Author: John Crawley

WASHINGTON, June 14 (Reuters) - The U.S. House of Representatives voted on Wednesday to delay for one year a Bush Administration proposal to ease restrictions on foreign investment in U.S. airlines.

The vote, mainly pushed by pro-labor Democrats, could upset plans by the Transportation Department to finalize a tentative "Open Skies" agreement with Europe to broaden transatlantic travel by commercial carriers.

The administration wants to change long-standing federal law that gives overseas investors no influence over domestic airline operations, including pricing, scheduling and fleet planning.

Transportation planners argue the provision, if enacted, could spur new capital investment in a struggling domestic industry and introduce new competition.

The proposal is supported by United Airlines <UAUA.O>, a unit of UAL Corp., which is expanding overseas flights, but opposed by Continental Airlines <CAL.N>, which flies internationally, but thinks U.S. aviation policy gives away too much to Europe.

Attempts to derail the proposal in Congress appeared to fade last week, but a new push in recent days gained sharp momentum on the House floor during debate on a transportation spending bill.

A handful of lawmakers with strong backing from airline pilots and other labor groups aggressively pushed an amendment to delay the investment proposal, saying enhanced foreign ownership could undercut U.S. economic interests and cost American jobs.

They also argued that allowing foreigners to have a meaningful interest in U.S. airlines could compromise homeland security and possibly disrupt a Pentagon program that uses commercial airlines to transport troops during wartime.

The House passed the amendment, 291-137, before approving the overall transportation bill for the fiscal year beginning next October.

The Senate has yet to take up the transportation legislation.

But mere House passage means the investment issue will likely be resolved by a committee of congressional negotiators, who will have to reconcile final transportation spending legislation. That could take weeks or months or months to complete.

The Transportation Department would not comment on the House vote.

The administration is under pressure from Europe to have the investment matter wrapped up this summer so European Union transportation ministers can review the "Open Skies" agreement in October. A spring deadline for action was already missed because of congressional misgivings.

Administration proponents say the foreign ownership plan would not harm security or prevent the military from moving troops and equipment when needed.

Opponents of the proposal also exploited anti-foreign sentiment that flared during a controversy earlier this year over a Dubai-based company's plans to manage several big U.S. ports. That plan, initially approved by the administration, was scrapped after a congressional uproar.