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The European Union has intensified its warning to the U.S. that efforts to deregulate the transatlantic aviation market could be "dangerously" impaired by proposed legislation before Congress, threatening talks slated for later this year.

The E.U. is echoing industry concerns about language attached to the bill that could unwind the existing system of global alliances, curb overseas investment in U.S. carriers and hamper an existing transatlantic aviation safety agreement.

John Bruton, the E.U.'s Washington D.C. ambassador, expressed the concerns in a letter this week to Ray LaHood, the U.S. transportation secretary.

It comes as the DOT reviews separate applications for anti-trust immunity, or ATI, involving Star and Oneworld, two of the three global alliances, as well as questions raised about whether Virgin America complies with existing ownership rules.

The European Commission arm of the E.U. had already expressed some of its misgivings last week to U.S. Rep. James Oberstar, D-Minn., chairman of the House of Representatives transportation committee.

Bruton told LaHood that "restrictive measures" in the FAA bill that has already passed the House transportation committee may could "hamper" the so-called open skies deal introduced between the U.S. and the E.U. last year and "dangerously impair" further liberalization ahead of talks later this year.

The proposed legislation before the House approves funding for long-term plans to modernize the aging U.S. air-traffic control system, but has been used to revive longstanding concerns among some lawmakers about overseas ownership and the competition issues raised by alliances. Oberstar has argued that the provisions on airline alliances and foreign ownership are designed to ensure the industry doesn't fall into the hands of several international conglomerates. He added U.S. airlines must remain controlled by U.S. citizens so that matters such as pricing and scheduling aren't determined by investors overseas.

The E.U. is also concerned about a provision on inspecting aircraft maintenance bases, which it said "contradicts" the E.U.-U.S. Aviation Safety Agreement signed last year. It said the negative impact would be greater on U.S. repair and pilot training facilities, costing around $140 million a year in higher costs and lost revenues.

AMR Corp. (AMR), parent of American Airlines, and British Airways PLC (BAY.LN) are seeking ATI for themselves and other members of Oneworld, and hope to secure approval by year-end. Continental Airlines Inc. (CAL) is also seeking ATI ahead of its planned entry to the Star alliance later this year, alongside the United Airlines unit of UAL Corp. (UAUA), Deutsche Lufthansa AG (LHA.XE) and other carriers.

Continental expects to hear from DOT in May. "I think Congressman Oberstar is off on a mission that is detrimental to the airline industry," Continental President Jeff Smisek told Dow Jones Newswires this week.

-By Doug Cameron, Dow Jones Newswires; +1 312 750 4135, doug.cameron@dowjones.com