EU president Germany optimistic on U.S. air pact

BRUSSELS, Mar 22 (Reuters) European Union president Germany voiced cautious optimism on Thursday that the bloc's transport ministers would back a major agreement with the United States seen as helping to open transatlantic air travel to more competition and driving down fares.

EU transport ministers gathered in Brussels to vote on the pact, hammered out after four years of talks, which would allow EU airlines to fly from any city in the 27-nation bloc to any city in the United States and vice versa.

The so-called ''open skies'' agreement is slated to enter into force in October.

But Britain, which is seeking concessions for London's Heathrow Airport and some firm assurance that Washington will in the future allow foreign airlines to own and control U.S.

carriers, was guarded on its intentions.

''I am carefully optimistic that it's doable,'' German Transport Minister Wolfgang Tiefensee told reporters as the 27 EU ministers arrived for the decisive meeting.

He said he recognised the will of colleagues to approve the agreement but declined to comment on whether Britain would win any concessions for Heathrow, Europe's busiest hub, as part of a deal.

British Transport Secretary Douglas Alexander was guarded on arrival, telling reporters: ''I will listen carefully to the arguments that are put around the table and I will set out very clearly what Britain regards as the right deal for the United Kingdom, for Europe, for industry and for passengers.'' SHARES TAKE OFF EU diplomats have said London is isolated and has signalled it will not block a deal, but it might prefer to be outvoted in a decision taken by majority voting rather than going along with an agreement by unanimity.

However French Transport Minister Dominique Perben told reporters that unanimous agreement was required because of the inter-governmental nature of part of the accord, adding he was optimistic there would be a deal.

Italian Transport Minister Alessandro Bianchi said he would express concerns about the pact in Thursday's talks but ministers would aim for a unanimous agreement.

Proponents say ''open skies'' would boost competition, increase flight frequencies, reduce fares and create jobs on both sides of the Atlantic.

But Britain is reluctant to lift restrictions at Heathrow which favour British Airways and Virgin Atlantic without getting more rights to invest in U.S. carriers.

Industry sources say Britain will vote against the deal unless there is a delay in its implementation and an automatic termination of its contents if talks for a second stage -- when the EU will push for greater ownership rights of U.S. airlines -- are not in full swing by 2010.

Speculation that ''open skies'' would trigger airline mergers boosted shares in British Airways and Spain's Iberia on Wednesday.

Apart from BA, which stands to lose lucrative market share at Heathrow, European and U.S. airlines are largely supportive.

''We welcome the agreement and hope that it's approved,'' said Anthony Concil, spokesman for airline industry group IATA.

''It's not the great leap forward that's going to fundamentally change the industry, but it's a step in the right direction, so let's take it.'' Currently British Airways, Virgin Atlantic, AMR Corp.'s American Airlines and UAL Corp.'s United Airlines are the only carriers allowed to fly transatlantic routes through Heathrow.

The new rules would abolish those restrictions but would not create extra takeoff and landing slots at the busy hub.

U.S. rules limit foreign investment in U.S. carriers to 25 percent of voting-rights, whereas U.S. companies can control up to 49 percent of EU carriers -- a key sticking point for Europe.

The new deal would give European companies the right to own more than 50 percent of non-voting equity in U.S. carriers and allow the EU to limit U.S. investment in EU airlines to 25 percent of voting-shares.

REUTERS CS HS1604