Air France-KLM chief warns of danger to air pact

The head of Air France-KLM on Wednesday warned that European Union governments were likely to turn down a US proposal on airline ownership and control, endangering plans for a new transatlantic aviation pact.

Jean-Cyril Spinetta, chairman and chief executive of the world's largest airline by revenues, also said he could help Continental Airlines secure slots at London's congested Heathrow airport. Continental, which has an alliance with the European carrier, has been the most vociferous opponent of the so-called open-skies deal.

Mr Spinetta said in a speech in New York that the failure to secure open skies after three attempts would be "a disaster" for the industry, and was likely to trigger action by the European Commission to unwind existing deals between member states and the US. These have been deemed illegal by the European Court of Justice in 2002, but would have been superceded by a new agreement which the tow sides hope to implement next year.

Mr Spinetta's comments offered a stark warning to US officials that their attempts to deal with domestic opposition to proposed changes in the role of foreign investors in US carriers had backfired.

The EU and the US reached a tentative deal on a new aviation treaty last November, but this hinges on the US transportation department coming up with a change in the control rules deemed "acceptable" by European transport ministers.

The proposed changes unleashed a storm of criticism from US unions and Continental, which claimed they threatened jobs and posed a threat to national security as foreign investors may be more reluctant to transport US troops on their aircraft.

He said the administration had taken "a step in the wrong direction" by refining the planned rule change last month. "I doubt the language in the supplemental proposal will be acceptable to the European side in its present form," said Mr Spinetta.

The DoT hopes to finalise its plan by the end of the summer, in time to present to EU transport ministers in October. However, the administration still has to overcome some domestic hurdles, notably lingering opposition in Congress.

Continental Airlines, which is a member of the SkyTeam alliance alongside Air France-KLM, Northwest and Delta, has been the key driver of opposition on Capitol Hill, and Mr Spinetta's speech was watched by Larry Kellner, Continental's chairman and CEO.

Mr Spinetta told the FT afterwards that its partner's position had not created tension in the alliance, but said it could help dilute Continental's key concern over its lack of access to slots at Heathrow, the world's busiest international airport.

An open-skies deal would not guarantee carriers suitable access to Heathrow unless they bought the slots on a grey market. Air France has already made an informal offer to help Delta access the airport, and Mr Spinetta said this could be extended to Continental. "Why not? We could consider it," he told the FT.

Financial Times