BRUSSELS (Reuters) - A British-Spanish territorial dispute over Gibraltar threatened to block implementation of agreement by European Union member states on Wednesday to merge national air corridors to create shorter flight paths and cut costs and carbon dioxide emissions.
The Single European Sky initiative, launched in 2004, would merge corridors into transnational "blocks". But Spain wants Gibraltar airport excluded from EU aviation law until a dispute about sovereignty over the isthmus, a narrow strip of land connecting Gibraltar to Spain, is resolved.
"The Council has not taken any position on the application of this proposal to Gibraltar airport," the Council of the European Union, comprised of the EU's 28 member states, said in a statement.
Ana Pastor Julian, Spain's minister of public works and transport, described the airport, situated on the isthmus, as "an area which is being illegally occupied by the United Kingdom".
Britain says that under a 2006 Cordoba agreement between London, Madrid and the Gibraltarian government, Spain agreed to stop seeking the exclusion of Gibraltar airport from EU aviation measures.
"There is absolutely no reason at all for Gibraltar to be excluded from continuing participating in these measures," said Robert Goodwill, British under secretary of state for transport.
Under the current air corridor system, responsibility for airspace belongs to each country, which usually manages its flight paths and charges navigation and terminal fees, estimated by the Eurocontrol air traffic agency at some 8 billion euros a year.
Gibraltar, a rocky outcrop off Spain's southern coast ceded to Britain in 1713, has been an increasing source of diplomatic tension since the current Spanish government took office in 2011.
Spain claims the whole of Gibraltar, but views the isthmus as a distinct question. According to Spanish diplomatic sources, it was not included in the treaty ceding Gibraltar to Britain three centuries ago, so has always been Spanish territory.
Wednesday's agreement will need to be finalised in discussions with the European Commission and EU lawmakers - probably next year. However, until the wrangle over Gibraltar's airport is solved the updated airspace reform proposals cannot be implemented.
Reporting by Julia Fioretti; editing by Ralph Boulton