Identifier
Created
Classification
Origin
10LONDON255
2010-02-04 10:15:00
CONFIDENTIAL//NOFORN
Embassy London
Cable title:  

UK SEES FOREIGN OWNERSHIP AS KEY ISSUE IN UPCOMING U.S.-EU SECOND STAGE NEGOTIATIONS IN MADRID

Tags:  EAIR ECON EU SENV SP UK 
pdf how-to read a cable
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FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 4857
INFO RUEHMD/AMEMBASSY MADRID PRIORITY 1269
RUEHMT/AMCONSUL MONTREAL PRIORITY
RHMFISS/FAA NATIONAL HQ WASHINGTON DC PRIORITY
RULSDMK/DEPT OF TRANSPORTATION WASHDC PRIORITY
RUEHBS/USEU BRUSSELS PRIORITY
C O N F I D E N T I A L LONDON 000255 

NOFORN
SIPDIS

PLEASE PASS TO EEB/TRA

E.O. 12958: DECL: 02/03/2020
TAGS: EAIR, ECON, EU, SENV, SP, UK
SUBJECT: UK SEES FOREIGN OWNERSHIP AS KEY ISSUE IN UPCOMING
U.S.-EU SECOND STAGE NEGOTIATIONS IN MADRID

REF: A. REF A: SECSTATE 9584
B. REF B: 09 LONDON 626

Classified By: Kathleen Doherty, Economic Counselor for reasons 1.4 (b)
, (d)

C O N F I D E N T I A L LONDON 000255

NOFORN
SIPDIS

PLEASE PASS TO EEB/TRA

E.O. 12958: DECL: 02/03/2020
TAGS: EAIR, ECON, EU, SENV, SP, UK
SUBJECT: UK SEES FOREIGN OWNERSHIP AS KEY ISSUE IN UPCOMING
U.S.-EU SECOND STAGE NEGOTIATIONS IN MADRID

REF: A. REF A: SECSTATE 9584
B. REF B: 09 LONDON 626

Classified By: Kathleen Doherty, Economic Counselor for reasons 1.4 (b)
, (d)

1. (C/NF) Summary: The British government reiterated its
view that the U.S. must lift some restrictions on foreign
ownership of U.S. carriers in the U.S.-EU second stage air
transport negotiations. UK officials at the Department for
Transport noted they agreed to the first stage negotiations
with the understanding the U.S. would loosen foreign
ownership restrictions in the second stage. They said
domestic political pressure to renegotiate the entire
agreement was mounting in both houses of the British
parliament. Finally, DfT noted that Spain, which will host
the next round of air transport negotiations, may be more
willing to agree to second stage negotiations if the U.S.
Department of Transportation grants Iberia airlines (along
with British Airways, American Airlines and others) antitrust
immunity. End Summary.

2. (C/NF) In a February 3 meeting at the Department for
Transport (DfT) offices, EconOffs met with Francis Morgan,
Head of International Aviation and Safety, and Simon Knight,
Head of Aviation Negotiations. EconOffs delivered the
demarche (Ref A) encouraging the UK to take a realistic and
pragmatic view of the upcoming round of second stage
negotiations in Madrid and indicating that the USG would not
change the law limiting foreign ownership and control of U.S.
airline carriers in the near future. Morgan responded with
some frustration to the latter point, noting that closing
second stage negotiations without a USG concession on this
issue is "not possible" due to domestic political pressure in
Britain. He said both houses of parliament are unsatisfied
with the results of the first stage negotiations (see Ref A
for background on first stage) and that a House of Commons
committee suggested in December that the UK should start from
scratch and renegotiate the entire agreement.

3. (C/NF) Morgan stated the UK "needs the U.S. to go as far
as possible" on loosening foreign ownership restrictions. He
said DfT "went out on a
limb" when they pushed HMG to agree
to open Heathrow Airport up to greater foreign competition in
the first stage; which they did, according to Morgan, with
the understanding that the U.S. would make concessions on
foreign ownership in the second stage. DfT views the first
stage as a fair deal for the British, Morgan noted, but the
public and parliament saw Heathrow as the UK's best
bargaining chip to leverage negotiations and they feel that
DfT squandered it in the first stage agreement. Morgan feels
that if the UK were to conclude second stage negotiations
without anything to show, the domestic political pressure to
pull out of the first stage agreement will increase. He
urged the U.S. administration to "think hard on this" and
give the UK "some recognition." Morgan said the U.S. "should
be under no illusion (second stage) will be easy. We can't
just close negotiations and wrap it up", but said there is
room for "creativity" and that it all depended on "the proper
words."

4. (C/NF) American Airlines, British Airways, Iberia
airlines, Finnair and Royal Jordanian Airlines have filed a
Joint Application with the U.S. Department of Transportation
(DOT) for antitrust immunity (ATI) for airline alliance
agreements, which DOT is due to rule on in the near future.
While the UK claims it is not drawing a link between what
happens with the ATI ruling and second stage talks, Morgan
said Spain may see the two as being closely linked. (Note:
Spain is hosting the next round of stage two negotiations in
Madrid on February 16-17 and also holds the EU presidency
until July. End Note.) Morgan also noted that British
Airways could walk away from any ATI agreement which is not
satisfactory, and if they did that "all bets were off".

5. (C/NF) Comment: The UK's frustration over the USG's
apparent unwillingness to loosen limitations on foreign
ownership of U.S. carriers was expected. Their argument that
political pressures may require revisiting of first stage
"concessions" is virtually the only card they can play. It
is difficult to gauge whether British members of parliament
(MP) - or British airlines - would realistically press for a
renegotiation of the entire U.S.-EU air transport agreement
should there be insufficient progress in second stage talks,
as Morgan suggested. British Airways, Virgin and others are

already taking advantage - to the extent the current economic
climate allows - of the benefits the first stage brought
them. In addition, British elections are due this spring and
more than one-fifth of current MPs are expected to lose their
seats. Should this be the case, many of the old guard who
felt the UK gave up too much in the first stage without
getting much in return, may not be around to pressure DfT.
End Comment.

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