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MARK AUSTIN THOMAS: The U.S. government has scrapped a plan to give foreign investors more influence over domestic airlines. This ends a 13-month struggle with labor unions and Congress. It's a setback for the Bush administration and has dimmed prospects for the so-called "Open Skies" treaty with the European Union. Its goal was to increase trans-Atlantic competition. More from Stephen Beard in London.

STEPHEN BEARD: The U.S. proposal had been designed to meet a key European demand.

What the EU was saying was this: if American carriers want freer access to European airspace, the U.S. must allow European airlines to get more heavily involved in the U.S.'s domestic market.

The plan would have given foreign investors more of a say in the marketing of airlines, flight schedules and types of aircraft operated within the U.S.

Now the Transport Secretary has withdrawn the plan, the outlook for Open Skies is cloudy says Kieran Daly of Air Transport Intelligence:

KIERAN DALY: The prospect of the European carriers gaining significant U.S. market access has now really closed down. Now there's not enough on the table for the Europeans to be able to move forward at all.

American opponents of the plan said that giving foreigners more control over U.S. aviation might weaken security and lead more American carriers to order their planes from Airbus not Boeing.

In London, this is Stephen Beard for Marketplace.