Virtually since the beginning of commercial airline traffic, the European airline industry has been copying the United States industry. Now is perhaps time for the United States airline industry to copy the Europeans, according to Ambassador John Bruton, head of delegation for the European Union’s Delegation of the European Commission in Washington, D.C.

Speaking at the German Marshall Fund of the United States last week, Bruton called for continued changes in the Open Skies agreement between the United States and the European Union that would reflect the liberalization of the European carriers that occurred in 1992, creating a single market within 12 European states. That has now expanded to cover 30 countries…27 U.E. states plus Iceland, Norway and Switzerland.

This full liberalization could be worked out in the second stage of the U.S./EU open skies agreement, he said. The first stage has already brought significant benefits, including an 8% increase in flights, Bruton said. That agreement was signed on April 30, 2007 and became effective exactly a year ago today.

In working on the second stage, the United States should imitate the European Union’s deregulation of the industry. This particularly includes areas such as larger ownership of U.S. carriers by foreign investors, currently limited to 25 percent, while U.S. investors can own up to 49 percent of the voting stock in E.U. airlines. But, his statement comes as the U.S. seems to moving in the opposite direction with calls from both Alaska Airlines and the Air Line Pilots Association for an investigation into Virgin America’s citizenship alleging it violates U.S. law and Congressional objections to further liberalize ownership laws. Unions, of course, fear the loss of jobs and are counting on the Obama Administration to support them.

“The Alaska Air Group Labor Coalition, which represents more than 9,000 unionized employees at Alaska Airlines and Horizon Air, believes there is more than enough compelling evidence for a public review of Virgin America’s citizenship status,” said Capt. Sean Cassidy, vice chair of ALPA’s Alaska Airlines Master Executive Council and a member of the Labor Coalition. “It is critical that the Department of Transportation ensure all domestic carriers fully and openly comply with U.S. law regarding foreign ownership and control. A failure to do so creates an uneven playing field that jeopardizes American jobs.”

The second stage should also open up the U.S. domestic market to E.U. carriers. One area of liberalization would be greater flexibility in forming alliances, Bruton said. This was to counter a move by House Transportation and Infrastructure Committee ChairRep. James Oberstar (D-Minn.), to pass anti-trust legislation designed to prevent alliances as anti-competitive actions which would take away American jobs and reduce service. However, Bruton noted that that alliances and consolidations within the European Union have already improved service, and that Oberstar’s home state of Minnesota “would have better service” as a result of U.S. and E.U. carriers working together.

As an example, the alliance between KLM and Minneapolis-based Northwest, with its anti-trust immunity, has already allowed the two carriers to go to three daily wide-body departures this summer on the Minneapolis-Amsterdam route that could not support even one daily non-stop flight prior to the alliance. But, Oberstar disagrees saying the alliance cost jobs. Related Story

Another example of a successful alliance is the agreement between United and Aer Lingus, Bruton said. “This is a very innovative agreement that allows them to fly from any U.S. airport to any E.U. airport.” The U.S./E.U. agreement should not be jeopardized by anti-trust laws that “would have an impact on the next stage of negotiations. It would be best to let everything go forward.”

Bruton stated that, in fact, that liberalization of the U.S./E.U. airline industries would mean “more jobs, more flights, more airports served and better service.”

The first stage agreement simply provides for the “possibility” of anti-trust immunity for carriers forming alliances, according to a position paper put out by the European Commission Delegation. The second stage would call for the development of a regulatory convergence that would allow the two regulatory bodies to iron out differences on major issues such as anti-trust.

Along with anti-trust immunity for alliances, Bruton also noted that agreements are going to have to be worked out in areas such as “Buy American” requirements, foreign repair stations, security and retaliatory measures taken against foreign carriers serving U.S. destinations.

Passage of Stage Two of the U.S./E.U. agreement is going to “take a lot of hard work,” as well as getting President Obama behind it to promote an open market, he said. He also said that the European Union should have an E.U. ambassador in the United States just for aviation.

The second-stage negotiations are now underway and are expected to be reviewed at the end of this year. Because of what it calls Washington’s refusal to be more flexible on ownership and investment rules in Stage One, that agreement contains a suspension clause that will allow the European Union to suspend access rights newly obtained by U.S. airlines if the United States does not open up its domestic market and loosen its rein on foreign investment and ownership by the end of next year.

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