The United States and the European Union reached a tentative deal on Friday to dramatically expand aviation service and boost competition on both sides of the Atlantic.
Negotiators made substantial progress in the US State Department-led talks this week on the breakthrough pact, which must be reviewed by EU transport ministers, who meet next month.
Europe is conditioning approval on a crucial side issue - the US proposal to ease some limits on foreign investment in American carriers. European negotiators first want to ensure the Transportation Department plan is finalised and that it would facilitate greater investment opportunities and wider access to important travel markets.
Daniel Calleja, the European Commission director general for aviation, called the "open skies" agreement a "significant step" and said chances for approval in Europe were good, if the ownership question moves "in the right direction."
The agreement has remained elusive for years and does not require US congressional approval. Nevertheless, there has not been universal support among lawmakers, airlines and labour groups in the United States for further opening the trans-Atlantic market. The Bush administration said it plans to move forward carefully on Capitol Hill.
If approved, the deal would eliminate remaining restrictions on service and routes between European and US destinations. It would also effectively remove fiercely protected competition barriers to London's Heathrow airport, Europe's foremost gateway for international business travel.
The agreement would not impose restrictions on the frequency of service, the type of aircraft used, or routes selected by airlines.
But many large metropolitan airports, especially in the United States, are crowded and space is often tightly controlled for safety. The agreement would grant carriers clearance to apply to regulators for operating rights.
Fares could be set freely and carriers would be granted unlimited rights for service beyond the 25-member EU states and United States to points in third countries.
"We want to open the gates for vigorous competition," said Senator John Byerly, a senior State Department official and the lead US negotiator.
Negotiators for both sides came close last year to securing a broad-based deal to expand where airlines can fly in the trans-Atlantic market, but European ministers rejected it.
The United States had liberalisation agreements with most European countries before the European Union assumed authority for negotiating a universal agreement.
The primary holdout has been Britain, which has been reluctant to give up more access to Heathrow. Currently, only two US carriers - United Airlines and American Airlines can fly there, and only on a limited basis.
British Airways, the dominant carrier at Heathrow, did not fully embrace prospects for liberalisation. "Right now, the US proposal falls short of the legislative solution that could have delivered a very real transformational change to the restrictive ownership and control rules," said Andrew Cahn, the director of government and industry affairs for British Airways.
Virgin Atlantic was also critical of the deal. The airline founded by British entrepreneur Richard Branson said Europe rejected last year's proposal for favouring the United States. "Nothing has fundamentally changed," Virgin Atlantic chief executive Steve Ridgway said in a statement.
Earlier this month, the Bush administration transportation planners proposed to ease restrictions on overseas investment in US airlines, giving foreign investors more input into marketing, routing and fleet planning.
Seventy-five members of the House of Representatives, including 22 Republicans, have written to Transportation Secretary Norman Mineta opposing the ownership change.
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