Government officials hope to keep abreast of new developments after US President Bill Clinton was urged to void a controversial 20-year old aviation treaty between the US and the UK that regulates Bermuda air traffic.

The `Bermuda Two' agreement, signed on the Island in 1977, also is the prime policy document regulating air traffic between the US and the UK.

But negotiations to re-work the deal last month have reached an impasse. The stumbling block is a US demand for a free market policy to remove restrictions on access to London's major airport for most US air carriers.

US negotiators walked away from the first formal talks in 20 months on an `open skies treaty', declaring the British were stalling on key issues.

Talks were suspended indefinitely, leaving a trans-Atlantic policy for air traffic, that includes Bermuda, in limbo.

The UK refused a 1994 Bermuda request to be allowed to negotiate her own air service agreements with the US. But the Island won approval for input into the current talks, by being given the option to consult with the UK.

A Cabinet committee (including the Ministers of Tourism and Transport) has awaited the conclusion of the Bermuda Two negotiations. Local officials have met with UK officials, but can only make formal requests once the broad terms of the treaty are finalised.

Bermuda's options were to include remaining with the provisions that exist for the Bermuda Two agreement, accepting a new deal under the anticipated new open skies treaty (Bermuda Three), or participating in a group arrangement with Britain's other dependent territories.

"Generally,'' said Tourism Minister David Dodwell, "we don't support the third option of a multi-lateral arrangement, because there are differences among all of these territories. Cayman Islands, for example, has its own airline.'' Mr. Dodwell said, "The Cabinet committee would have to look at the Bermuda Three agreement when it is finally produced, and make recommendations as to what the Bermuda Government should do after that.'' He agreed that Bermuda would seek an improvement to current arrangements, anyway.

He said: "We're interested in the whole issue of open skies. These talks are important to us. Right now, we have to take any airline that comes out of the UK, but we don't have any ability to negotiate for European airlines. Under Bermuda Two, they would need special permission.

"We are well served by British Airways. We have more flights, more seats and good fares. But we want the flexibility to negotiate ourselves. We want to be able to consider our options.

Bermuda Two threat "And we can't do anything, until a new agreement is reached.'' Meanwhile, US Airways president Stephen Wolf wants his government to put the squeeze on Britain by cancelling the current pact.

In a fiery statement issued by the carrier, he said: "The UK is simply not prepared to permit the transatlantic marketplace to be governed by principles of free competition.'' The dispute is of interest for other reasons. US regulators won't allow the announced air alliance between American Airlines and British Airways, before a new open skies agreement is agreed to by the two countries.

The US wants protectionist measures that have favoured British Airways abolished and it wants open access to UK airports for all US airlines. Under Bermuda Two, American and United Airlines are the only US carriers that can fly to Heathrow Airport. US Airways has limited flights to Gatwick airport under the treaty, but wants to expand its trans-Atlantic traffic.

Mr. Wolf wrote to President Clinton last month that the Bermuda Two agreement "is an anachronism that obstructs further progress in the trans-Atlantic market, seeks to perpetuate colonial protectionism into the next century, and denies the travelling public the true benefits of competition.'' He accused the UK of seeking only "to deter competition and perpetuate its dominance of the US-UK market.'' Mr. Wolf claimed, "For over 20 years, the UK has withstood all of the unrelenting attacks on the agreement and has steadily increased its dominance in the US-UK market to the detriment of US consumers.

"At this point there is only one proper course of action for the US government to follow: renounce Bermuda Two.'' If repudiated, the agreement terms remain in force for one year after which air travel usually continues on a reciprocal basis until a new agreement is negotiated.

The UK unilaterally renounced the first Bermuda agreement, a more consumer-friendly, pro-competition pact, in 1976 and threatened to block all air service unless the US agreed to the more restrictive Bermuda Two accord.

President Clinton has led the negotiation of most of the current 31 open skies agreements the US has with other countries.