Congress Won't Block Airline Investment Plan

June 8, 2006

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Congress will allow a Bush administration proposal aimed at attracting foreign investment in US airlines to proceed, despite security concerns among some lawmakers, officials said on Thursday.

Lawmakers negotiating final details of emergency war spending and hurricane relief legislation have agreed to drop language in the bill that would have delayed the airline proposal for a year, House and Senate aides said.

The language was the central obstacle to the plan to give foreign investors more say in airline operations, within the existing 25 percent voting stock limit.

The revised investment rules, which the US Transportation Department plans to finalize as early as this summer, also keeps on track a tentative deal between US and European Union negotiators to further open transatlantic service, especially greater access for US airlines to London's Heathrow Airport.

The investment rule change is strongly opposed by Continental Airlines, but United Airlines is supportive of the move.

A spokesman for the department said transportation planners will "continue to move forward" with the proposal, which was introduced last November and updated several weeks ago to address congressional concerns.

Current rules give foreign investors little or no influence on operating decisions, conditions that have discouraged foreigners, with a few exceptions, from taking an interest in US carriers.

The Bush administration and other proponents say the changes are overdue to help an industry where four big airlines have fallen into bankruptcy since 2002 and high costs and losses define much of the business.

Supporters contend that giving foreigners influence over pricing, scheduling, fleet plans and other operating issues for their stake could expand the pool of investors in US airlines, encourage competition and enhance partnerships.

Previous attempts to ease the restrictions have withered on Capitol Hill and current congressional objections centered on national security concerns, which were sharpened by the controversy earlier this year over whether a Dubai-based company should manage some US port terminals.

Some lawmakers also objected to the impact foreign investment could have on labor unions and American jobs in general.

Continental supports foreign investment in US airlines but says the administration proposal does not go far enough to ensure that a carrier is controlled by Americans, as the law requires.

Continental also believes that the administration's international aviation policy is one-sided; that European companies will eventually get broad access to domestic airlines and markets with no practical, reciprocal benefit for US carriers.

United says excessive restrictions on foreign investment limits the ability of US airlines to tap global capital markets and compete internationally.

(Reuters)