EU Transport Chief Calls on Nations to Look Past Flaws in U.S. Aviation Deal

BRUSSELS, Belgium (AP) _ The U.S. failure to lift rules that prevent European airlines taking control of American carriers is a ''disappointment,'' but it should not keep EU nations from backing a deal that opens up the trans-Atlantic aviation market, EU Transport Commissioner Jacques Barrot said Monday.

''I still believe progress in this area is possible _ and I will work to make trans-Atlantic investment in aviation a reality _ but realistically, this could take a considerable amount of time,'' he said in prepared remarks for a speech at an aviation conference in London.

''We wanted to be very ambitious on cross-border investment. We wanted to agree on changes in the law to completely liberalize ownership of airlines between the European Union and the United States,'' he said. ''It is clear, however, that there remains considerable political doubts about this step in the United States.''

U.S. Transportation Secretary Mary E. Peters said in December that her department bowed to job and security fears when it withdrew a proposal to lift the 25 percent limit on foreign control of U.S. carriers _ a key EU demand that stalled talks on a deal for over a year.

British Airways PLC Chairman Martin Broughton said that this kept the U.S. domestic market closed to EU airlines, claiming the entire ''open skies'' deal was a ''template designed to bolster U.S. interests'' that offered ''minuscule concessions dressed up as significant breakthroughs.''

The aviation pact will increase competition for the airlines that now control the lucrative trans-Atlantic routes, such as BA, which makes half of its profits flying the Atlantic.

The airline's shares fell 6.6 percent to close at 496.50 pence (euro7.34; US$9.66) in London, with analysts attributing the drop to concerns about that BA could face tougher competition at its Heathrow hub. At present only four airlines _ BA, American Airlines, United Airlines and Virgin Atlantic _ can fly to the U.S. from Europe's busiest airport.

Heathrow may struggle to meet surging demand for limited landing slots, said Donal Dowds, director of operations at BAA PLC, the British airports operator controlled by Spain's Grupo Ferrovial SA. He told a London conference that Heathrow is already operating at 98 percent of runway slot capacity, but that may improve slightly next year when a new terminal opens.

But Barrot said EU transport ministers _ who meet March 22 to approve a less ambitious deal EU and U.S. negotiators struck on Friday _ had to look past any drawbacks and consider the consumer benefits in reach.

If EU nations and U.S. Congress ratify the pact, it would allow any airline _ European or American _ to fly any route between any city in Europe and any city in America.

The EU's executive arm said Friday this would reduce the cost of tickets, claiming economic benefits of up to euro12 billion (US$15.8 billion) over a period of five years and creating up to 80,000 jobs spread equally between Europe and the United States.

Within five years, the deal could put an extra 26 million people on trans-Atlantic flights, the EU said. Just under 50 million travelers now make that trip every year.

It also opens up new horizons for European airlines who are currently prevented from combining with airlines based in other EU nations or from taking over airlines in other parts of Europe or in Africa.

A Citigroup analysts' note said the deal could benefit German carrier Lufthansa and budget airline easyJet. It also predicted accelerated European consolidation, with top candidates for takeovers Iberia, bmi and troubled Alitalia SpA.

Barrot said he would also report in a few weeks' time on the state of play of new rules that aimed to compensate passengers when their flight is overbooked, delayed or canceled.

''There is still a certain amount of confusion and frustration,'' he said, signaling that airlines and airports may not have done enough.

''Most people accept that flights are disrupted by bad weather, terrorist alerts or serious safety problems. But these excuses must not be abused,'' he warned. ''I think we need a further effort to explain these rules more clearly and to apply them more consistently ... There must be an improvement.''