Unfair Business Practices Threaten U.S. Airlines
Open Skies and Flags of Convenience
In recent years, international aviation has seen developing headwinds to the pilot profession and to the competitiveness of U.S. air carriers. Some foreign airlines are unfairly attempting to get ahead in the global marketplace by using atypical business practices to avoid their home countries’ employment, tax, labor, and safety requirements. These companies seek to do business in the United States with unfair competitive advantages that hurt U.S. airlines and their workers.
If unchecked, the global growth of flag-of-convenience air carriers and other atypical employment practices will radically undermine labor relations, aviation safety, and the stability of the domestic airline industry.
The U.S. government must defend a fair and free marketplace for U.S. airlines and their employees. Permanently preventing unfair business models from taking root in the United States is critically important for American airline workers. We must take immediate steps to prevent the proliferation of job-killing business models—and you can help by joining our Call to Action.
Since the early 1990s, the U.S. policy of pursuing highly liberalized air service agreements—commonly referred to as “Open Skies” agreements—has provided increased market access opportunities for carriers, employees, passengers, and shippers. This policy has generally worked because it provided for fair and equal opportunities for carriers and employees of all countries to compete. Open Skies agreements created a mutually beneficial marketplace where foreign countries gained access to our market while we gained access to theirs, creating more jobs for all. However, this can only work if the terms of our air service agreements are properly enforced and regulators keep airline employees’ labor standards at the forefront of their view of public interest.
Flag-of-convenience airlines present a major anticompetitive hurdle. This practice, which originated in the maritime industry, allows an airline or holding company to locate and register its aircraft away from its home country in “convenient” locations with less-stringent employment, tax, and safety laws, thus shopping the globe for the most permissive legal, regulatory, safety, and labor environment available.
Similarly, “atypical” employment occurs when employers—through a variety of schemes—dissolve their direct relationship with their pilots and cabin crew, often by misclassifying pilots as self-employed or as independent contractors. Not only does this undermine the crews’ right to collectively bargain for pay, benefits, and working conditions, but it also dismantles the traditional employee-employer relationship that is vital to safety reporting.
While these dangerous practices can arise anywhere, the multilateral nature of the U.S.-EU Open Skies Agreement poses the unique ability to form flag-of-convenience operations. Accordingly, the United States and European Union agreed to a labor clause—Article 17 bis—to prevent these business practices from undermining European and American air carriers and their employees. Unfortunately, by choosing not to apply its statutory public-interest test in a flag-of-convenience case, the U.S. Department of Transportation (DOT) has chosen to willfully ignore this labor standard to the detriment of U.S. employees and airlines.
- Congress must require the DOT to conduct a public-interest test before issuing a foreign air carrier permit.
- Congress must add to the public-interest test an examination of whether a foreign air carrier is a flag of convenience or is otherwise undermining labor standards in a disadvantageous way to U.S. workers and carriers.
- Congress must ensure that new foreign air carrier permits issued by the DOT for EU airlines follow the labor clause (Article 17 bis) of the U.S.- EU Open Skies Agreement and uphold labor standards.
- DOT and the U.S. Department of State should prioritize labor standards when formulating international aviation policy.
- DOT should use its discretion to apply the public-interest test in all foreign air carrier licensing cases and ensure that the economic regulatory criteria governing employee and U.S. carrier interests (U.S.C. § 40101[a], 40101[a], respectively) cover flag-of-convenience carriers or otherwise prevent the diminishment of labor standards.
- DOT should restore the intent of the parties to the U.S.-EU Air Transport Agreement regarding labor standards as expressed through the labor Article 17 bis.
- The DOT should declare its interest in imposing conditions on any foreign air carrier with an operating certificate to ensure compliance with the public interest (49 U.S.C. § 41304), including temporary suspensions (provided under 49 U.S.C. § 41312). Finally, the DOT and Department of State must declare their intent to establish labor standards in all new Open Skies agreements or otherwise incorporate them where relevant for existing air service agreements.