US proposes giving foreigners bigger say in domestic airlines


SAN FRANCISCO (XFNews) - The Bush administration on Tuesday proposed new rules that would make the ailing U.S. airline industry more attractive to foreign capital, according to a media report Wednesday.

The proposal, which is subject to a 60-day review and comment period, would give foreign investors a potentially greater say in how U.S. airlines are run, allowing them a voice in matters like marketing, flight-route decisions and types of aircraft operated, The Wall Street Journal reported in its online edition.

The proposed rule change, effectively loosens the administrative interpretation of what constitutes control of an airline, The Journal said.

"For the very first time in history, international investors will be in a position to actually protect their investment in U.S. airlines. They don't have to be purely passive investors," The Journal quoted Jeff Shane, undersecretary for policy at the Transportation Department, as saying Tuesday.

The new rule could benefit foreign airlines that want to invest in U.S. carriers and international alliances, which would be able to operate more smoothly without running afoul of the foreign-control standards, according to The Journal story.

U.S. law forbids foreigners from owning more than 25% of an airline's voting shares. The proposal doesn't change the ownership cap, which enjoys strong support from labor unions and others, The Journal said.

One early beneficiary of the rule change could be Britain's Sir Richard Branson, whose London-based Virgin Group has been trying for months to establish a new carrier in the U.S., Virgin America, The Journal said, adding that limits on the role of foreign investors have been a factor in slowing its creation.

The proposal would require that decisions about aviation security, safety and national security remain in the hands of U.S. citizens, The Journal said. To take advantage of the new rules, a foreign investor must come from a country that accords comparable benefits to U.S. investors, according to the story.

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