March 7, 2006

US pushes for more foreign investment in airlines

By John Crawley

WASHINGTON (Reuters) - The Bush administration will push
ahead with a proposal to ease limits on foreign investment in
U.S. airlines, despite some congressional pressure to slow down
the plan or withdraw it, Transportation Secretary Norman Mineta
said on Tuesday.

The proposed regulation was opposed earlier this year by
mainly Democratic lawmakers concerned about the impact on U.S.
jobs and airline service if global capital options for
financially struggling domestic airlines were expanded.

But in recent weeks a few Republicans have begun to
question whether the initiative is wise in light of the
firestorm of controversy that has consumed plans by a
Dubai-based company to manage six U.S. ports as part of its
multibillion-dollar purchase of a rival British firm.

Many Republicans and Democrats in Congress, as well as
state and local officials who lease port facilities, are
worried that giving a company owned by the United Arab Emirates
management control of key U.S. ports could undermine security.

The administration said any security concerns have been
adequately addressed but pressure from Congress has forced a
new review of the ports proposal.

While Mineta did not comment directly on the ports saga at
a House of Representatives appropriations hearing on Tuesday,
he did respond to concerns from two Republican lawmakers that
the airline deal could pose similar security risks for the
United States -- especially since the 2001 attacks on New York
and Washington involved hijacked jetliners.

He also angrily denounced a three-page anonymous document
circulating on Capitol Hill -- believed generated by an unnamed
U.S. airline -- that also questions the wisdom of allowing more
foreign investment in the airline industry.

"They're saying we're going to hand over the keys of the
cockpit," Mineta said. "That's not true. This paper is replete
with inaccuracies."

"There is nothing in the rule that would change the
ownership law," Mineta said of federal standards that limit
control of an airline to U.S. citizens.

It would, however, allow overseas investors more input in
key airline company operating decisions in return for a maximum
investment of 25 percent of voting stock.

"We want Americans to own American airlines. We're trying
to split hairs," said Rep. John Culberson, a Texas Republican.
"This raises all kinds of red flags."

Mineta resisted a suggestion by Culberson to pull the
ownership proposal, or at least delay it. "I don't believe we
should postpone the rule," Mineta said.

"We gave this a lot of thought. When it comes to safety and
security -- that's walled off," Mineta said.

There is little if any overseas capital in U.S. carriers.
ACE Aviation Holdings, the parent of Air Canada, has an equity
stake in US Airways.

In a separate interview, Rep. Frank LoBiondo of New Jersey,
one of the first Republicans to openly question the
administration's handling of the ports deal and original
opponent of the airline ownership proposal on economic grounds,
said it is appropriate to link the two in the security debate.

"One is as critical as the other -- these are critical
infrastructure issues," LoBiondo said.