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Last Updated: Thursday, 3 November 2005, 11:15 GMT
US airlines seek foreign capital
Plane taking off
The US air industry could lose $10bn this year
Foreign investors could gain a greater say in how US airlines operate as part of Washington's efforts to bolster the aviation industry's fragile finances.

The US is considering giving overseas firms more input into key decisions such as route selection and marketing to encourage them to invest capital.

Some US carriers have sought bankruptcy protection after recording huge losses.

The move comes as the US and Europe try to reach agreement on liberalising transatlantic traffic.

Active investors

Discussions over a so-called "Open Skies" agreement resumed last month after stalling for several years.

A fresh round of talks - which stumbled over European demands for greater access to US destinations - takes place later this month.

No strategic investor is going to come in if he is required to remain in a passive position
Jeffrey Shane, US Transportation Department undersecretary

Current regulations limit the degree of influence which foreign investors can have over US airlines.

The 49% cap on foreign ownership of US carriers or the 25% limit on voting rights are not up for discussion, the US says.

However, it is seeking ways of allowing foreign firms to have a bigger say in the decision making of US airlines.

"No strategic investor is going to come in if he is required to remain in a passive position," Jeffrey Shane, an undersecretary at the Transportation Department, said.

"We think that by facilitating more participation by non-US citizens, we enhance the flow of capital to US airlines."

Financial turmoil

The proposed changes would only apply to investors in countries with existing aviation agreements with the US and which permit US investment in their own domestic airlines.

The US aviation industry has been in financial crisis since the 11 September terrorist attacks, its problems compounded by soaring oil prices, fluctuating demand and huge labour costs.

Delta information screen
Delta and other carriers have made huge losses

Combined losses across the industry could total $10bn this year.

United Airlines, Delta Airlines, US Airways and Northwest have all been forced into bankruptcy protection as they try to sort out their finances.

Despite the industry's financial problems, Washington has baulked at relaxing the ownership rules governing the industry, citing safety and national security concerns.

Unions have argued that foreign ownership could threaten jobs and employment rights.

Current regulations require two-thirds of the directors and executive officers of US airlines to be US citizens.

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