Brussels to push for EU-US airline mergers The EU is to make a renewed push to persuade Washington to relax its stringent foreign ownership rules on airlines in the belief that combined EU and US carriers would be better able to compete with fast-expanding rivals in the Gulf and China. Siim Kallas, the European commissioner responsible for transport, told the Financial Times that consolidation between EU and US airlines could result in better capitalised groups that could afford the next generation of fuel-efficient aircraft. "American and European carriers can together form a powerful alliance," he said. However, he admitted Brussels" efforts to persuade the US to reform its foreign ownership rules that prevent airline mergers could be stymied by Washington's objections to the EU's contentious scheme under which European and foreign carriers must pay for their carbon dioxide pollution. Mr Kallas, an Estonian, is proposing an overhaul of the EU's aviation policy to fortify Europe's airlines. Many of them are facing losses this year, unlike their Asian and US peers, because they have been hit harder by the economic downturn. The most hotly debated proposal is expected to be Mr Kallas" push to reform the US rules under which foreign companies can only own 25 per cent of the voting shares in a US airline. He described these rules as a "relic." "There is a general assumption among all experts . . . that [airline industry] consolidation brings more capital desperately needed to renew [aircraft] fleets," he added. Mr Kallas suggested the US should at least be prepared to accept similar ownership rules to the EU, which allow non-European companies to own up to 49 per cent of the voting shares of a European airline. The Commission believes mergers between EU and US carriers - which dominate routes over the North Atlantic, the world's most valuable international market by revenue - could act as a catalyst for global consolidation of the airline industry. However, Washington has resisted Brussels" previous attempts to secure changes to the American rules, notably during negotiations on the 2007 "open skies" agreement between the US and EU under which they opened up each region's aviation markets. Changes to the US rules would require a new law and Congress has been reluctant to act, partly because airline worker unions, notably those representing pilots, fear their jobs would be put at risk if American carriers combine with their EU peers. The US department of transportation, which enforces the US rules, said it has no plans to ask Congress for a change in the law. Meanwhile, Mr Kallas is keen to draw up new rules to tackle unfair practices in the aviation industry, following complaints by some European airlines, led by Germany's Lufthansa, that they are not competing on a level playing field with the state-controlled Gulf carriers. These carriers - Emirates Airline, Etihad Airways and Qatar Airways - deny receiving government subsidies. But Lufthansa complained in May that the airlines based in the United Arab Emirates - Emirates and Etihad - had far greater access to the German market than it and other German carriers enjoyed in the UAE. "This is a very widespread opinion among European aviation communities, that Gulf carriers present a real danger," said Mr Kallas. Although he declined to endorse Lufthansa's concerns, he believes the commission's existing measures to tackle unfair competition are outdated and ineffective. Mr Kallas" most basic proposal is to negotiate new EU-level air transport agreements with China, the Gulf states, India, Japan, Russia and 10 countries in the Association of Southeast Asian Nations group, including Indonesia and the Philippines. Such liberalisation agreements would provide EU airlines, and the carriers in the signature countries, greater access to each other's markets. Brussels estimates annual economic benefits worth €12bn could be reaped from these agreements, mainly in the form of reduced air fares after increased competition on liberalised routes. Mr Kallas is hoping that EU transport ministers will endorse his proposed overhaul of European aviation policy at a meeting in December. But he admitted the intense row between the EU and countries objecting to the bloc's inclusion of foreign airlines in its carbon emissions trading scheme could slow progress on much of the policy overhaul. The row is threatening to unleash a global trade war. Airbus, the European aircraft maker, claimed in March that China's objections to the EU carbon scheme were preventing it from finalising jet sales worth $14bn.