Timeline of Opposition to Foreign Control of U.S. Airlines

Almost from its very beginnings, commercial air transport has been recognized as a critical component of a nation’s economic and security infrastructure. Most countries have laws to preserve and foster their own domestic air transport systems, motivated by the desire to maintain air service that is self-reliant and free from undue foreign influences. For example, virtually all nations prohibit cabotage, which is the practice of allowing a foreign carrier to pick up and/or discharge traffic traveling between domestic points within its own borders. For similar reasons, many nations limit foreign investment in, and control of, their own airlines. Up until now, both U.S. law and administrative policies have reflected this philosophy.

On Nov. 7, 2005, the U.S. Department of Transportation (DOT) issued a notice of proposed rulemaking (NPRM) that would overturn longstanding policies prohibiting foreign interests from exercising actual control over U.S. airlines.

Current law forbids foreign citizens from owning more than 25 percent of a domestic airline’s voting stock, and operations must be under the "actual control" of U.S. citizens. Although the DOT’s recent NPRM would leave the 25 percent limit unchanged, the Department would redefine the term "actual control" to significantly expand opportunities for foreign citizens to manage U.S. airlines.

DOT’s proposal is a radical break from law and past policy

This DOT proposal, which would grant foreign investors the authority to determine key operational and economic decisions, including fleet planning, route structure, pricing, and marketing, completely fails to address the potential impact of the proposed changes on wages, working conditions, and the collective bargaining process.

In a Nov. 15, 2005, letter to Congress, ALPA president Duane Woerth stated that "DOT’s proposed action is blatantly inconsistent with congressional intent, it fails to address a number of public policy factors established by Congress, sets forth a completely unworkable test definition of control, and is based on unsound premises about how the rule would affect wide-ranging operations throughout the airline industry.”

ALPA adamantly opposes DOT’s proposal, because

In 2003, when the Bush administration proposed raising the voting stock cap from 25 percent to 49 percent, the effort was roundly rejected on Capitol Hill. In response to that particular proposal, Congress enacted language as part of the Federal Aviation Administration’s last reauthorization bill that codified the rule that U.S. airlines must be under the actual control of U.S. citizens. The issuance of the NPRM is now the Bush administration’s sleight-of-hand attempt to circumvent Congress.

Why now?

The White House seeks to change the rule in order to help the administration finalize an open-skies treaty with the European Union. Even though foreign control is not covered in the current open-skies tentative agreement, the tentative accord is expressly contingent on the E.U. being satisfied with the outcome of the NPRM process.

Immediate objection to the DOT’s process and policy on Capitol Hill

On Nov. 15, 2005, 85 members of the U.S. House of Representatives, including 24 Republicans, sent a letter of protest to the DOT. "The NPRM is a back door effort to accomplish what the Department (of Transportation) has failed to accomplish by legislation," the representatives wrote. "We believe that the Department has overstepped its authority in this proposal with its revised interpretation of ‘actual control’ as it relates to the citizenship of a U.S. airline, and we urge the Department to withdraw the NPRM."

A similar letter of objection was sent by Sens. Frank Lautenberg (D-NJ), George Voinovich (R-OH), Mike DeWine (R-OH), Daniel Inouye (D-HI), and Jon Corzine (D-NJ) to DOT on Nov. 16, 2005. The NPRM “goes beyond the scope of current law … adopted only two years ago," states the letter. "Any changes to current law on ownership and control of U.S. airlines would require extensive review and public debate … to consider the impacts any proposed changes to current law would have on U.S. jobs, our national defense, homeland security, and the financial stability of the U.S. airline industry."

Administration dismisses congressional opposition

The administration’s response to these initial congressional protests was both disingenuous and dismissive. The truncated public comment period on the original NPRM, which ran in large part over the 2005 holiday season, was an obvious maneuver to limit public scrutiny. A key DOT official told an Airports Council International Conference on Dec. 1, 2005, that, while the DOT welcomed all comments about the proposal and its impact on the public interest, the NPRM was nonetheless moving forward because the DOT had the authority and broad scope to interpret the statute as it chose.

Legislation introduced in both houses of Congress

With no sign that the administration would withdraw the proposed rule, members of Congress from both houses introduced legislation to reassert their jurisdiction over this issue.

H.R. 4542, which would prohibit the DOT from issuing a final rule for one year and would direct the Department to bring the proposal before Congress was introduced on Dec. 14, 2005. More than 190 members of the U.S. House have co-sponsored that bill. On Feb. 8, the U.S. House Aviation Subcommittee held a hearing on the DOT proposal. ALPA’s president Duane Woerth voiced pilots’ serious concerns about the proposed shift in national policy. Subcommittee members from both parties present at the hearing were nearly unanimous in their objection to the proposal.

A similar bill, S. 2135, was introduced in the Senate on Dec. 16, 2005. Hearings were held on the bill in the Senate Aviation Subcommittee on May 9, 2006. Capt. Duane Woerth testified in strong support of the bill and in strong opposition to DOT’s proposal.

The Senate Appropriations Committee included and passed language in the Senate Supplemental Appropriations bill on April 4, 2006 that would prohibit the DOT from spending any funds to issue or to implement the proposal before Oct. 1, 2006. The vote was an “undeniable signal that Congress is united in opposing this radical change because of its implications for our country’s airline industry, national defense, and jobs,” according to Woerth.

DOT issues “supplemental” NPRM

On May 3, 2006, the DOT issued a “supplemental” NPRM in a purported attempt to address congressional concerns about the proposal without actually changing any of its substance. “Erecting a firewall around safety and security operations within the corporate governance of a U.S. airline is simply not possible,” said Woerth about the repackaged proposal. “As a former member of a board of directors, I can assure you that the dominant investor wields the power to appoint and remove directors, no matter what the fine print of federal regulations may say.”

Congressional opposition continues to build on both sides of the political aisle

On June 14, the House of Representatives passed the Oberstar-LoBiondo-Poe amendment to the Transportation-Treasury-HUD Appropriations bill. The amendment passed in an overwhelming 291-137 bipartisan vote and would prohibit the DOT from using funds to implement any change in the rules prohibiting foreign control of U.S. airlines.

In a June 22 letter to the Secretary of Transportation, key members of Congress, including House Armed Services Committee Chairman Duncan Hunter (R-Calif.), called on the DOT to end its current rulemaking on foreign control of U.S. airlines.

The letter, to then Secretary of Transportation Norman Mineta, states: “As was made clear in the debate in the House, we and many of our colleagues believe that the DOT has no legal authority to ‘interpret’ the statutory requirement that U.S. citizens must have ‘actual control’ of a foreign airline, to mean that U.S. citizens only need to control safety, security and the Civil Reserve Air Fleet program, and that foreign citizens may control all of an airline’s commercial decisions, such as the cities served, the fares charged, and the aircraft purchased.”

On July 20, 2006, the Senate Appropriations Committee voted in favor of the Inouye-Dorgan-Specter amendment to the Transportation Appropriations bill. The amendment, which is identical in substance to the Oberstar-LoBiondo-Poe amendment in the House, was passed by an overwhelming 19-6 bipartisan vote.

In his statement to the news media on the Senate vote, Woerth said:

“The DOT has blatantly ignored concerns raised by the U.S. House when it passed the Oberstar-LoBiondo-Poe amendment to the Transportation Appropriations bill by a landslide 291-137 bipartisan vote in June. Congress has told the DOT to halt its effort numerous times, yet the agency’s stubborn refusal to heed the will of Congress has forced the Senate Appropriations Committee to address this issue again.

“Sens. Daniel Inouye, Byron Dorgan, and Arlen Specter have taken a strong stand for the working people of this country, our nation’s defense, and the U.S. airline industry, which is just now beginning to regain its financial strength.

“Resounding opposition from both houses of Congress and from both sides of the aisle is an unmistakable directive: The DOT and the administration must immediately shelve this ill-conceived proposal and bring any attempt to overturn the current law prohibiting foreign control of U.S. airlines before Congress.”

Directive to DOT clear: Halt rulemaking immediately

With such broad opposition to the DOT’s process and policy to turn over control of U.S. airlines to foreign interests, it is incumbent on the administration to stop its brazen bid to unilaterally overturn existing law now. Congress must reassert its authority over the DOT’s proposal and fully debate and decide whether any change to the long-standing law prohibiting foreign control of U.S. airlines is necessary.

The DOT pledged to issue the rule as early as August, but elected to slow timeline

In spite of dramatic and overwhelming Congressional opposition, the DOT appeared to remain stubbornly committed to overturning the current prohibitions on foreign control of U.S. airlines.

On August 17, U.S. government officials informed ALPA that the DOT is delaying until at least later in the year a rulemaking that would allow foreign interests to control U.S. airlines. The Administration also told European Union officials that it would not meet the EU's summer deadline to finalize the rulemaking because of insufficient time to address Congress’s concerns.

While the DOT reportedly insisted that the rulemaking will go forward at some point, the decision to delay it now acknowledges the serious questions surrounding the misguided policy, including its potential effect on U.S. airline-industry safety, security, national defense, and jobs.