The Bush administration yesterday proposed giving foreign investors in the U.S. airline industry more input into a carrier's day-to-day operations.
The Transportation Department is not proposing any change in the 25 percent cap on foreign investment in U.S. carriers. Relaxing ownership rules has been fiercely opposed by labor unions and members of Congress who argue that such changes could undermine jobs and national security.
The administration's proposal yesterday, aimed at boosting investment in the airline industry, would give foreign investors more authority on an airline's investments, destinations and other operations. Foreign investors would still be prohibited from influencing decisions on security and safety.
"No strategic investor is going to come in if he's required to remain in a passive position. The only way someone will come in is if there's an opportunity to protect it," said Jeffrey N. Shane, the undersecretary of transportation for policy. "When a foreign investor invests in an airline, he's kissing his money goodbye. He has no say in a meaningful way in the decisions of that company."
While airline executives would have ultimate discretion over a foreign investor's input, the proposal would strip away any governmental restrictions. It would apply only to countries that have aviation treaties or "open skies" agreements with the United States.
European leaders have demanded that the United States change its rules on foreign investment in U.S. airlines.
In recent months, several airline executives -- including Glenn F. Tilton, president and chief executive of United Airlines parent UAL Corp. -- have repeatedly called for relaxing U.S. laws governing foreign investment. Tilton has said U.S. carriers, including United, which has been restructuring in Chapter 11 bankruptcy protection for nearly three years, should have more access to capital from overseas.
Since the Sept. 11, 2001, terrorist attacks, the nation's airline industry has been in financial distress and is expected to lose as much as $10 billion this year.
Shane said the proposal would also allow U.S. companies to invest in foreign airlines. "This proposal will create and facilitate further evolution of the world's airlines in a more robust and competitive global sector," he said.
The proposal has a 60-day comment period, after which Transportation Secretary Norman Y. Mineta could approve, modify or reject it.