The proposed open skies treaty between the United States and the European Union (earlier commentary here and here) suffered another setback last week, when the US Department of Transportation restated its proposed rules for foreign ownership of US-based airlines. At present, non-US individuals or entities can hold no more than 25% of the voting stock of America’s airlines; the EU wants the US to raise that number to 49% — the same limit that Europe mandates for its own airlines.
Though technically separate issues, the open skies treaty and the foreign ownership rule are intimately linked in negotiations, ostensibly for “security reasons”:
“Open skies” discussions between the European Union and the United States have stumbled over U.S. concerns that the new regulations would allow European airlines to play a greater role in the management of U.S. carriers. Because of domestic opposition, it was reported this week that the United States has decided to delay the new rules. As a result, a European Union spokesman said, the EU will not move forward this year with an agreement.
Any eventual agreement would open the skies no earlier than summer 2007.
The latest rules go a step further than the existing restrictions. They specifically state that American airline shareholders or boardmembers must have veto power over foreigners: International investors’ purchases would buy them equity, but not control, as they would have no voice if the Americans on the board objected.
Feel safer, knowing these rules are in place? Maybe we should extend the same rules to banks, car makers, and insurance underwriters, whose products could presumably have security ramifications as well. Let’s build a moat while we’re at it.
This is economic nationalism at its finest, and it’s probably unworkable in practice. Will every corporate decision be subject to USDOT regulation in light of these new rules? If an airline makes any change, must they demonstrate that an American made the decision? Ridiculous.
Caught in the crossfire is Virgin America, the proposed San Francisco-based discount carrier. Some controversy (and delay in license approval) has emerged over whether the new airline is owned or controlled by the Virgin mothership and its headstrong helmsman Richard Branson, in violation of existing USDOT rules. (Incidentally, Virgin America’s chairman is Canadian-born (gasp!!) Donald Carty, former head of AMR Corporation (American Airlines).) Even California’s Governator, Arnold Schwarzenegger, is getting into the game, lobbying the federal government to approve the Virgin America application.
Once again, nationalist bluster and the security canard are getting in the way of reason — and lower fares.
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tags: travel | air travel | open skies | regulation | economic nationalism | security