Carriers On Opposite Sides Of DOT Foreign-Ownership Proposal

U.S. and international carriers offered conflicting viewpoints this week on a proposal by the U.S. Department of Transportation to ease foreign ownership restrictions. DOT said its notice of proposed rulemaking "clarifies how the Department will interpret 'actual control' of a U.S. carrier." It was posted between negotiating sessions for a liberalized aviation pact between the United States and the European Union. The next round of talks is scheduled for Nov. 14 in Washington, D.C.

Specifically, DOT said it proposes to "reduce substantially the significance of foreign influence over many purely economic decisions, such as choice of markets, type of equipment and rate-setting." U.S. citizen control still would cover "those areas of airline operations where there currently remains significant government involvement or regulation." The 25 percent cap on foreign voting interests in a U.S. carrier also would be unchanged.

Continental Airlines blasted DOT's proposal as "a blatant attempt to circumvent the law that the DOT has been unable to convince Congress to change" and an obvious concession to the European Union.

The carrier said DOT is "attempting to gut the definition of 'actual control,' " and that existing law requires U.S. citizens to control "all aspects" of a U.S.-based airline's operations. "This shows that either the DOT has misinterpreted the law or has ignored the realities of internal airline management and how airlines operate," Continental said. "Actual control over day-to-day operations, including scheduling, pricing, employment and labor decisions and financing, provides foreign citizens actual control of the very areas DOT is trying to carve out."

Virgin Atlantic also opposed DOT's proposal, but for different reasons. "It appears that [U.S. regulators] are trying to secure access to London Heathrow Airport for their airlines while giving little or nothing in return," said CEO Steve Ridgway. "Their proposal would leave in place the fundamental restrictions on foreign companies investing in or controlling U.S. airlines."

Ridgway added that the DOT would use its proposal as leverage to allow U.S. carriers to fly unrestricted throughout Europe while still barring European carriers from operating within the United States.

U.K. carrier BMI welcomed DOT's proposal, saying it "goes a long way" in opening market access as part of a new U.S.-E.U. aviation treaty. Unlike Virgin, BMI currently cannot operate nonstop service from Heathrow to United States gateways.

British Airways is one of four airlines that can. Its CEO, Willie Walsh, recently told Business Travel News that existing regulations hinder meaningful progress in bringing commercial aviation into the 21st century. "Because government regulators have had a lot to say about foreign ownership and control--where in most cases it cannot exceed 49 percent, or in the case of the United States, 25 percent--we have not seen cross-national mergers and sensible economic rationalization that we see in every other global industry," he said.

DOT said its proposal "reflects the substantial changes that have taken place in global financial markets" and helps U.S. carriers compete more effectively in the global airline industry.