National Defense

Keep U.S. Airlines Strong: Maintain Current Foreign Ownership and Cabotage Restrictions

Laws governing ownership of U.S. airlines require that effective and actual control of a U.S. air carrier is held by U.S. citizens. These rules address a key concern of U.S. airline employees—that they receive a fair share of international flying opportunities.

 Foreign control of U.S. carriers could result in the loss of flying opportunities for U.S. carriers, resulting in a loss of U.S. pilot and airline worker jobs as foreign air carriers allocate flying opportunities to their own workers rather than those of the U.S. carrier in which they have a stake.

The ownership and control laws also are rooted in basic safety and security considerations to ensure that U.S. air carrier aircraft are available in times of national emergency. The most obvious example of how this need is met is through the Civil Reserve Air Fleet (CRAF), a U.S. Department of Defense (DOD) program that uses U.S. airlines to provide airlift for DOD, using contractually committed aircraft, when the need for airlift exceeds the capability of military aircraft. As of June 2014, 24 airlines had enrolled 553 aircraft in CRAF. Amending foreign ownership rules could have a direct, negative impact on national security because non-U.S. majority owners would not have the incentives to use their aircraft for U.S. military purposes that U.S. majority owners do.

In a related matter, ALPA remains concerned about proposals to allow for a foreign airline of one country to be owned and controlled by another country’s citizens, and be permitted to operate to the United States. ALPA believes that the United States should retain the right to object on a case-by-case basis to particular ownership structures of airlines that wish to serve the United States.

During the U.S.-EU air service negotiations between 2003 and 2010, the European Union (EU) sought to liberalize ownership and control rules for airlines of both sides, but failed in an attempt to have the U.S. DOT change its ownership and control rules. Currently, the United States Trade Representative (USTR) is in the process of negotiating a bilateral free-trade agreement with the EU, known as the Transatlantic Trade and Investment Partnership (TTIP). The EU is seeking to include air services, and thus airline ownership and control rules, within the TTIP. Adding air services to the TTIP negotiations is an attempt by the EU to gain now what it could not achieve earlier. Access to purely U.S. domestic markets is another long-term goal by the EU and others.

ALPA remains concerned about proposals put forward in the past by the U.S. government to allow for third-country ownership and control of foreign airlines. ALPA believes that the United States should retain the right to object on a case-by-case basis to particular ownership structures of airlines that wish to serve the United States.

The United States has by far the largest and most complex domestic traffic market of any country. Allowing foreign air carriers to conduct cabotage operations—the transport of local traffic between two points in the same country by an airline of another country for compensation—would permit them to operate flights in this market in direct competition with U.S. carriers.

The practice of cabotage is contrary to basic U.S. employment policy altogether, as no other industry permits foreign companies to operate in the U.S. domestic market with workers who are subject to the labor laws of that company’s home country. During the U.S.-EU negotiations, the EU sought to include an exchange of cabotage rights in a new U.S.-EU agreement. From time to time, other negotiating partners have also proposed an exchange of cabotage rights with the United States. To date, the U.S. government has firmly rejected these proposals.


Flight Plan

The United States must maintain its current foreign ownership and control and cabotage restrictions. The United States must also maintain its case-by-case ability to approve or reject third-country ownership and control of foreign air carriers seeking permission to operate to the United States.

The United States should inform all parties with whom it is currently negotiating any general trade or services agreement—including the TTIP—that air services is not a negotiable item, and that matters pertaining to international air traffic rights will continue to be negotiated by the Department of State and Department of Transportation. Congress should reinforce this message to both the USTR and all trading parties.