June 1, 2006

Airlines see “fines or jail” dilemma in EU data row

By Tim Hepher and Benoit Van Oversraeten

PARIS (Reuters) - Global airlines accused the United States
and Europe of failing to coordinate security and trade policies
on Thursday, saying a European court decision to halt a
data-sharing deal had left them in legal no-man's-land.

Under a 2004 anti-terrorism pact, European airlines have
been obliged to give U.S. authorities up to 34 pieces of
information on passengers flying to the United States but on
Tuesday a European court ruled the agreement illegal.

"If we do not follow the US rules we will be fined and if
we follow them we will go to jail," said Giovanni Bisignani,
director general of global airlines body IATA.

"This just gives you an idea of the extent to which
governments are unable to have a dialogue, even on something as
important as security -- and we are in the middle," he said.

Under existing rules, airlines face fines of $6,000 per
passenger if they do not share the information.

The 25-nation European Union and United States have pledged
to find a new deal preserving the content of the anti-terrorism
agreement within a four-month deadline set by the court.

An EU Commission spokesman said on Thursday it was
confident a deal would be reached by the end of September.

"If there is no European deal, the national rules will
apply," the spokesman said.

But Bisignani, representing 265 airlines preparing to hold
their annual meeting in Paris next Monday, said the wrangle
stemmed from a wider failure of transatlantic coordination that
is hurting the world's airline and tourism industry.

"We have a few months to find an agreement but this gives
you a picture of how much harmonization is lacking between
Europe and the United States," Bisignani told a news briefing.


Also unresolved is a long-delayed "open skies" agreement to
free up transatlantic air services, something negotiators hope
to resolve by the end of this year.

"We want to operate in an open market," Bisignani said.

"Europe and the United States have to lead the way in
changing a bilateral system which is 60 years old. Why is this
important? Because Europe and the United States represent 60
percent of total traffic."

Airlines are trying to find ways to cut costs and compete
more effectively to cope with sharp increases in fuel costs.

But cost cuts, coupled with increases in traffic, have
failed to compensate for rising oil prices.

IATA estimates the industry could have broken even at an
oil price of $50 a barrel in 2005, but the actual average was
$54. The breakeven point has risen from $22 a barrel in 2002.

With oil now touching $70 a barrel, IATA is expected to
predict wider than expected industry losses for 2006 at its
industry summit next week. The airline body currently predicts
airlines will lose a combined $2.2 billion this year.

IATA said passenger traffic grew 6.9 percent and freight
traffic grew 5.7 percent in the first four months of 2006,
compared to January-April last year. The biggest percentage
rises -- around 18 percent -- were seen in the Middle East
where demand for new jets has also been strong in the past

(Additional reporting by Ingrid Melander in Luxembourg)