Foreigners May Get Bigger Stake in U.S. Airlines

The Bush Administration is pushing Congress to raise the limit on foreign ownership of U.S. airlines to 49% of voting stock as soon as this year, Transportation Secretary Samuel K. Skinner said Thursday.

The legislative change would advance an administrative decision Skinner announced in January allowing foreigners to own up to 49% of the total equity of a U.S. airline, including stock, without rights to vote in corporate affairs.

The current legal limit on ownership of voting stock is 25%.

Opening the door to increased foreign investment would be good news for struggling American carriers, some of which would welcome a cash infusion without having to relinquish ultimate control.

Skinner said raising the limit would encourage investment. Foreigners might see such stakes as opportunities to gain better access to the huge, potentially lucrative U.S. domestic market.

British Airways said it supported the move, but some observers questioned whether foreigners would be interested in bailing out American carriers in exchange for minority interests.

“Our carriers need much wider financing alternatives so that they can grow and compete effectively in the world market, and so do European carriers and carriers all over the world,” Skinner said in a speech to the American Chamber of Commerce.

The airlines need financing to cover firm orders they have placed for $47 billion worth of new aircraft between 1991 and 1995, paying off debt and leases and for non-capital expenditures, he said.

Citing the move toward airline globalization, Skinner said, “The most important step we can take in this connection is to create an environment more receptive to foreign investment in the U.S. airline industry.”

The 49% level still would protect national security, he said.

Skinner later told reporters that there were protectionist interests in Congress who would oppose such a move, but “we believe that this particular point (49%) will have an excellent chance of moving Congress.”