By David Field in Washington

European Commission (EC) president Jose Manuel Barroso went so far as to raise hopes in a joint meeting with President Bush at a late June summit in Vienna, saying that he believed a deal could be finalised “by the end of the year”. This is despite setbacks in other major issues between Europe and the USA such as the troubled Doha round of trade talks or agreements on airline security that European Union (EU) courts ruled invalid earlier in June.

Air France chairman Jean-Cyril Spinetta wonders if the EU-US deadlock can be breached
Barroso’s highly public statement comes as other key figures such as Air France/KLM chief executive Jean-Cyril Spinetta have issued pessimistic warnings and as a coalition of Republicans and Democrats managed to keep alive a de facto veto of any agreement for at least a year. Both Spinetta and the congressmen focus their objections on a Transportation Department proposal to encourage foreign investment in US flag carriers. It is the liberalisation of these rules on which the new Open Skies framework will be based.

The EC has made such liberalisation a pre-condition and the USA has accepted the condition, issuing a lengthy proposal to modify its interpretation of the long-standing limits on foreign stakes in US carriers.

The department recently revised this proposal in the face of intense labour and political opposition, and it was this revision that drew Spinetta’s harshest remarks. Spinetta warns: “The DoT has taken a step in the wrong direction. I won’t mince my words. I do not think the language in the revised proposal will be found acceptable to the EU side in its present form.”

But the chief Washington representative of a major international carrier argues that the manoeuvring and posturing are just that. “Spinetta was sending a clear message to the regulators that they had best fine-tune their investment proposal and work with the Senate to overturn the [lower house] ban.” The parties know that if they let the agreement founder, it will create major problems, such as forcing the EC to act on the legal status of existing agreements, said the representative.

Cathay Financial analyst Susan Donofrio says senior lawmakers have already signalled opposition to the veto-language and that time allows opponents to gather forces.

Open Skies supporters may find a potent lobbying ally in a coalition formed by the US Chamber of Commerce and 11 groups including the European-American Business Council, the Franco-American Chamber of Commerce and the US/ASIAN Business Council. Led by former Air Transport Association head Carol Hallett, it stresses the benefits of liberalised air service in general but emphasises the $7.8 billion in benefits of a new UK/US pact alone.

And they have the support of the Washington Post, the capital’s powerful daily paper, which comments: “The shame is that a powerful caucus in Congress is prepared to accept [opponents’] specious arguments”, and urged the Senate to “put national interests before vested interests”. ■

Source: Airline Business