in late April that the proposed rule "has been the focus of far more controversy in the US, frankly, than we had anticipated." Shane, like others, fears that without the rule, the EC would reject any proposed changes in the US/EC aviation regime, which the EC has said it will do; without the rule, no deal, and without the deal, the possibility that existing open skies treaties between the US and EC member states will be abrogated.

Failure to adopt the new US-EU agreement would actually be he fears "a 'triple-whammy.' That's because, if we lose the open-skies bilaterals, we face the very real prospect of dismantling the cross-border alliance structure upon which so much international aviation competition is based today. That is because the antitrust immunity that facilitates the efficient operation of many of the current (airline) alliances is necessarily predicated on the underlying open-skies agreements." Without legally secure open-skies agreements "it is very difficult for regulators to justify a grant of immunity from antitrust enforcement to airlines who are potential competitors," Shane said.  

Members of a key Senate appropriations panel have won approval of a measure that would effectively bar the government from implementing the rule, which would commit regulators in Washington to a more liberal and nuanced interpretation of longstanding limits on foreign investment in and management of US-registered airlines. Labour and political opposition has stalled a plan by US and international investors to begin a San Francisco-based Virgin Atlantic franchise or affiliate, dubbed Virgin America; the would-be carrier faces renewed examination by the DoT, which has been flooded with filings by legislators, pilots and other unions opposing the startup. Shane concludes that the EC Council of Ministers "might wish to postpone its consideration" of the rule's outcome until its fall gathering in October, he said. Read Jeff Shane's remarks: http://www.state.gov/e/eb/rls/rm/2006/65147.htm