EU urged to accept partial air pact

EU urged to accept partial air pact

The European Union, which is pursuing a complete liberalization of the trans-Atlantic airline market, should settle for less initially or risk the breakdown of "open skies" talks, U.S. Transportation Secretary Norman Mineta said.

"We are committed to setting a definite timeline for continuing the discussion after we sign an initial open-skies agreement," Mineta told the European Aviation Club in Brussels on Wednesday. "But we must seize the moment, or risk closing the door on open skies for a long and uncertain period."

The EU and U.S. began a fifth round of aviation talks in Washington last week. The EU said on March 9 that a U.S. offer to open the market was inadequate and pledged to seek a broader agreement. The EU also said it would consider a two-stage opening if the U.S. gave some initial access to the domestic market.

An EU-U.S. agreement would encourage airline mergers by at least removing nationality-based traffic-right restrictions in existing U.S. treaties with European countries. The restrictions, which prevent European airlines from flying from a their home country to another European point and onward to the U.S,, violate the laws of the 15-nation EU's common market, the bloc's top court has ruled.

The EU wants a trans-Atlantic aviation pact to offer access for European airlines to U.S. routes, abolish foreign airline ownership limits of 25 percent in the U.S. and 49 percent in Europe and encompass competition issues.

Current agreements allow U.S. carriers to pick up passengers in one EU nation and carry them to another. European carriers don't have similar rights, known as cabotage, in the U.S. market.

The U.S. has offered to raise its foreign airline ownership limit to the EU's 49 percent level while saying European competition on domestic routes isn't negotiable because Congress would not permit it.

The EU would be willing to sign an initial accord that stopped short of a full market opening if the deal included some access to the U.S. market, a rise in the U,S, ownership limit to at least 49 percent and a commitment by both sides to remove the remaining barriers in a second agreement sometime after this year, EU Transport Commissioner Loyola de Palacio said in March.

Allowing European airlines to set up subsidiaries in the U.S. would be an acceptable form of initial market access in place of cabotage, said Michel Ayral, director for air transport at the European Commission, the EU's executive arm.

Another acceptable substitute to cabotage initially would be allowing European carriers to book part of the capacity on U.S. flights, extending international code-sharing practices, he said in an interview with Bloomberg. "We have made these proposals as alternatives," Ayral said.

Mineta, who conferred with de Palacio for about 90 minutes Wednesday morning, told the aviation club that the commission's market-access proposals amounted to cabotage.

"I know that market access is still an important issue, so we'll have to see if there are innovative ways of dealing with that without that falling in the basket of cabotage," he said.

He said U.S. lawmakers probably wouldn't be ready to change the rules on airline cabotage for at least the next three years, in part because of concern that a precedent could be set for the maritime sector.

"There's no room for any negotiation there," Mineta said.