European Union transport ministers have rejected a current US offer for an aviation agreement and want further negotiations, European Transport Commissioner Mr Loyola de Palacio said this afternoon.
"We are going to continue negotiations to try and improve the current situation," she told reporters. Further talks on an "open skies" pact would focus on gaining more access for EU carriers to the US domestic market.
She said the EU would try to win more concessions on that issue before an EU-US summit later this month.
The talks between the EU and the US began after an EU court ruled that US bilateral agreements with individual EU states broke European rules which create a single internal market for the bloc.
So far, the States has agreed to let EU investors own up to 49 per cent voting stock in a US carrier, up from 25 per cent.
But it balked at allowing European carriers to fly US domestic routes, a process known as cabotage. Under current bilateral agreements with individual EU countries, US airlines have this right in some cases. De Palacio said this created an "imbalance" in the market.
Britain, crucial to any EU open skies deal because of its large share of the transatlantic market and because US carriers are anxious to gain more access to London's Heathrow airport, has said it would not support an agreement without better access to the US domestic market.