Business Notes

Should foreign airlines be allowed to hold major stakes in U.S. carriers? The old answer, motivated by national pride and security concerns, was no. The new answer, influenced by the dire financial condition of many U.S. airlines, is yes -- within limits. Last week Transportation Secretary Samuel Skinner increased the allowable size of a foreign carrier's stake in a U.S. airline to 49% of equity, up from 25%.

The plan is intended to help infuse struggling U.S. airlines with capital at a time when they are suffering from recession, a wartime travel slump and high fuel costs. Earlier this month, cash-starved Eastern Airlines shut down after 62 years. Both Continental and Pan Am are operating under Chapter 11 protection. One immediate beneficiary of the new policy is KLM Royal Dutch Airlines, which will be allowed to keep most of the 57% stake it bought in Northwest Airlines in 1989. Skinner believes that the infusion of foreign money will boost competition in the airline industry and help keep fares down.