US EDGES TOWARD LETTING EUROPEANS BUY ITS AIRLINES

The United States moved a step closer to allowing foreign ownership of its airlines following a draft agreement on extending an 'Open Skies' aviation treaty with the European Union.

Bloomberg reported on Thursday, that European Union companies can currently take stakes no larger than 25 per cent in US carriers, while American operators are able to control up to 49 percent of European airlines. The deal builds on a 2007 treaty that gave greater access to European airports including London Heathrow and was intended to foster increased competition between airlines.

The US has agreed to 'engage in a process' to lift ownership restrictions and Europe will grant reciprocal rights once this is done, European Transport Commissioner Siim Kallas said in a statement from Brussels.

EU airlines will also be allowed to fly between the US and non-European countries, subject to amendments to noise-based restrictions at airports.

'A process has been agreed towards the further expansion and consolidation of the trans-Atlantic aviation market,' Kallas said. The accord will 'remove the barriers to market access,' he said.

More immediate changes will allow European airlines improved access to government-financed air traffic through an easing of the 'Fly America' program that has limited such business to US carriers.

'This agreement strengthens our already close aviation relationship with our European partners,' US Transportation Secretary, Mr. Ray LaHood, said in an e-mailed statement. 'President Obama promised European leaders that we would reach an agreement this year, and today we fulfill that promise.'

Virgin Atlantic Airways Limited, the United Kingdom long-haul carrier that operates services to the U.S. from Heathrow, said the agreement 'falls somewhere short' of the freedoms it wants.

The carrier's stake in Virgin America Incorporated is capped under the ownership rule and UK billionaire Richard Branson faced claims from Alaska Air Group Inc. that he had violated the limit before the DOT said January 8 that was not the case.

'We hope the commitments agreed will mean that the European Commission, EU Member States and U.S. government lose no momentum in removing the remaining barriers to full market access,' Virgin said in a statement.

The accord will also seek to harmonise environmental regulations and market-based measures concerning aircraft emissions, noise and fuel use.

The European Union estimates that opening up the two markets will provide economic benefits worth $16bn and create as many as 80,000 jobs.

The European Commission said it will ask EU member nations and the European Parliament to approve the deal.