Friday, July 07, 2006

US to proceed with airline foreign ownership plan

US to proceed with airline foreign ownership plan
By John Crawley

WASHINGTON (Reuters) - The Bush administration plans to move ahead this summer with its proposal to ease restrictions on foreign investment in U.S. airlines despite strong congressional opposition, Transportation Secretary Norman Mineta said on Thursday.

Mineta, who has resigned from his post after 5-1/2 years and leaves office on Friday, told reporters he may have underestimated the strength of lawmaker sentiment on the politically sensitive plan to give foreign investors some say in day-to-day airline operations in exchange for equity.

But in a speech earlier to the U.S. Chamber of Commerce, Mineta said he believes the United States must embrace foreign capital to stay competitive in a globalized economy.

He has championed foreign investment for years, positioning his agency to approve the airline regulation without him.

"It's pure folly to think that economic isolationism is an option in today's interconnected world," Mineta told the business group.

The House of Representatives voted overwhelmingly on June 14 to delay action on the airline investment plan for a year. Language to reject the proposal was included in annual transportation spending legislation.

Congressional opponents, braced by labor interests, said enhanced overseas ownership of airlines -- prohibited for decades on national security grounds -- could undercut U.S. economic interests and cost American jobs.

Opponents also tapped anti-foreign sentiment that flared during this year's controversy over a Dubai-based group's plan to run several big U.S. ports. That plan, initially approved by the administration, was scrapped after an uproar in Congress.

House rejection of the airline foreign ownership plan means the issue will probably remain unresolved in Congress until the end of the year -- the time it will take lawmakers in both chambers to pass a final transportation spending bill.

The administration is taking its chances on Capitol Hill and moving forward now because delay beyond the autumn could threaten an agreement between the United States and European Union to eliminate longstanding barriers to more transatlantic air service -- especially to London's Heathrow airport.

The EU has linked success of the foreign ownership plan to its approval of the landmark air services agreement.

Mineta said the Transportation Department hopes to finalize the foreign investment rule by the end of August, which would exploit the expected congressional lag time for addressing the matter and meet the timeline for European review.

"Right now there is no legal impediment" to move forward, John Byerly, a senior State Department official and lead negotiator in the U.S.-EU aviation talks, said in an interview.

Byerly said he was confident the investment plan would not be derailed when the transportation bill is cleared by Congress, probably after congressional elections in November.

"I hope we have an agreement in place with the EU at that time," he said.