MacGregor to fight curbs on airline owners: No breakthrough likely in transatlantic open skies talks on Monday

OPEN SKIES between Britain and the United States will be achieved only if curbs on foreign ownership of US airlines are eased, John MacGregor, Secretary of State for Transport, will tell his American counterpart on Monday.

The message will be delivered to Federico Pena, Transportation Secretary in the Clinton administration, when he meets Mr MacGregor in London for resumed talks aimed at liberalising transatlantic air services.

In what will be the first encounter between the two, Mr MacGregor is expected to reiterate Britain's stance that US airlines will get increased access to Heathrow airport only if restrictions limiting foreign shareholdings in US airlines to 25 per cent are lifted.

Mr MacGregor is also likely to point out that even if more take-off and landing slots can be freed at Heathrow US carriers cannot expect preferential treatment over other airlines.

However, there are growing indications that, as a sign of goodwill, Britain will support the designation of United Airlines as the second US carrier on the Chicago-Heathrow route.

The US-UK air talks broke down before Christmas after the two sides failed to agree on the staged liberalisation of each other's market. This scuppered a dollars 750m tie-up between British Airways and USAir, America's third-largest domestic carrier.

A modified deal involving BA paying dollars 300m for a 19.9 per cent stake in USAir was subsequently approved earlier this year. BA has the option to raise its investment to dollars 750m and its shareholding to 32.4 per cent, provided regulatory approval is granted.

Britain argues that the US restrictions on ownership in effect cut off UK carriers from a quarter of all the transatlantic airline passengers originating in the US. The US has countered by arguing that BA and Virgin Atlantic are heavily protected in their domestic market, operating to and from many more US hub airports than its carriers can, and that BA's penetration of the domestic US market will rise dramatically as it enlarges its code-sharing arrangements with USAir.

Although both sides remain publicly committed to the concept of open skies, actually achieving full liberalistion is likely to prove a painstaking process.

Whitehall officials have cautioned that Monday's talks are not expected to produce any grand breakthrough. Instead they are designed to allow the two men to meet, establish their positions and pave the way for proper negotiations. An opening round of detailed discussions has been pencilled in for the first week of May.

United Airlines, the second-biggest US carrier, is seeking approval to begin a service from its main hub of Chicago to Heathrow from 15 July. At present only BA and American Airlines fly the route although Virgin also has a licence.

For United to start services the UK and US governments would have to agree to it buying USAir's London- Philadelphia route and then transferring the designation to Chicago. The plan is being opposed vigorously by American Airlines.

United's chairman, Stephen Wolf, who briefed Mr MacGregor on the plans at a breakfast meeting three weeks ago, said recently: 'If Britain said no it might send a very incorrect signal to the US government in light of what has just been approved (the BA/USAir deal).'