A tentative deal on liberalizing transatlantic aviation could collapse if the US Congress or the courts intervene to stop a Bush administration plan to ease limits on foreign investment in US airlines, a senior government official said on Wednesday.
Several Republican and Democratic lawmakers were critical of both proposals at a House of Representatives aviation subcommittee hearing. They worried that increased competition from overseas airlines or involvement by foreign investors in the operations of US carriers could hurt an industry battered by years of steep losses.
"The two things together are so (potentially) destructive to the domestic fleet and jobs in this country," said Rep. Peter DeFazio, an Oregon Democrat.
The United States and the European Union reached a tentative deal last November to eliminate key barriers to transatlantic airline competition.
The deal, among other things, would open up London's Heathrow Airport beyond the two US carriers -- United Airlines and American Airlines -- that are allowed to fly there now by treaty.
It would also enable broader marketing agreements between European and US carriers and help cargo airlines like FedEx and UPS build larger networks. European carriers would have broader access to US destinations as well.
Europe, however, has linked approval of the tentative aviation accord to a proposal by the Transportation Department to ease strict federal limits on how much influence overseas investors can have on US airline operations. A final rule is due this spring.
Some in Congress believe transportation planners have no authority to alter the ownership statute and have proposed a bill to delay any change for at least a year.
Continental Airlines President Jeffrey Smisek said he was certain the rule would be challenged in court if it moved forward and if Congress took no action.
Current transatlantic restrictions favor Continental's operations, especially its marketing alliance with Virgin Atlantic Airways.
But John Byerly, a senior State Department official and lead US architect of the transatlantic agreement, doubted the same deal would be in place next year if the ownership proposal was blocked.
"We have a chance to do it now," Byerly said. "I don't think we should risk the opportunity."
One lawmaker, a Republican, said he was concerned that overseas investors, which could include foreign airlines, might force fleet changes that would favor planes made by Europe's Airbus over Boeing.
Other lawmakers -- Democrats and Republicans -- worried that foreign investors, for political or business reasons, would prompt carriers to opt out of the voluntary program of transporting US troops during wartime.
But Jeffrey Shane, the Transportation Department undersecretary for policy, said a "Chinese wall" would be built to guarantee the needs of the Defense Department. Shane said Pentagon planners reviewed the ownership change and expressed no opposition.
