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EU, U.S. agree to ease airline restrictions

The tentative deal would lift limits on foreign ownership and on transatlantic routes.

March 03, 2007|From the Associated Press

WASHINGTON — European companies would be allowed to hold larger stakes in U.S. airlines under a tentative agreement reached Friday between the U.S. and the European Union. The deal also would give carriers more freedom to choose transatlantic routes and potentially lead to lower fares.

The agreement, announced by the Transportation Department, would allow European airlines to fly from anywhere in the EU to any point in the U.S., and vice versa. For example, it would end restrictions on the number of airlines allowed to fly between the U.S. and London's Heathrow Airport, one of the world's busiest. Only four carriers -- United Airlines, American Airlines, British Airways and Virgin Atlantic -- now serve that market.

Transportation Secretary Mary E. Peters said the agreement would "offer more choice and convenience to American consumers."

Another key aspect of the deal, described by a U.S. government official who spoke on condition of anonymity, would enable European companies to own as much as 49.9% -- and in some circumstances, more than 50% -- of U.S. airlines, up from the current 25% limit. Yet another provision could help Richard Branson's Virgin Group Ltd. gain regulatory approval needed to launch a U.S. subsidiary, Virgin America Inc.

EU Transport Commissioner Jacques Barrot said he would ask EU nations to back the deal when EU transport ministers meet March 22. The deal would then probably be considered at a U.S.-EU summit in May. Congress must also back the deal before the new rules would take effect Oct. 28.

Air travel in Europe and the U.S. accounts for 60% of global traffic, and an ambitious EU-U.S. open-skies deal could allow more airlines to fly the lucrative transatlantic routes, possibly offering less expensive tickets. The EU forecasts that within five years the deal could put an additional 26 million people on transatlantic flights.

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