When Will Foreigners Be Able to Own US Airlines? Not Anytime Soon

(MoneyWatch)  I never thought I'd see the day. It appears that the United States has made good on its promise to the European Union (EU) to allow for greater foreign ownership of US airlines . . . in theory. There's only one, enormous problem. It ain't gonna happen. They can keep dreaming in Europe while the US celebrates a victory.

In reality, this new agreement reached yesterday simply takes away the "temporary" provisions of the last open skies agreement. That one was only valid assuming a new agreement to open up foreign ownership rules up was passed in the next round of talks. If that wasn't achieved, then the current open skies agreement would disappear. And that would be most harmful to airlines that received the ability to fly to London/Heathrow in the last round. They would have had to go back to Gatwick, and everything would go back to the way it was a couple years ago. But we no longer have to worry about that.

According to the US Department of Transport (DOT), the new agreement . . .

affirms that the terms of the 2007 agreement will remain in place indefinitely. It also deepens U.S.-EU cooperation in aviation security, safety, competition, and ease of travel. In addition, it provides greater protections for U.S. carriers from local restrictions on night flights at European airports. It also includes a ground-breaking article on the importance of high labor standards in the airline industry.

The new agreement underscores the importance of close transatlantic cooperation on aviation environmental matters in order to advance a global approach to global challenges.

Mmmm, vagueness goes down so smooth. Fortunately, the EU issued a memo that got a little more specific. For example,

Other elements will enter into effect at a later stage as they are subject to legislative changes on either side:

-The reciprocal liberalisation of airline ownership and control. This will require legislative changes in the US. Currently, foreign ownership in US airlines is limited to 25% of voting rights. Upon legislative change in the US, the EU will reciprocally allow majority ownership of EU airlines by US nationals.

In other words, the US and EU are aligning policies and growing closer together, and they'll allow foreign ownership levels to increase . . . once Congress allows it. There's the rub.

That law is something that only Congress can change, and what's the chance that's going to happen? Slim to none. The Democrats want to support labor by protecting them, and the Republicans will end up flying the "national security" flag about how our airlines need to be in American hands. For once, both sides are likely to agree, right or wrong.

So effectively this new agreement is a big win for the US. It makes the previous open skies agreement permanent, which is good for both sides of the Pond, yet it deftly dodges the foreign ownership demand that was there after the last round. I'll give the last word to the International Air Transport Association (IATA), which, as usual, was spot on:

It is disappointing that, at this critical time, we did not make significant progress on the issue of ownership. The agreement was not a step backwards, but it did not move us forward.

[Photo via Flickr pedrofraiman]