The EU says the deal will create up to 80,000 jobs spread equally between Europe and the United States and put 26 million more people on transatlantic flights.

If approved, the deal is expected to come into force in October.

US ownership rights

Industry sources say Britain will vote against the deal unless there is a delay in its implementation and an automatic termination if talks for a second stage - when the EU will push for greater ownership rights of US airlines - are not under way by 2010.

US rules limit foreign investment in American carriers to 25 per cent of voting-rights, whereas US companies can control up to 49 per cent of EU carriers - a key sticking point for Europe.

Italy's Finanza & Mercati newspaper reported that Rome could join Britain in blocking the deal, because of a perceived threat to flag carrier Alitalia.

"There is no Italian position yet. It is being decided ahead of tomorrow's meeting of EU transport ministers," a spokesman for Alessandro Bianchi, Italy's transport minister, said on Wednesday.

But one EU diplomat told Reuters news agency said there was cautious optimism that a deal would be reached on Thursday.

"It should be doable, but it's not completely in the dry dock," he said.

European and US airlines largely support the deal.

'Right direction'

Anthony Concil, spokesman for international airline industry group International Air Transport Association, said: "We welcome the agreement and hope that it's approved.
 
"It's not the great leap forward that's going to fundamentally change the industry, but it's a step in the right direction, so let's take it."

But British Airways Plc (BA), which stands to lose lucrative market share at Heathrow Airport, has objected.

Currently only British Airways, Virgin Atlantic, AMR Corp's American Airlines and UAL Corp's United Airlines are allowed to fly transatlantic routes through Heathrow.

The new rules would abolish those restrictions but would not create extra takeoff and landing slots at the busy aviation hub.

Speculation that "open skies" would trigger airline mergers boosted shares in BA and Spain's Iberia on Wednesday.