DLPMMM
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EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 3:15 am

The talks are set to resume today.

http://www.atwonline.com/news/story.html?storyID=8028

According to the article, if no preliminary agreement is reached in this round, it is unlikely for any agreement to happen before 2009.

I don't think any agreement can be reached, as the EU is demanding 49% foreign ownership of USA airlines. The US DOT cannot give on this issue since the US Congress will not agree to this concession that must be enacted by legislation.

Not a big deal, except for Irish interests.
 
kaitak
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 3:29 am

Here's an extract from today's ATW, which basically suggests things not looking too good. Some gentleman calling on the sides to give ground, but I don't see it happening.

http://www.atwonline.com/news/story.html?storyID=8028

Here's an edited response to a question in the Irish parliament, which sets out the Irish position: basically, if there's no deal by the end of this week (which now looks likely), we'll go it alone and stuff the Commission. The response is from the minister himself.


"I am following the negotiations between the EU and US closely and
my Department is in ongoing contact with the Office of the Attorney General
on the legal options. As I indicated previously, in the absence of
progress at EU level, I intend to seek to implement, in accordance with
Community law, measures to provide for liberalisation of transatlantic
services between Ireland and the US by way of an amendment to the
Ireland-US bilateral Air Services Agreement.
 
DLPMMM
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 3:36 am

I think that would be a wise move by the Irish government.

I am not an expert on EU constitutional law, but I don't think the EU commission (or what ever it is) would press Ireland on the legalities of this since Ireland is presently at an economic dis-advantage to other EU countries WRT aviation to the USA.
 
IADLHR
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 3:39 am

There are some people, mainly from the UK, who think the USA would not enter into an agreement with Ireland if the negotiations collapse. They feel that the USA would not want to upset the EU.

My feeling is that they absolutely, positively would agree to enter into an agreement with Ireland. It would, after help US carriers. Also it would put more pressure on the UK . By that time the UK might have to wait about 3 years for negotiations
to start up again. By that time the other alliances and airports have passed BA and LHR so that catching up might be next to impossible. In addition who knows what the political landscape might be in either the US or EU? The time is now.
 
kaitak
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 3:54 am

The EU may tick Ireland off and may even take action to prevent a deal between the US and Ireland, but at the end of the day, the EU must see that if it took the action it has taken on competition grounds, that must apply to everyone. Ireland does not want to upset the EU; all it wants is to be treated fairly, but the EU has consistently shown that it is not willing to do so. So, we have to do things ourselves. And the EU should take note that its behaviour towards Ireland won't be soon forgotten. For one thing, we will seek to do an updated bilateral deal with Canada, to pre-empt the EU move on Open Skies with Canada; we don't want to be found in this position again.

Hopefully, some workable deal can still emerge at the end of this week; frankly, I was quite optimistic about the last round, because the fact that they reconvened after such a short delay and there were no acrimonious press releases blaming each other, suggested that they had found a way forward.

The EU needs to understand that the DOT's hands are tied; no matter how effectively it (the EU) may be able to persuade the DOT of the perceived rightness of its stance, it means nothing if Congress won't move and I just don't see them doing so. So, in effect, the "realpolitik" is that either they take a deal which is less than they want or the deal falls through and the EU goes home with nothing ...
 
detroitflyer
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 4:02 am

Why exactly is Ireland and the EU demanding 49% foreign ownership of USA airlines?? What do they gain out of it ??
Plus which airlines are currently fit that ownership description anyway?
Boiler Up!!!
 
kaitak
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 4:13 am

We (the Irish) have absolutely no interest in 49% - or any interest - in US carriers; it's an EU demand, collectively; all we want is fair and increased (from a very low base) access to US markets. The larger EU countries (led by the UK) want the right to what they perceive to be a quid quo pro for increased US access to Europe, particularly LHR.

However, there is a new idea on the table: franchising. It'll be interesting to see how this will play ...

http://www.flightglobal.com/articles...o-make-franchise-offer-to-usa.html
 
IADCA
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 4:24 am

Quoting Detroitflyer (Reply 6):
Why exactly is Ireland and the EU demanding 49% foreign ownership of USA airlines?? What do they gain out of it ??
Plus which airlines are currently fit that ownership description anyway?

Well, a 49% stockholder would easily be able to place several members on any board it wished, and thus have great influence over the company's strategy. Furthermore, through the cooperation of a fairly small number of friendly investors, a 49% rule would allow a European carrier to effectively gain control of an American one; this would give European airlines the access to the large US domestic market without having to negotiate for 5th, 6th freedom rights, etc.

At the extreme end of the spectrum it would allow European airlines to quasi-merge with their US counterparts; this obviously would be most noticeable in the case of VS and Virgin America (if it ever does actually fly), but might extend as far as even more extensive UA/LH cooperation, for example.
 
sllevin
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 6:21 am

Quoting IADCA (Reply 8):

At the extreme end of the spectrum it would allow European airlines to quasi-merge with their US counterparts;

Actually, the extreme end would be significantly more than that. A carrier such as LH could acquire 49% of a small US carrier, then lease that carrier aircraft, provide loans, etc., and essentially build their own US-based airline as long as they have 2% ownership which is US-based and sympathetic to their cause.

So for practical purposes, 49% ownership can be used to create a European-controlled airline in the United States. Admittedly, not all the money can be funneled out of the US, but such an airline could easily displace US jobs, which would be highly unpopular.

Steve
 
IADCA
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 6:32 am

Quoting Sllevin (Reply 9):
So for practical purposes, 49% ownership can be used to create a European-controlled airline in the United States. Admittedly, not all the money can be funneled out of the US, but such an airline could easily displace US jobs, which would be highly unpopular.

Well, that's what I was getting at in the first paragraph. However, I'm new here, so I didn't really want to post it and get absolutely flamed by some people.

The other factors to consider are first, that US regulators would likely be looking extra-closely at who those 2% of investors were to determine who really controlled them (again, as they've done with a much larger amount of Virgin America); so it would have to be squeaky-squeaky clean in terms of ethics, etc, which is kinda antithetical to a scheme in which an airline buys another and then leases its planes back to it. Second, if that 49% rule did come to pass, you'd likely see some poison pills enacted that would put YX's to shame.

This is all pretty much academic discussion, however, as I doubt these negotiations will go anywhere.
 
magyar
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 7:22 am

I loved the following quote in the article:

>
"The US cannot surrender its role of leadership in the international aviation community," attorney Allan Mendelsohn, former assistant secretary for transportation affairs at the US State Dept., said last week in Washington at ATW's Winning Airline Strategies conference.
<

It speaks volumes about the idea US officials have about "level playground"!
 
steeler83
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 8:38 am

Quoting Kaitak (Reply 7):
However, there is a new idea on the table: franchising. It'll be interesting to see how this will play ...

That idea does look rather intriguing. I don't get the last statement though... "if this proposal looks vaguely attractive to the EU, the US won't allow it..." er something of the sort. So the US apparently keeps backing out of this proposal or keeps shooting it down?

I admit I know little if anything about this whole thing. I really want to know about this. In an active PIT thread, someone posted that if PIT is to see any kind of chance at getting transatlantic service back, the US-EU open skies agreement would have to go through... I know this is not just restricted to PIT and that pretty much every market is involved with this, particularly those that do not have AA, UA, or BA or VA service to LHR from an American market...
Do not bring stranger girt into your room. The stranger girt is dangerous, it will hurt your life.
 
atmx2000
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 8:48 am

Quoting Magyar (Reply 11):
It speaks volumes about the idea US officials have about "level playground"!

What in the world are you talking about? This guy was advocating acquiescing to the EU's demands.

On second thought, maybe you are right but only in that he is advocating something that might leave US airlines disadvantaged.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
magyar
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 10:49 am

Quoting Atmx2000 (Reply 13):
Quoting Magyar (Reply 11):
It speaks volumes about the idea US officials have about "level playground"!

What in the world are you talking about? This guy was advocating acquiescing to the EU's demands.

What am I talking about? Well, first it would have been great if you had quoted the sentence I was
refering to, which is

Quoting Magyar (Reply 11):
"The US cannot surrender its role of leadership in the international aviation community," attorney Allan Mendelsohn,

Excuse me, but according my limited understanding of English language "role of leadership" means
something of being "in charge" or being "the prominent player" OF the "international aviation community"
which I believe is NOT the same as the "US aviation community". If you believe that my understanding
of the above sentence was wrong please enlighten me, otherwise I hope I answered your question.
Also, please remember that the above sentence by Mr. Mendelsohn was in the article linked
by the starter of this topic and was not my creation!!
 
DLPMMM
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 11:00 am

This just reaffirms my opnion that these talks are going nowhere. A bunch of blathering idiot lawyers and bureaucrats on both sides.

The EU negotiators are insistant that EU companies be able to gain effective control over USA airlines. DOT cannot legally submit to these requests. These continued suggestions for DOT to change the "rules" and "definitions" will never make it past congressional review.

"Franchising" is just another "definitions" ploy doomed to failure.
 
masseybrown
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 3:41 pm

Quoting Magyar (Reply 11):
I loved the following quote in the article:

>
"The US cannot surrender its role of leadership in the international aviation community," attorney Allan Mendelsohn, former assistant secretary for transportation affairs at the US State Dept.,

Mendelsohn is an old Washington hanger-on trying to relive his months of being almost a somebody. He was appointed to the State Dept position in the dying days of the Clinton administration and I don't believe he served a complete year. About 70 years old, he is "of counsel" at a Washington law firm, meaning he never made partner, and an adjunct professor of law, meaning he teaches one specialty and never got tenure.

He is not remotely a spokesman for the US government - just the handy source of a quote that suited the article.
 
ANother
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 5:00 pm

Quoting DLPMMM (Thread starter):
as the EU is demanding 49% foreign ownership of USA airlines



Quoting DLPMMM (Reply 15):
The EU negotiators are insistant that EU companies be able to gain effective control over USA airlines

Would you substantiate these claims please? While the EC would be happy with NO ownership and control rules they are prepared to accept something a lot less. The DOT NPRM, for example, would likely have been enough although it would have been only symbolic and would have had little, if any, practical effect. The EC has never 'demanded' 49% ownership or 'effective control' over US airlines.

Suffice it to say that todays rules are not balanced. Foreign interests (airlines or others) can own up to 49% of an EU airline's voting shares, while only 25% of a US airline's voting shares.I've seen suggestions that US interests own up to 40% of BA. There are no nationality restrictions of EU airlines CEO or member of the Board - For US airlines the CEO must be a US citizen and a large percentage of the Board must be US citizens. Non-US citizen employees of US airlines are prohibited from involvement in fleet planning, route planning, safety and security. None of these restrictions apply in Europe.

But how about a compromise. US negotiators agree to take proposal to US Congress that % limitation be relaxed by 5% a year for five years (to 50% + 1 share) for EU citizens (and others if they want, but that's their business). Also begin phase out of silly citizen rules. Open skies comes into effect the day the law is signed by the President. At any time US government able to revoke the agreement - and EU-US agreement would revert to status-quo ante. Takes the EU five years to get to where they want, but gives both sides open skies (end of Bermuda II) as quickly as the Congress takes to act. Gives US side an escape valve - if they see that the skies are falling, they can cancel the deal.
 
ANother
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 6:26 pm

I thought it might be an idea to detail what the EC is looking for and why. This is from a Speech by Jacques Barrot, Commissioner for Transport at the International Aviation Club 5 February 2007. The entire speech is here: http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/07/65

Quote:
The negotiators from the two sides had finalised the text of a historic, comprehensive first-stage agreement. And I say "historic" because this agreement is not a traditional "open skies" agreement - it is much more. Let me give you six key advances …
1. It would replace all of the existing bilateral agreements with one, single EU-US agreement, and would extend open skies to all 27 Member States of the EU - for the first time, there would be free competition on every single transatlantic route.
2. It would enable, for the first time, new co-operation arrangements between competition authorities, to ensure compatible approaches for this global industry.
3. It would establish, for the first time, strong co-operation and consultation between the EU and the US in aviation security. I cannot stress enough that this is an area where good co-operation is essential to governments and passengers. This agreement would allow it.
4. The agreement would also, for the first time, give structure to our co-operation in other essential fields, including air safety and environment.
5. And it would create, for the first time, a Joint Committee that would enable both Parties to raise and resolve any issues that may arise in relation to the application of the agreement.
6. Finally, and very importantly, this agreement would remove the legal uncertainty surrounding the existing bilateral agreements - so that airlines - and alliances - could have a long term future on a legally secure basis.
In economic terms, the agreement would be a step change:
The latest estimates are that an agreement would generate more than 25 million additional passengers over the next 5 years. It would produce up to 15 billion Euros - 18 billion dollars - in benefits for consumers. It would create 80,000 new jobs in the EU and US combined.
For this reason - we should not be calling this an "open skies" agreement - this is at least "open skies PLUS".
BUT! WE ARE NOT THERE YET. We need to push forward towards what we might call a "superskies" agreement.
Already in November 2005, Europe made clear that it would be essential to consider the reform of American policy on the control of airlines that had been announced by the D.O.T. The US Administration told us that it was fully committed to changing its policy.
So in Europe we waited…..and waited.….and waited….!
The Ministers of Transport from all 25 Member States of the EU met no less than five times between December 2005 and December 2006.
And on each occasion the Ministers repeated that a change in US policy towards control was an essential element for moving forward with the agreement.
Imagine, then, our disappointment when the D.O.T. decided to withdraw its proposal in December. This leaves us with an agreement that does not provide the level playing field that we seek.
And why is it not a level playing field?

The answer is because Europe is ready to open its market to US airlines. We are happy to allow US airlines to operate within the EU's internal market - But only if there are equivalent opportunities in the American market for European airlines. To put it very simply, this is what we are missing at the moment!
 
kaitak
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 9:23 pm

Even if "franchising" is acceptable, I'm just trying to understand how it could be attractive to any EU carrier; i.e. they set up a US operation, totally owned and managed by Americans; do they just get paid for using their name. What would be in it for anyone operating the franchise for a US carrier? Presumably, it would have to offer the same level of service as the European carrier does on short haul routes and would just open the new carrier up to attack from WN, F9, NK etc etc, even the legacy carriers. All that effort, when they could just codeshare.

I think that's academic only, because I don't see the US having any interest in it.
 
ANother
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 9:58 pm

Kaitak,
It isn't a question of how much of a US airline that an EU airline is allowed to own - It's the prohibition of any investment beyond 25% voting shares by any EU citizen. Level playing field - that's what the EC is looking for. No US airline, to my knowledge, has a financial interest in a EU carrier - but US investors do, up to 40% in the case of BA. So why shouldn't EU investors have the same rights?
 
DLPMMM
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 10:23 pm

Quoting ANother (Reply 20):
Kaitak,
It isn't a question of how much of a US airline that an EU airline is allowed to own - It's the prohibition of any investment beyond 25% voting shares by any EU citizen. Level playing field - that's what the EC is looking for. No US airline, to my knowledge, has a financial interest in a EU carrier - but US investors do, up to 40% in the case of BA. So why shouldn't EU investors have the same rights?

The EU made their restriction of 49% foreign ownership on a unilateral basis. If the EU wants a "level playing field", why don't they decrease their allowed foreign ownership percentage to match the USA's.

It is all blather about nothing because the ownership restrriction of 25% will not be raised by congress in the forseeable future, and any future side-steps attempts of the laws via "revised rulemaking" will be DOA.

As far as rights go, the EU has the right to determine their own laws, as does the USA. Your strawman of "EU investor rights" just doesn't fly.
 
IADLHR
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 10:46 pm

Quoting MasseyBrown (Reply 16):
Mendelsohn is an old Washington hanger-on trying to relive his months of being almost a somebody. He was appointed to the State Dept position in the dying days of the Clinton administration and I don't believe he served a complete year. About 70 years old, he is "of counsel" at a Washington law firm, meaning he never made partner, and an adjunct professor of law, meaning he teaches one specialty and never got tenure.

He is not remotely a spokesman for the US government - just the handy source of a quote that suited the article.

I have a neighbor who is an aviation lawyer. He thinks that possibly Mendelshon is also making his presence known and will continue to do so in hopes of a possible job in a democratic administration elected in 2008.

On the subject of franchising, didnt BA try that and fail miserably? i cant rememreb if they did that or not. if so what would be different this time around regarding the success of it.?

All in all it might be just a play to stall the eventual openskies.
 
ual747-600
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 11:29 pm

Does anyone have access to total RPM's US vs EU carriers? Total A/C US vs EU carriers? What other numbers would be useful in comparing US vs EU markets?

UAL747-600
 
ANother
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 11:42 pm

Quoting DLPMMM (Reply 21):
The EU made their restriction of 49% foreign ownership on a unilateral basis. If the EU wants a "level playing field", why don't they decrease their allowed foreign ownership percentage to match the USA's.

That is likely one possible result. But isn't it better to work toward consensus than to go to war?

How about my proposed compromise? Your administration could take it to congress. If fast tracked it could be law in six months. And then we could lose all of the Bermuda II threads on a.net.

Or if you don't think (or want) that to work - what do you suggest?
 
vv701
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RE: EU-US Open Skies Talks Resume Today

Tue Feb 27, 2007 11:57 pm

Quoting Detroitflyer (Reply 6):
Plus which airlines are currently fit that ownership description anyway?

A significant number of the non-American world's leading airlines fit this ownership description. Consider the UK. We have three airlines operating out of LHR. BA declare the level of foreign (mainly US) ownership in their annual report. In the 2006 report ny best recollection is that it was 44 per cent. This is mainly ownership by US private and institutional investors. So if

Quoting DLPMMM (Reply 21):
The EU made their restriction of 49% foreign ownership on a unilateral basis. If the EU wants a "level playing field", why don't they decrease their allowed foreign ownership percentage to match the USA's.

Then the UK government would need to order US citizens and institutions to sell their BA shares which would not be acceptable to the USA. (Historically when BA was privatised a limit on foreign ownership of 40 per cent was part of their articles of association. However foreign - mainly US - investment in BA soon exceeded 40 per cent. Faced with the need to either dilute all stockholders holdings (by the issue of new shares) or the need to order all non-Brtitish investors to sell a proportion of their holding - difficult to enforce the British government took the logical step of changing the articles and eliminating the clause.

Turning back to the other two British airlines operating out LHR, VS is 49 per cent owned by SV. BD is 50 per cent less one share owned by LH (30 per cent) and SK (20 per cent).

The 49 per cent 'rule' is currently necessary so that airlines can operate under bilateral agreements negotiated by their governments.

Outside of LHR the situation other than North America is similar. For example LH has (according to their annual report) a foreign ownership level - again predominantly US - even higher than that of BA.
 
ANother
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 12:02 am

Quoting VV701 (Reply 25):

 checkmark 

(PS Singapore Airlines code is SQ. Saudia's is SV)
 
DLPMMM
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 12:32 am

Quoting ANother (Reply 24):
How about my proposed compromise? Your administration could take it to congress. If fast tracked it could be law in six months. And then we could lose all of the Bermuda II threads on a.net.

Or if you don't think (or want) that to work - what do you suggest?

Your "proposed compromise" will not work because the US congress has already made it clear that they will not change the law and increase the foreign ownership limitations. In order to get such legislation through congress, it would require 60 cloture votes in the Senate to overcome the inevitable fillibuster. The votes are not there.

Just the real facts.

I would suggest that the whole foreign ownership issue be dropped from the agreement, as it has almost nothing to do with "open skies". The EU should be glad to let the issue lie since if anything it is a competitive disadvantage for USA airlines, who have their access to capital limited.

Quoting ANother (Reply 24):
That is likely one possible result. But isn't it better to work toward consensus than to go to war?

Who said anything about war? Things will just mosey along for a few more years under the status quo. It is not that big of a deal to anyone but some politicos, some bureaucrats, and the Irish.

Quoting VV701 (Reply 25):
Then the UK government would need to order US citizens and institutions to sell their BA shares which would not be acceptable to the USA. (Historically when BA was privatised a limit on foreign ownership of 40 per cent was part of their articles of association. However foreign - mainly US - investment in BA soon exceeded 40 per cent. Faced with the need to either dilute all stockholders holdings (by the issue of new shares) or the need to order all non-Brtitish investors to sell a proportion of their holding - difficult to enforce the British government took the logical step of changing the articles and eliminating the clause.

Turning back to the other two British airlines operating out LHR, VS is 49 per cent owned by SV. BD is 50 per cent less one share owned by LH (30 per cent) and SK (20 per cent).

The 49 per cent 'rule' is currently necessary so that airlines can operate under bilateral agreements negotiated by their governments.

Outside of LHR the situation other than North America is similar. For example LH has (according to their annual report) a foreign ownership level - again predominantly US - even higher than that of BA.

So in effect what you are saying is that some EU airlines needed the USA's capital so the EU raised their ownership limitations to 49%.

The EU now insisting that the USA follow suit and allow EU investors to 49% sounds a bit like "small penis syndrome" to me.
 
masseybrown
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 12:40 am

Quoting Kaitak (Reply 19):
Even if "franchising" is acceptable, I'm just trying to understand how it could be attractive to any EU carrier; i.e. they set up a US operation, totally owned and managed by Americans; do they just get paid for using their name.
...... All that effort, when they could just codeshare.

Wouldn't Virgin America, as constituted, be a franchise operation? (Assuming it is 75% US owned....  Smile )

The Virgin Group stands to make some nice fees out of the VA deal - fees that would be much bigger than the tiny earnings (less than a travel agent's commission) from a codeshare.
 
IADLHR
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 12:41 am

Quoting DLPMMM (Reply 27):

Your "proposed compromise" will not work because the US congress has already made it clear that they will not change the law and increase the foreign ownership limitations. In order to get such legislation through congress, it would require 60 cloture votes in the Senate to overcome the inevitable fillibuster. The votes are not there.

Thats what I thought too. I am not educated on all the nuances of the legislative process. However, is it possible to put the issue of an increase in the foreign ownership levels, as an amendment to another piece of legislation. Congress is nortorious in doing things like that to anything that might arose debated and controversy. Just wondering.
 
masseybrown
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 12:51 am

Quoting IADLHR (Reply 22):
I have a neighbor who is an aviation lawyer. He thinks that possibly Mendelshon is also making his presence known and will continue to do so in hopes of a possible job in a democratic administration elected in 2008.

I was maybe a little hard on old, I say O-L-D, Mr. Mendelsohn. He would have to be owed quite a bit to get an AsstSec spot in a 2009 administration.
 
DLPMMM
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 1:11 am

Quoting IADLHR (Reply 29):
Thats what I thought too. I am not educated on all the nuances of the legislative process. However, is it possible to put the issue of an increase in the foreign ownership levels, as an amendment to another piece of legislation. Congress is nortorious in doing things like that to anything that might arose debated and controversy. Just wondering

Not a chance on this issue. There is just no strong constituancy for passage of this type of legislation, and a strong opposition (an even stronger opposition now than 6 months ago since the Democrat party has taken control of both houses of Congress).

I don't think that the EU negotiators are naive as to the USA's negotiator's postition (The EU demanding in a reasonable tone what the USA negotiators cannot rightly or wrongly deliver). Therefore the only logical conclusion is that the EU negotiators do not really want an agreement at this time. Why the EU does not want an agreement at this time is a matter of speculation.
 
Lumberton
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 2:20 am

Quoting DLPMMM (Reply 30):
Therefore the only logical conclusion is that the EU negotiators do not really want an agreement at this time. Why the EU does not want an agreement at this time is a matter of speculation.

 checkmark  It plays well in the press back home, though. Unfair, obstructionist, non-environmentally-conscious-enough Americans always resonates well in an op-ed.

Quoting DLPMMM (Reply 30):
There is just no strong constituancy for passage of this type of legislation, and a strong opposition (an even stronger opposition now than 6 months ago since the Democrat party has taken control of both houses of Congress).

 checkmark  The time to have forged an agreement is past.
"When all is said and done, more will be said than done".
 
kaitak
Posts: 8933
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 2:27 am

I was on another forum (PPRUNE, I think), where one of the posters said he had a friend on the inside who suggested that things aren't as pessimistic as we might be making out. Make of that what you will! To me, however, based on what I've read above, it doesn't look good.

One question that occurred to me was this: let's say a deal is pulled off and it goes to the EU council meeting next month (?). What happens then; how soon will a deal come into play:
(a) I'm guessing the EU will select a date (say Nov 07) when the deal will come into play, but
(b) Can a member state insist on an earlier date?
(c) Could the EU pick a date which it deemed the latest date on which a deal could become effective, but allow member states to choose, in agreement with the US, an earlier date?

I think "(a)" is most likely, but in view of the fact that the 2007 Summer season could be written off, hopefully there will be some flexibility. I'm not hopeful!
 
Lumberton
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 2:33 am

Quoting Kaitak (Reply 32):

I don't know much about the workings of the EU, Kaitak, but as DLPMMM noted earlier, I'd rate the new Congress approving any increase in foreign ownership of U.S. airlines as less than nil. I'm convinced the only reason these talks have resumed is to give both sides "deny-ability" and the excuse to point the finger accusingly across the pond.
"When all is said and done, more will be said than done".
 
ANother
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 3:07 am

Quoting Kaitak (Reply 32):
but in view of the fact that the 2007 Summer season could be written off, hopefully there will be some flexibility.

Summer 2007 schedules are set. Next Schedules Conference, for winter 07/08 begins 1 June. The new argreement COULD come into effect the last weekend of Oct 07, but given the comments expressed by some on this thread it could be a very long time.
 
ANother
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 3:21 am

Quoting ANother (Reply 17):
The latest estimates are that an agreement would generate more than 25 million additional passengers over the next 5 years. It would produce up to 15 billion Euros - 18 billion dollars - in benefits for consumers. It would create 80,000 new jobs in the EU and US combined.

So why would Congress find it difficult to change the law?

From what I understand Congress hasn't actually been asked to change the law. What has happened is the DOT issued a NPRM which would have amended their interpretation of 'control' as opposed to any change in ownership. Congress said - HEY! That's our role, not yours.

So, why doesn't the administration ask Congress to change the law? At least a few of those 80K jobs would be in America. What exactly is difficult here?
 
Lumberton
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 3:31 am

Quoting ANother (Reply 35):
So why would Congress find it difficult to change the law?

What is so difficult in having to explain during an election that you voted to "surrender" control of a vital and strategic asset --an airline for example--to "foreign entities". Are you kidding? Do you remember the public relations fiasco in the U.S. last year over Dubai Ports? The Democrats wire brushed the Republicans badly with that one; even Bush's own party turned on him when he advocated the deal! Lesson learned for all.
"When all is said and done, more will be said than done".
 
DLPMMM
Topic Author
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 4:30 am

Quoting ANother (Reply 35):
From what I understand Congress hasn't actually been asked to change the law. What has happened is the DOT issued a NPRM which would have amended their interpretation of 'control' as opposed to any change in ownership. Congress said - HEY! That's our role, not yours.

Not quite, congress said "If you pass that revised interpretation of "control" administratively, we will pass our own new law which will not need to be interpreted!" It was not a turf battle, but rather a policy battle.

Quoting ANother (Reply 35):
So, why doesn't the administration ask Congress to change the law?

Congress already replied with a "No fricken way!"

Quoting ANother (Reply 35):
What exactly is difficult here?

Very simple really.

The USA's population's sentiment is clearly opposed to increasing the foreign ownership limitations, any politician that votes counter to the public wishes will be vulnerable in the next elections.
 
ANother
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 4:44 am

Quoting DLPMMM (Reply 37):
The USA's population's sentiment is clearly opposed to increasing the foreign ownership limitations, any politician that votes counter to the public wishes will be vulnerable in the next elections.

Actually nobody is proposing to increase the limitations, just the opposite.

Can you substantiate your claim? I certainly see your point of view, but is it in fact shared by the US population?

OTOH - don't bother.
 
detroitflyer
Posts: 367
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 5:12 am

welll if the negiotations fall through (which it looks like it probably will), cant the EU change its rule to match the U.S's ?? If US citizens are forced to sell their stocks (just beacuse european airlines want to decrease foreign ownership) it will probably cause them to be unhappy and lobby congress to change their rule to match the EU'S???
What are the chances of that happening??
Boiler Up!!!
 
DLPMMM
Topic Author
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 5:31 am

Quoting ANother (Reply 38):
Can you substantiate your claim? I certainly see your point of view, but is it in fact shared by the US population?

It is not my view, I could care less about the foreign ownership levels. I am just stating the political facts, as evidenced by the Bush administrations dropping of the NPRM under congressional pressure. If congress was not adamantly against the new rule, I can guarantee you that the rule change would have quietly gone through.

The EU negotiators know the proposal is DOA as well. It is all just political posturing on both sides. I think we will have the status quo for another 3 to 10 years, as there is no impetus for an agreement at this time.
 
vv701
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 5:42 am

Quoting DLPMMM (Reply 26):
So in effect what you are saying is that some EU airlines needed the USA's capital so the EU raised their ownership limitations to 49%.

Please do not put words into my mouth. This is certainly not what I was saying. What I actually said was that an arbitrary limit was raised because US investors had chosen to invest in a UK airline. Clearly if BA had needed that investment the limit would not have been put in place in the first place. Over here we call that cutting of your nose to spite your own face!

The situation is that the highly protected US airline industry is so poorly managed that most major airlines have had to seek Chapter 11 protection in the last several years. So, taking the advise of that well known and successful (American) investor, Warren Buffet, US private investors and financial institutions have chosen not to invest in the US airline industry. Instead those requiring exposure to this industry have chosen to invest in well run companies like BA and LH. This has resulted in US airlines sinking deeper into the mire as it has become more and more difficult for them to raise equity for infrastructure investment. On the other hand there is some truth in what you say in so far as long term investors in the likes of BA and LH have seen their investment increase substantially in value as American investors have chased the stock price up.

It is clearly not even handed if US corporations can invest in, for example, UK airlines. An example is Atlas Air. It has owned 49 per cent of Global Supply Systems since that company, based at STN, was founded. GSS's fleet of 744F aircraft all operate with the legend 'operated for British Airways World Cargo' on their noses. No doubt your solution to this anomalous situation would be for the US Congress to order Atlas Air to disinvest itself of half of its investment in GSS thus putting antiquated politics in front of the sound commercial decision making that resulted in Atlas Air making its original investment. In this way you would deprive the USA of a source of overseas income that is helping to restrain its burgeoning balance of payments deficit. You would also deprive the USA of a small amount of employment for American expatriates.

Of course there is sense in the UK regulations as they allow UK airlines to benefit from the experience and knowledge of those managing overseas airlines. This is not only the case with the Atlas Air input to GSS. Consider BA. Their former CEO was an Australian national who had previously run CX. He has been succeeded by an Irish national who had previously run EI.

Now let us assume for just one moment that Eggington and Walsh were the world's best airline CEO's. While UK and, indeed, EU law allowed BA to benefit from these men's knowledge and experience, US law prevents their employment by US airlines! And however strange it might seem while the USA probably produces more top managers than any other country or group of countries, they do not have a monopoly in producing top management.
 
donder10
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 5:46 am

What is the situation with rights for cargo operators?Both FX and UPS have large operations in Europe.Do cargo operators need 5th freedom rights like a US passenger operator would or are cargo operators exempt?
 
kaitak
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 5:52 am

I think, DLPMMM, this is likely to be the way it'll go. The Americans aren't going to give way; Representatives, who are only in office for 2 years, are simply not going to see any benefit to them in giving ground; they simply don't see a pressing need for it and unfortunately, the EU has simply not understood this. The numbers, whether we're talking about 25%, 49% or whatever, are secondary. I'd like to be proved wrong; I'd like to think that a deal could be done, but as long as the EU insists on the Americans changing something they've been told will NOT be changed, the deal is a dead duck.

There will still be a meeting of EU Transport ministers late next month, when the ministers can have a post-mortem. I think it might be useful, because lessons need to be learned. This was supposed to be a big boost for Europe and its airlines; they could have got a deal and frankly, the tragedy is that the concessions being sought by the EU were kind of academic; after all, what airline in Europe is likely to take advantage of the EU proposal on franchising? Would they REALLY buy into US carriers (I know BA has spoken of buying AA, but that was really just to scare the Americans into holding firm on the ownership issue). In effect, BA has won; Open Skies is dead. The EU wasn't focused on what it wanted and the EU is at a loss as a result. Consequences: what faith will EU countries have in the Commission's negotiation stance in future? Will they give the EU the right to negotiate with Canada? Will the Commission now take a tough line and force EU countries to revoke their bilaterals with the US (surely the next logical step for a Commission determined to cut off its nose to spite its face?)

The EU is really going to have to think about its position and what its ultimate aim in this process is, because no matter how right it feels its stance was, it's not going to cut any ice with the American legislators. That's the bottom line and the EU ignores it at its peril.

Meanwhile, as our minister has pointed out, we'll do our own deal with the Americans ... so there.
 
vv701
Posts: 5773
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 8:41 am

Quoting Kaitak (Reply 43):
In effect, BA has won; Open Skies is dead.

Your presumption that BA does not want Open Skies is mistaken. Currently their situation in many ways is very similar to that of that pertaining to Ireland. Just as EI are very restricted in the US entry points they may serve by the Irish-American bilateral so BA and VS are restricted to the entry points they can serve from their hubs and BD is totally excluded from serving the US from their main hub by the UK-US bilateral. Like the restrictions on the cities Irish airlines may serve this results in a boost for US domestic airlines as it is they who fly many of BA's and VS's as well as EI's trans-Atlantic passengers from the entry cities to their final destinations.

On the other hand US airlines may fly from any US hub airport to any British city. Further any US airline flying to any British airport other than LHR or LGW and applying for fifth freedom rights to anywhere else are likely to be awarded those rights by the British government. This is because the three main scheduled UK airlines (BA, BD and VS) do not offer good services from British airports where they do not have a hub. So the British government has stated that such fifth freedom rights would generally be in the interests of the British consumer. Such rights could address the total lack of competition that airlines such as AI, CX, EK and PK face out of airports such as BHX and MAN. The British government's stated policy is to favourably consider awarding these routes to these airlines and to favourably consider awarding applied for fifth freedom rights to non-EU airlines where there is no competition from any EU airline on the awarded routes because this benefits the British consumer. However apart from UA's existing, now unused fifth freedom rights out of LHR this policy does not extend to LHR or LGW as there are relatively few routes from theses two airports where there is not already competition. (For example LHR-HKG sees BA and VS competing against each other and with CX, NZ and QF.)

In recent years the US legacy airlines have partially woken up to the opportuities Bermuda II offers them and have started to serve UK airports like BHX, BRS, EDI, GLA, MAN and NCL from their hubs. This has ben particularly welcomed at airports like BRS and BHX from which their are no connecting flights to LHR or LGW and the only alternative has been to fly to AMS, CDG or FRA and connect with flights from there or travel by surface transport to LHR or LGW.

Howeever as yet no US legacy airlines have applied for fifth freedom rights from any of the provincial UK airports that they serve.

Of course there is an argument that BA flies to more US cities than the number of British cities to which all the US airlines put together fly. This argument is true. But it ignores important geographic and demographic facts. For example the greatest distance between any of these British airports is no further than the distance from NYC to Upper New York State. Similarly the total land area of the UK is less than that of the state of Colorado. Further, many parts of the UK, such as Scotland north of the Forth Clyde Valley and central Wales, are as sparcely populated as parts of Colorado.

Mitigating against these geographic facts are the US population demographics. Overall the US is much less densely populated. So a better way of looking at it is to say that with approximately five times the population you would expect in a free market (i.e. Open Skies) there to be significantly more than five times but very significantly less than 40 times the number of entry points in the US compared to the number of UK entry points. Where does my '40' figure come from? Well with a land area of 3,618,766 square miles the USA is almost 40 times the UK's land area of 94,247 square miles. So logically if you were to ignore population density there would be 40 US entry cities for every single UK entry city.

Look at this from the opposite perspective. Consider New York State. Its area is 49,099 square miles or a little more than half that of the whole of the UK. Its population of approaching 20 million is slightly less than one third that of the UK's 60 million. So logically with 'Open Skies' one would expect sonewhere between one third and one half the number of UK entry cities to be New York State entry cities. But the restrictive Bermuda II agreement only allows UK airlines to fly from their hubs to one city in NY, New York City even though it allows entry at two airports, JFK and EWR. Up-state destinations such as BUF, ROC and SYR are strictly off limits to British scheduled airlines operating from their UK hubs and, indeed, for US airlines serving the UK. As a result and just like the restrictive Irish-American bilateral, there is a very high level of transfer traffic from trans-Atlantic flights to US domestic flights. This high level of transfer from BA and VS and from EI to US domestic routes is to the benefit of US airlines while those same airlines are permitted by the bilaterals to deliver all their passengers from their hubs much closer to the final destinationds in both the UH and the RoI.

As UA have shown us by recently quitting what is said to be one of the world's most lucrative routes, JFK-LHR, the hub issue is everything. On long haul flights legacy airlines, be they American or European, cannot compete unlesss one end of the route is an active hub. Their costs will be higher and they will not be able to feed sufficient passengers onto their flights to make their operation profitable. So while it is true that, for example, BA, BD or VS could fly from BRS to any - yes, any - US airport under the Bermuda II agreement this is of no value to any of the British airlines.
 
macilree
Posts: 106
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 8:55 am

Quoting MasseyBrown (Reply 15):
Mendelsohn is an old Washington hanger-on trying to relive his months of being almost a somebody. He was appointed to the State Dept position in the dying days of the Clinton administration and I don't believe he served a complete year. About 70 years old, he is "of counsel" at a Washington law firm, meaning he never made partner, and an adjunct professor of law, meaning he teaches one specialty and never got tenure.

He is not remotely a spokesman for the US government - just the handy source of a quote that suited the article.

Mendelsohn was the lead US negotiator at the negotiation of the Multilateral Agreement on the Liberalization of International Air Transportation or MALIAT in Hawaii (hence the Kona Agreement as it is sometimes known). The MALIAT saw the US move away from its standard "open skies" model on the question of foreign ownership and control of international airlines of other MALIAT members wishing to serve the US.

I am sure that most of those in the know appreciate that Mendelsohn is not a spokesperson for the US Republican Administration but, given that the Republicans have just lost control of the US Congress, Democrats with expertise in this area are probably worth listening to.

Having said that, the reported comments a recently retired Mineta made in Mexico about new Chairman Oberstar's attitude to the foreign ownership and control of airlines issue are probably the most telling. Sorry I don't have a link.

A key question I haven't seen addressed is what are the consequences for the Dutch and Austrian airline "subsidiaries" of LH and AF if no deal is done with the US. Does the US have the opportunity to play hard ball on the status of KLM, Austrian and Swiss?

And to end with, some readers may be interested in this Paper recording discussions at a Conference on the trans-Atlantic aviation relationship at the Dean Rusk Center at the University of Georgia back in 2003 attended by some of the noted experts in this subject.

John Macilree's Weblog

[Edited 2007-02-28 01:11:12]
John Macilree
 
DLPMMM
Topic Author
Posts: 2118
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 9:44 am

Quoting Macilree (Reply 45):
Mendelsohn was the lead US negotiator at the negotiation of the Multilateral Agreement on the Liberalization of International Air Transportation or MALIAT in Hawaii (hence the Kona Agreement as it is sometimes known). The MALIAT saw the US move away from its standard "open skies" model on the question of foreign ownership and control of international airlines of other MALIAT members wishing to serve the US.

So he was the idiot that opened this can of worms!

Quoting Macilree (Reply 45):
I am sure that most of those in the know appreciate that Mendelsohn is not a spokesperson for the US Republican Administration but, given that the Republicans have just lost control of the US Congress, Democrats with expertise in this area are probably worth listening to.

Since the Democrats in Congress tend to be much more protectionist and union influenced than the Republican members, this hardly bodes well for any concessions on ownership limits.

Quoting Macilree (Reply 45):
A key question I haven't seen addressed is what are the consequences for the Dutch and Austrian airline "subsidiaries" of LH and AF if no deal is done with the US. Does the US have the opportunity to play hard ball on the status of KLM, Austrian and Swiss?

The USA will not start a trade war over this.

Everything will just mosey along unchanged.
 
atmx2000
Posts: 4301
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RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 9:47 am

Quoting Magyar (Reply 14):

Excuse me, but according my limited understanding of English language "role of leadership" means
something of being "in charge" or being "the prominent player" OF the "international aviation community"

His view of leadership appears to be being at the forefront of aviation liberalization.

That's why he said this:

He suggested that the US should ease its foreign ownership restrictions, a move that would increase the likelihood of reaching a deal with the EU. He emphasized, however, that such rule changes should come through legislation rather than the withdrawn, "ill-conceived" Notice of Proposed Rulemaking the US Dept. of Transportation attempted to push through last year (ATWOnline, Dec. 6, 2006). "Amend [the law] so that foreign investors except for [foreign] governments could own US carriers subject to all applicable US laws," he said.

Mendelsohn advocated seeking a multilateral open skies pact with nations around the globe rather than merely an EU-US pact. "A much better way of amending all these [bilateral] agreements [the US has with various nations, including EU member states] is to do it multilaterally. . .It's long past due that we look at multilateral solutions rather than the bilaterals that have governed aviation.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
scotron11
Posts: 1181
Joined: Tue Feb 10, 2004 4:54 pm

RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 9:59 am

Quoting Atmx2000 (Reply 47):

He suggested that the US should ease its foreign ownership restrictions, a move that would increase the likelihood of reaching a deal with the EU. He emphasized, however, that such rule changes should come through legislation rather than the withdrawn, "ill-conceived" Notice of Proposed Rulemaking the US Dept. of Transportation attempted to push through last year (ATWOnline, Dec. 6, 2006). "Amend [the law] so that foreign investors except for [foreign] governments could own US carriers subject to all applicable US laws," he said.

Sounds good to me. I am for doing away with all barriers, including Bermuda II. Let's hope that something does come out of this. Christ, it's being going on for long enough!
 
vv701
Posts: 5773
Joined: Fri Aug 19, 2005 10:54 am

RE: EU-US Open Skies Talks Resume Today

Wed Feb 28, 2007 10:03 am

Quoting Donder10 (Reply 42):
What is the situation with rights for cargo operators?Both FX and UPS have large operations in Europe.Do cargo operators need 5th freedom rights like a US passenger operator would or are cargo operators exempt?

They use locally based and operated franchise partners like Air Contractors and Swiftair:

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