Management at Virgin Atlantic Airways believes failure by negotiators to reach terms on the lifting of foreign ownership restrictions of US airlines will hurt US carriers far more than their European counterparts.

A stipulation of the open skies deal brokered by the European Union (EU) and the USA – which  takes effect this month - is that individual EU states retain their right to withdraw newly-granted landing rights if a second phase deal that addresses ownership restrictions is not reached by 2010.

Virgin Atlantic director of external affairs and route development Barry Humphreys told Air Transport Intelligence (ATI),'s sister premium news source at the Phoenix Sky Harbor International Aviation Symposium that US airlines have spent hundreds of millions of dollars for slots at Heathrow, while Virgin Atlantic has not made a similar investment and British Airways’ expansion has been minimal.

Continental Airlines recently disclosed it paid $209 million for its Heathrow slots to support flights that begin from its Houston and New York Newark hubs on 29 March.

Having spent sizeable sums, US airlines that have gained slots at Heathrow might feel moved to pressure government to advance negotiations to lift restrictions, says Humphreys. The Virgin Atlantic executive believes “the problems are not with the negotiators” but rather that the attention needs to be placed on the US Congress.

Participating on a conference panel to discuss foreign ownership, Humphreys said little movement is likely in the second phase of negotiations before 2009 after a new US Presidential administration is named.

Even with fresh talks, a foreign ownership deal is unlikely to be reached by 2012, according to FedEx VP regulatory affairs Steven Taylor and United Airlines managing director international and regulatory affairs Julie Oettinger.

Oettinger says a gradual increase in ownership levels from the current 25% to the European cap of 49% is “almost wasted effort”.

Citing other deals reached within the EU, Oettinger notes that Air France/KLM and Lufthansa/Swiss have replaced American Airlines and United as the largest carriers in the world, with the ability to invest in aircraft and infrastructure.

The US by contrast has eliminated 150,000 aviation jobs since 2000 and carriers have limited ability to invest in new fleets, she notes.

Regardless of whether there is enough capital in the US market to support the country’s airlines, lifting the ownership restrictions would “make the process” of securing capital more competitive, adds Oettinger.

Labour remains the largest obstacle to lifting the current foreign ownership restrictions. Senior attorney for the Air Line Pilots Association Russell Bailey says there is no international labour framework in place to handle such a move.

Current labour law does not address concerns such as keeping flight crews from bidding against each other, Bailey notes, and until those issues are addressed labour groups are likely to be wary of moving forward to change the current ownership restrictions.

Source:'s sister premium news site Air Transport Intelligence news