[Senate Hearing 113-567]
[From the U.S. Government Publishing Office]



 
                                                        S. Hrg. 113-567

                  THE U.S. AVIATION INDUSTRY AND JOBS:
               KEEPING AMERICAN MANUFACTURING COMPETITIVE

=======================================================================

                                HEARING

                              BEFORE THE 

       SUBCOMMITTEE ON AVIATION OPERATIONS, SAFETY, AND SECURITY
       
				OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 13, 2014

                               __________

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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

            JOHN D. ROCKEFELLER IV, West Virginia, Chairman
BARBARA BOXER, California            JOHN THUNE, South Dakota, Ranking
BILL NELSON, Florida                 ROGER F. WICKER, Mississippi
MARIA CANTWELL, Washington           ROY BLUNT, Missouri
MARK PRYOR, Arkansas                 MARCO RUBIO, Florida
CLAIRE McCASKILL, Missouri           KELLY AYOTTE, New Hampshire
AMY KLOBUCHAR, Minnesota             DEAN HELLER, Nevada
MARK BEGICH, Alaska                  DAN COATS, Indiana
RICHARD BLUMENTHAL, Connecticut      TIM SCOTT, South Carolina
BRIAN SCHATZ, Hawaii                 TED CRUZ, Texas
EDWARD MARKEY, Massachusetts         DEB FISCHER, Nebraska
CORY BOOKER, New Jersey              RON JOHNSON, Wisconsin
JOHN E. WALSH, Montana
                    Ellen L. Doneski, Staff Director
                     John Williams, General Counsel
              David Schwietert, Republican Staff Director
              Nick Rossi, Republican Deputy Staff Director
   Rebecca Seidel, Republican General Counsel and Chief Investigator
                                 ------                                

       SUBCOMMITTEE ON AVIATION OPERATIONS, SAFETY, AND SECURITY

MARIA CANTWELL, Washington,          KELLY AYOTTE, New Hampshire, 
    Chairman                             Ranking Member
BARBARA BOXER, California            ROGER F. WICKER, Mississippi
BILL NELSON, Florida                 ROY BLUNT, Missouri
MARK PRYOR, Arkansas                 MARCO RUBIO, Florida
AMY KLOBUCHAR, Minnesota             DEAN HELLER, Nevada
MARK BEGICH, Alaska                  TIM SCOTT, South Carolina
BRIAN SCHATZ, Hawaii                 TED CRUZ, Texas
CORY BOOKER, New Jersey              DEB FISCHER, Nebraska
JOHN E. WALSH, Montana               RON JOHNSON, Wisconsin
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 13, 2014...................................     1
Statement of Senator Cantwell....................................     1
Statement of Senator Ayotte......................................     4
Statement of Senator Klobuchar...................................    40
Statement of Senator Fischer.....................................    42
Statement of Senator Scott.......................................    44
Statement of Senator Thune.......................................    45
    Prepared statement...........................................    46

                               Witnesses

Dennis Muilenburg, Vice Chairman, President and Chief Operating 
  Officer, Boeing................................................     5
    Prepared statement...........................................     7
Hon. Marion C. Blakey, President and Chief Executive Officer, 
  Aerospace Industries Association of America....................    10
    Prepared statement...........................................    12
Nicholas Calio, President and Chief Executive Officer, Airlines 
  for America....................................................    17
    Prepared statement...........................................    19
Edward Wytkind, President, Transportation Trades Department, AFL-
  CIO............................................................    22
    Prepared statement...........................................    24

                                Appendix

Letter dated March 13, 2014 to Hon. John D. Rockefeller IV, Hon. 
  Maria Cantwell, Hon. John Thune and Hon. Kelly Ayotte from 
  Daniel B. Fisher, Vice President of Legislative Affairs, 
  Aeronautical Repair Station Association........................    51
Response to written question submitted by Hon. Amy Klobuchar to:
    Hon. Marion C. Blakey........................................    55
    Nicholas Calio...............................................    55


                  THE U.S. AVIATION INDUSTRY AND JOBS:


              KEEPING AMERICAN MANUFACTURING COMPETITIVE

                              ----------                              


                        THURSDAY, MARCH 13, 2014

                               U.S. Senate,
  Subcommittee on Aviation Operations, Safety, and 
                                          Security,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 11:05 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Maria 
Cantwell, Chairman of the Subcommittee, presiding.

           OPENING STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. The Senate Commerce Committee, 
Subcommittee on Aviation will come to order. And I want to 
thank my colleague, Senator Klobuchar, for being here. I know 
that Senator Ayotte is finishing up her questioning at an Armed 
Services Committee meeting at this moment and will be here 
shortly to give her comments and statement, but since everybody 
is on a tight timeframe this morning we want to go ahead and 
get started.
    I want to thank our witnesses that are here with us today: 
Dennis Muilenburg, Vice President and Chief Operating Officer 
from Boeing Commercial Airplane Company, thank you for being 
here; the Honorable Marion C. Blakey, President and CEO of 
Aerospace Industries Association, and obviously we're very 
familiar with much of your work in the past; Nick Calio, 
President and Chief Executive Officer of Airlines for America; 
and Ed Wytkind. Is it Wytkind?
    Mr. Wytkind. Wytkind.
    Senator Cantwell. Wytkind, President of the Transportation 
Trades Department, the AFL-CIO.
    So first, before we turn to the subject of the hearing, I 
want to offer my condolences to the families and the victims of 
the Malaysian Flight 370. Our thoughts are with them. I know 
there are several search parties and investigators working hard 
to locate the aircraft and find some answers, including the 
National Transportation Safety Board. And I want to thank them 
for their efforts and for their dedication. It's a tragic 
situation and it reminds the aviation community that as we see 
growth of our systems across the world we must also remain 
vigilant in regards to safety and operations of our systems, 
and continue to work every day to prevent such tragedies.
    Today, our hearing is entitled, ``The U.S. Aviation 
Industry and Jobs: Keeping American Manufacturing 
Competitive.'' The U.S. aviation sector is vital to our 
nation's economy. In 2009 the civil aviation industry supported 
over 10 million jobs and contributed $1.3 trillion to our total 
economic activity and accounted for 5.2 percent of the U.S. 
gross domestic product. Of this total, manufacturing of 
aircraft and related components provided over a million jobs 
that produced $185 billion in economic output while U.S. sales 
of civilian aircraft equipment and parts to foreign entities 
contributed $75 billion toward our Nation's trade balance. So 
aircraft operations directly contribute a lot of money to the 
U.S. economy.
    We're here today to discuss a critical point in aviation 
manufacturing, and then aviation in general, and that is that 
as world demand for airplanes continues to rise, what are the 
challenges and opportunities. We should note that for the first 
time in history, a truly global middle-class is emerging. By 
2030 it's projected that that middle-class will double in size 
from two billion today to five billion. And this will support a 
strong and steady growth in air service and aircraft. At the 
same time, while we look at this tremendous opportunity, we 
know that airlines, and I'm sure we'll hear from Mr. Calio, 
must replace old aircraft with new, more fuel-efficient models 
so that they can combat the rising cost of oil, which accounts 
for about 30 percent of its cost and the issue of reducing 
emissions.
    As a result, the forecast for new commercial planes over 
the next 20 years is over 35,000 planes. The market value of 
these aircraft orders is about $4.8 trillion. This is a huge 
economic opportunity for America to drive high-wage 
manufacturing and transportation-related jobs over the next two 
decades. However, this opportunity is not guaranteed.
    While the U.S. has been a global leader in aircraft 
manufacturing for 100 years, the competition is coming on 
fiercely. Other nations want to build those 35,000 planes and 
we can't rest on our laurels. The majority of demand for new 
planes will come from abroad. An estimated 80 percent of those 
new planes will be sold outside of North America and more than 
one in three planes will go to the rapidly growing Asian 
market. The European Union continues to make substantial 
investments in aerospace manufacturing. And new government-
backed competitors in China, Brazil, Russia and Canada have 
emerged as players in the aerospace market over the last few 
years and they are playing for keeps.
    So while we have a tremendous opportunity we also face real 
challenges in aviation manufacturing. We need to make the right 
investments to stay competitive on a global stage and financing 
that innovation is also a challenge. We have to keep moving or 
we will lose ground.
    Today's hearing is about taking the next steps to ensure 
that the Nation is ready and poised to capitalize on this 
opportunity to talk about the job creation activities. There is 
a demand in the aerospace market for those 35,000 planes and 
there is a demand for about 200,000 new aviation workers. These 
are everything from technicians, to engineers, to machinists, 
to those involved, if you just look at the number of flights 
that are going to be involved, for pilots, airplane mechanics 
and repairers. So these are big issues that are going to 
provide great opportunities for us.
    So while the aviation sector supports lots of jobs across 
our Nation and many states in the United States of America 
support these jobs, just to name a few: Missouri, 15,000; 
California, 18,000; obviously, Washington State, we have about 
80,000. So these are all areas of our country that depend on 
the aviation economy and we want to be competitive.
    So today we're going to hear and talk about how we educate 
and train the next generation of aerospace workers. That means 
making investments in programs like STEM and worker training. 
So I plan to move forward, working with my colleagues on both 
sides of the aisle, on new aviation job training and apprentice 
programs to make sure that we have some of those 200,000 people 
that we need for the future. And I want to know, with the 777X 
plane development, the fact that manufacturing is being brought 
back to the United States from overseas manufacturing, is a 
very telling opportunity for America as we move forward on 
advanced materials, like composites, to continue to stay ahead 
and show that the American workforce delivers the best product.
    We also are going to hear about how we need to make sure 
that there's a level playing field. The Chinese government has 
committed $30 billion to developing a 737 competitor. The 
Brazilians have increased their investment in vocational 
training. We're going to make sure that when it comes to the 
World Trade Organization that if there are illegal subsidies 
that those subsidies are stopped.
    We're going to hear from Mr. Calio about the competitive 
nature of what the airlines themselves are facing; about high 
fuel costs; and challenges as people add to the cost of 
aviation. The U.S. airline industry needs to have our support 
in making sure that carriers are on an equal footing in the 
global marketplace. And so, I look forward to hearing his ideas 
on how we do that.
    We will continue to talk about export investments and about 
modernization of our air traffic control system, which as many 
of you here know, is long overdue. These improve safety, expand 
capacity, lessen congestion, and provide greater efficiencies, 
and opportunities for airlines to run efficiently.
    We've had great success with the Greener Skies program in 
Seattle which was lowering cost for airlines by reducing noise 
and carbon dioxide emissions by putting people on a more direct 
path to landing but we need to make stronger progress 
implementing NextGen if we want to be a global leader. NextGen 
is just not critical for the airlines, it's critical for the 
manufacturers and the sooner the FAA implements the NextGen, 
the sooner our manufacturers can start exporting the important 
technologies and creating even more jobs here in the United 
States.
    So, I look forward to hearing from all the witnesses on 
this and how we maintain our competitiveness in the 
manufacturing industry. This is an incredible opportunity for 
us; not every day you can look forward and say there's an 
opportunity for 200,000 more jobs, but we have to be ready for 
the competition and put a game plan in place to capture that 
opportunity.
    With that, I'd like to turn to my colleague, Senator 
Ayotte. Thank you for rushing over from one hearing to this 
hearing. We very much appreciate you being here and look 
forward to your opening statement.

                STATEMENT OF HON. KELLY AYOTTE, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Ayotte. Thank you, Madam Chairwoman, and I really 
appreciate this hearing. It's a very important hearing that 
we're going to hold today.
    And before I begin my remarks, I just want to say that I 
know that all of our thoughts and prayers are with the families 
of those who have lost loved ones on the Malaysia Airlines 
Flight 370, including three Americans who were onboard that 
flight. I have full confidence that the authorities will 
conduct a thorough investigation to identify the cause of what 
happened with that flight and obviously help us prevent similar 
tragedies from occurring.
    Everyone in this room appreciates the value of a healthy 
and competitive U.S. aviation industry and we all recognize its 
contribution to America's economy. The industry supports over 
10 million American jobs, contributes over $1 trillion to our 
economy, and accounts for over 5 percent of U.S. gross domestic 
product. Our focus today is to identify ways to build on these 
contributions to expand the industry with the goal of making 
sure that the U.S. aviation industry remains second to none.
    For over a decade now, the domestic aviation industry has 
faced serious challenges. Many of those challenges were due to 
largely unanticipated events, shocks to our economy, including 
the September 11 terrorist attacks, the fallout from the 
financial crisis, and the highly volatile fuel prices. So, so 
many challenges that the aviation industry has faced.
    But some of the barriers to the industry's success can also 
be attributed to a pattern of poor aviation policy choices. For 
example, our Nation has an outdated and inefficient air traffic 
control system, the overhaul of which has been significantly 
delayed and is more expensive than originally envisioned. So 
this is something that we absolutely need to work together on, 
and I look forward to working with the Chairwoman on the 
NextGen system.
    We're also confronted with an aging workforce whose 
technical skills and expertise are not being adequately 
replaced. And the industry is further burdened by many onerous 
taxes and regulatory demands from Washington.
    In addition to these obstacles, our domestic aviation 
industry must also respond to the pressures, often unfair 
pressures, of an increasingly global marketplace and our 
ability to compete in that marketplace. These challenges also 
create an opportunity for the same spirit of innovation that 
made America a global leader in aviation. Some potential areas 
include exploring what increased efficiencies may be achieved 
by engineering smarter aircraft and the possibilities that 
exist for alternative fuels.
    I look forward to hearing from our witnesses today about 
how Congress and the industry can work together to address 
these challenges. I look forward to hearing from all of you on 
how we can help create a better competitive environment for the 
industry to thrive and grow. And as we begin developing the 
next FAA Reauthorization Bill, it is critical that members of 
this committee, and our House counterparts, collaborate with 
the industry and labor representatives like those on our panel 
today to understand that we, this is so important to our 
economy, that we create the very best environment for our 
aviation industry to continue to thrive and grow and be more 
competitive than it is now.
    Thank you, Madam Chairwoman.
    Senator Cantwell. Thank you.
    And now we'll turn to the witnesses. Again, welcome to all 
of you. Thank you for being here.
    And we're going to start with you, Mr. Muilenburg.

 STATEMENT OF DENNIS MUILENBURG, VICE CHAIRMAN, PRESIDENT AND 
                CHIEF OPERATING OFFICER, BOEING

    Mr. Muilenburg. Madam Chair and Ranking Member Ayotte, 
thank you very much for the opportunity to be here today as 
well as the other members of the Committee. We appreciate the 
challenges to American competitiveness in the aerospace 
industry.
    My name is Dennis Muilenburg. I am Vice Chairman, President 
and Chief Operating Officer of the Boeing Company and I'm proud 
to represent the hard-working employees of Boeing at the 
hearing here today.
    Now before beginning my testimony, I also want to express 
my condolences on behalf of Boeing to the families and friends 
of the passengers and the crew on Malaysian Airlines Flight 
370. Although we do not yet know the cause of the airplane's 
disappearance, Boeing is certainly joined with the National 
Transportation Safety Board. We have a technical advisor and 
team on the ground. It's a high-priority effort for us and we 
are committed to doing everything possible to sustain a safe 
and efficient global transportation system.
    Madam Chair, the topic you've chosen for today's hearing is 
both important and timely. The United States is the world 
leader in aerospace, but with increasing competition from 
foreign countries that are investing substantial government 
funds in their aerospace industries, U.S. preeminence in 
aerospace is eroding and at risk.
    Boeing has a proud history of excellence in aerospace that 
goes back nearly 100 years. In fact, we'll celebrate our 
centennial in 2016. During that time, Boeing has used 
innovation and a highly skilled workforce to create market-
leading products. For example, and, Senator, as you just 
mentioned, we recently launched the 777X; an airplane that will 
use 12 percent less fuel than its competitor due to the all-new 
composite wing technology and other innovations that have been 
built into the airplane.
    Our company remains unique in that we assemble, test and 
deliver all of our highly competitive products right here in 
the United States. We have approximately 160,000 highly skilled 
U.S. employees. And last year, we paid $48 billion more--excuse 
me--$48 billion to more than 15,600 U.S. businesses including 
6,800 small and disadvantaged businesses, which collectively 
support an additional 1.5 million jobs across the country. So 
the job impact, the employment impact, is very significant. And 
while 80 percent of the aircraft that we make go to foreign 
airlines, 80 percent of our supplier spend is right here in the 
United States. So you see how this globally enables jobs.
    Aerospace is one of the few sectors of the American economy 
with a positive balance of trade in large part because of 
Boeing Aircraft. For decades, Boeing has been one of the 
largest U.S. exporters. And over the next 20 years, Senator, as 
you said, we see a market for more than 35,000 new commercial 
airplanes valued at $4.8 trillion plus $2.5 trillion of 
additional commercial aviation services.
    This is an opportunity that must be seized because our 
competition is growing. Our competition with Airbus is 
especially fierce. And airplane manufacturers in Canada, 
Brazil, Russia and China are all soon to enter markets 
currently served by Boeing products. We are working to position 
ourselves to succeed in this competitive environment. We are 
focused on productivity and cost reduction while working with 
our customers to ensure we have the right products.
    But government actions and policies affect the competitive 
landscape as well. So we need your help to ensure that U.S. 
aerospace industry's proud legacy of leadership continues. One 
very important policy issue that affects our competitive 
position is the availability of export credit assistance from 
the Export-Import Bank. Eximbank, which returns a profit to the 
U.S. Treasury due to its prudent lending policies, is an 
important competitive tool for U.S. exporters large and small. 
Without it, Boeing would be competing on an unlevel playing 
field to foreign aircraft orders. Boeing also would be at a 
disadvantage in the intensely competitive market for commercial 
satellites.
    Madam Chairwoman, I know that there are some in Congress 
who question the need for official export credit, but calls to 
reduce or eliminate such assistance in the face of 
international availability amounts to unilateral disarmament. 
Boeing would feel the impact of such a move immediately and it 
would be broad, negative economic impacts on our extensive U.S. 
supply chain. Thousands of direct and indirect U.S. jobs would 
be lost and nothing would be gained. In fact, U.S. airlines 
that compete against other airlines on international routes 
would face that same competition. The only difference would be 
that foreign airlines would likely be flying more airplanes 
made in Europe and finance with European export credit 
assistance. Airbus, it must be noted, has unrestricted access 
to three European export credit agencies.
    Another important issue for us is aircraft certification. 
The future of American competitiveness in aviation is dependent 
on a shared commitment by the FAA and industry to adapt to 
changing safety and certification priorities, domestically and 
abroad. The committee has been very supportive of these efforts 
and we thank you for your leadership on Sections 312 and 313 of 
the FAA Reauthorization bill. That has been very important.
    These sections are the cornerstone of the reforms that will 
be needed to keep the United States at the forefront of 
innovation. Continued certification streamlining coupled with 
further use of delegation will provide better safety outcomes, 
more efficient use of FAA resources, and give industry the 
tools needed to remain safe and competitive.
    There are four additional policy issues which I simply 
mention here but which I address more fully in my written 
testimony. And those are, first, enforcement of the WTO ruling 
against the $18 billion of illegal European government 
subsidies to Airbus, subsidies that continue unabated.
    Second, the growing scarcity of science, technology, 
engineering, and math talent, and Senator, as you well noted 
the importance of that talent pipeline.
    Third, the decline in Federal R&D spending.
    And fourth, the importance, as both of you have mentioned, 
of NextGen air traffic control and management.
    We are proud of the position that Boeing holds in the 
global economy and what our employees all across the country 
achieve on behalf of the company and the Nation. And again, I 
thank the Committee for examining these issues today. And thank 
you for the opportunity to provide that testimony.
    [The prepared statement of Mr. Muilenburg follows:]

  Prepared Statement of Dennis Muilenburg, Vice Chairman, President, 
                  and Chief Operating Officer, Boeing
Introduction
    Madam Chair, Ranking Member Ayotte, and Members of the Committee, 
thank you for this opportunity to address the challenges to American 
competitiveness in the aerospace industry. I am Dennis Muilenburg, vice 
chairman, president and chief operating officer of Boeing.
    Before beginning my testimony I want to express my condolences on 
behalf of Boeing to the families and friends of the passengers and crew 
of Malaysia Airlines Flight 370. We still do not know the cause of the 
airplane's disappearance, but Boeing has joined with the National 
Transportation Safety Board team as a technical advisor and that team 
is now positioned in the region to offer assistance. We are committed 
to doing everything possible to sustain a safe and efficient global 
transportation system.
    Madam Chair, the topic you have chosen for today's hearing is both 
timely and important. United States is the world leader in aerospace, 
but with increasing competition from foreign countries that are 
investing substantial government funds into their emerging aerospace 
industries, the U.S preeminence in aerospace is eroding, and indeed is 
at risk.
Company Introduction
    Boeing has a proud history of excellence in aerospace that goes 
back nearly 100 years. During that time, Boeing has used technological 
innovation and a highly skilled workforce to create market-leading 
products that meet the demands of a diverse and growing global customer 
base. We evolve constantly to meet our customers' requirements. As an 
example, a few months ago we launched the 777X with 259 orders and 
commitments, marking the largest product launch in commercial jetliner 
history by value. The tremendous market response to the 777X was due to 
the numerous features that make it 12 percent more fuel efficient than 
its competitor. They include an all-new composite wing based on the 
innovative wing developed for the super-efficient 787 Dreamliner, 
aerodynamic advances such as a hybrid laminar flow control vertical 
tail and natural laminar flow nacelles, and all-new GE9X engines 
developed by GE Aviation. The 777X is the latest in a long line of 
superior Boeing products that provide better value to our customers 
than those offered by our competitor.
Our Place in the Economy/Suppliers
    William Boeing first began making twin-float seaplanes in 1915 from 
a small red boathouse, and while much has changed since then, our 
company remains unique in that we assemble, test and deliver all of our 
highly-competitive products right here in the United States. The final 
assembly facilities for our commercial products are located in the 
states of Washington and South Carolina, but we have facilities for 
engineering and manufacturing major components in multiple states 
beyond those two--including Oregon, Florida, California, Montana and 
Utah, where we have a growing presence. Our defense and space -related 
production primarily is located in the states of California, Missouri, 
Pennsylvania, Texas, Arizona, Florida and Alabama. Today Boeing has 
160,000 employees in the United States, and I'm proud to say that 
24,000 of those employees are military veterans. Boeing has been 
recognized as a top 100 Military Friendly Employer by G.I. Jobs 
Magazine, and we are very active in numerous national initiatives to 
help veterans find jobs and obtain the skills that they need to 
transition into the private sector.
    Notably, we have continued to add jobs at Boeing in recent years 
while other sectors of the U.S. economy have shown little or no 
employment growth. Both during and in the wake of the recent global 
recession we hired new talent and critical skills at Boeing--a total of 
more than 15,000 new, high-paying jobs since 2005. Our hiring has been 
driven by our record backlog of $441 billion, including a record $374 
billion commercial airplane backlog. With more than 5,000 commercial 
aircraft on order, our commercial backlog is diverse, with customers 
across the world committing to purchase a full range of Boeing 
airplanes.
    As these numbers suggest, Boeing's impact on the Nation's economy 
is substantial. Aerospace is one of the few sectors of the American 
economy where there exists a positive balance of trade--in large part 
because of Boeing's exports. We are the world's largest aerospace 
company and a leading U.S. exporter measured by sales. The company's 
capabilities in aerospace include commercial jetliners, military 
aircraft, helicopters, electronic and defense systems, satellites, and 
advanced information and communications systems. And Boeing's exports 
benefit literally every state in America. Last year, we paid $48 
billion to more than 15,600 U.S. businesses, including 6,600 small or 
disadvantaged businesses, which collectively support an additional 1.5 
million jobs across the country. While 80 percent of our commercial 
airplanes go to airlines outside the United States, 80 percent of our 
supplier spend is with U.S. companies.
    We also have suppliers and partners outside the United States. I 
mention that because I think it is important that members of the 
Committee understand the strategy behind our global partnering. It 
comes down to this. To ensure that we continue to design and build the 
best commercial airplanes and aerospace systems in the world we must 
seek out the best technologies, material resources and skills in the 
world, wherever they reside. In addition, global partnering is critical 
to Boeing's success in foreign markets where there is an expectation 
that we invest as well as sell. Some 80 percent of our commercial 
airplane sales, and nearly 30 percent of our defense and space sales, 
are outside of the United States, so success overseas is critical to 
the success of our domestic workforce--and the workforce of our entire 
U.S. supply chain.
Exports/CMO
    Boeing last year delivered more commercial airplanes than any other 
company in the world. Boeing for years has been one of the largest U.S. 
exporters, and we see significant opportunity going forward, with a 
strong and growing market for both our defense and commercial products 
and services. I will concentrate on the latter since today's hearing is 
focused on commercial aviation. From 2013 to 2032, we project a demand 
for $2.5 trillion in aviation services and a $4.8 trillion global 
market for more than 35,000 new airplanes. Some will replace older, 
less efficient airplanes, but we expect the total world fleet to double 
in size over the next 20 years as a result of rising demand for 
passenger services and a rebound in air freight. The aviation market is 
broader and deeper than it was in the past, with demand being fueled by 
growth in China, India and other emerging markets, as well as by 
rapidly growing low-cost carriers and legacy carriers which want to 
modernize their fleets. Our biggest challenge is to meet this demand, 
regain market share from aggressive competition, and have the 
profitability to invest in future products. For that reason, we are 
increasing the production rates across our 737 and 787 lines, as well 
as adding new models with the 787-9 and -10, 737 MAX, and the 777X. In 
February we began assembling the first 737NG at the new production rate 
of 42 per month, our highest rate ever, and we have announced that in 
2017 we will boost 737 production to 47 airplanes per month. These 
record high production rates will support tens of thousands of jobs at 
Boeing, and many more in our extensive U.S. supply chain. Each time a 
Boeing commercial airplane is exported and lands somewhere in the 
world, it lands with millions of parts reflecting the workmanship of 
many of our 15,600 small, medium and large U.S. suppliers.
Foreign Competitive Landscape
    The increasing demand for airplanes presents a great opportunity 
for Boeing and for U.S. commercial aerospace--but it is an opportunity 
that must be seized. Right now, the international market for airplanes 
is more competitive than ever, and that competition is only going to 
become tougher in the decade ahead. Competition with Airbus, our 
principal competitor, is particularly fierce, and airplane 
manufacturers in Canada, Brazil, Russia and China are all, in one way 
or another, soon to enter markets currently served by Boeing products. 
We are working tirelessly to position ourselves to succeed in this 
highly competitive environment, and are taking steps--often challenging 
and difficult steps--to enable us to win in this rapidly changing 
marketplace. We are taking cost out of our supply chain, focusing 
relentlessly on our own productivity, and working with our customers to 
ensure we have the right product strategy.
    We also have negotiated new long-term agreements with the IAM in 
both Puget Sound and St. Louis that will enable us to be more 
competitive while still maintaining market-leading pay and benefits for 
our employees. I cannot stress enough how important these agreements 
are to our collective future, or how grateful we are that members of 
the IAM recognize how intensely competitive the global aerospace 
industry has become. With agreements like these, we can and will move 
forward with confidence in our future as the world's leading aerospace 
company.
    But public policy and government actions also affect the 
competitive landscape as we face established and emerging state-
supported competitors. In short, we need your help to ensure that the 
U.S. aerospace industry's proud legacy of leadership continues in the 
face of these significant, and increasing, global competitive 
pressures.
WTO Ruling on Subsidies
    Airbus has been heavily subsidized by European governments since 
its inception more than 40 years ago. The subsidies take many forms, 
but the most egregious is launch aid--the subsidy Airbus receives for 
new product development. In 2004, the Office of the U.S. Trade 
Representative (USTR) challenged Europe's subsidies to Airbus with a 
request to the World Trade Organization for consultations--a step that 
led two years later to the filing of a formal complaint against the 
subsidies. A lengthy process ensued, but the bottom line is that in 
mid-2011 the WTO issued a final ruling stating that European 
governments had provided illegal subsidies to Airbus totaling $18 
billion. It gave European governments six months to comply with its 
ruling--something that has yet to happen--which is why USTR now is 
seeking a non-compliance ruling from the WTO. We expect the WTO to make 
such a ruling in the first half of this year. The U.S. government is 
moving ever closer to being in a position to pursue sanctions against 
European exports to the United States if the Airbus-sponsor governments 
do not remove the harmful effects of their illegal subsidies.
    Madam Chairman, this committee and the broader Congress have been 
very supportive of Boeing and its supplier-partners in this 
longstanding dispute, which we greatly appreciate. With your continued 
support we are confident we can end these market-distorting and harmful 
European practices.
Policy--EX IM
    I want to take a moment to discuss another important policy issue 
that affects our competitive position in the marketplace--the 
availability of export credit assistance. Today export credit 
assistance is provided to purchasers of U.S. manufactured products that 
are exported abroad, at no cost to the American taxpayer. Export credit 
assistance from the Export Import Bank is an important tool for all 
U.S. exporters, including aerospace companies like Boeing, to compete 
against foreign competitors that have access to even larger export 
credit assistance programs administered by their own governments. 
Without Ex-Im, Boeing would be unable to compete on a level playing 
field for non-U.S. aircraft orders--a segment that makes up more than 
80 percent of projected demand over the next 20 years. Boeing also 
would be at a competitive disadvantage in the global and intensely 
contested market for commercial satellites.
    Airbus has unrestricted access from three European export credit 
agencies. Countries with rapidly growing economies like Brazil and 
China, which also are investing large amounts of government funds into 
their emerging aerospace industries, together now provide nearly half 
of all official export credit in the world today. And with the 
exception of Brazil, none of the emerging economies is party to 
international rules and frameworks regarding export credit. Measured as 
a percent of 2012 GDP, U.S. official export credit ranks below six 
countries: Korea, India, China, France, Germany and Italy. If the 
United States were to disarm unilaterally by ceasing or scaling back 
its official export credit program, it would put U.S. exporters--
including Boeing--at even a greater disadvantage in global markets than 
we find ourselves in today.
    Madam Chairman, I know that there are some in this body that 
question the appropriateness and utility of official export credit, 
arguing that it creates market distortions. However, our decades of 
experience selling airplanes does not support that contention. Today, 
the availability of export credit assistance ensures that Boeing 
competes and wins on the basis of price and product; it levels the 
playing field. We can agree to disagree. But calls to reduce or 
eliminate export credit assistance in the face of international 
availability amounts to unilateral disarmament. If it is eliminated, or 
reduced in any significant way, the impacts on Boeing will be felt 
immediately and there will be a negative impact on the United States 
and the positive balance of trade payments in the aerospace sector. We 
know from experience that airlines will flip orders for Boeing 
airplanes if U.S. export credit halts and European export credit is 
still available. Thousands of direct and indirect U.S. jobs will be 
lost and nothing will be gained. U.S. airlines that compete against 
other international airlines today will face that same competition 
tomorrow. The only difference will be that their foreign competition 
will be flying fewer Boeing airplanes and increasing numbers of Airbus 
aircraft financed with European export credit assistance.
Certification
    Another very important issue for us is aircraft certification. The 
future of American competitiveness in aviation is dependent on a shared 
commitment by the FAA and industry to adapt to changing safety and 
certification priorities, domestically and abroad. This Committee has 
been very supportive of these efforts, and we thank you for your 
leadership on sections 312 and 313 of the past FAA Reauthorization 
bill. These sections are the cornerstone of the reforms that will be 
needed to keep the United States at the forefront of innovation. 
Continued certification streamlining coupled with further use of 
delegation will provide better safety outcomes, more efficient use of 
FAA resources, and give industry the tools needed to remain safe and 
competitive.
STEM, R&D, and NextGen
    There are three other public policy issues I want to mention here 
briefly. Boeing, like all high-tech U.S. companies, is concerned about 
the growing scarcity of talent in science, technology, engineering and 
mathematics--the so-called STEM disciplines--and we have numerous 
initiatives underway to attract more students to these academic 
disciplines. We know that many government officials share our concern, 
and we stand ready to partner with you to address the STEM issue 
because it is one that will have a significant effect one way or the 
other on U.S. competitiveness in general.
    Declining U.S. spending for research and development is another 
concern. Companies like Boeing are doing their part to develop new 
cutting-edge technologies and products. However, long-term research--
the kind that advances basic science and may not produce a payback for 
20 or more years, is very hard for the private sector to fund and 
manage. That is why the U.S. government historically has played a 
central role in long-range research and must continue to do so to keep 
our Nation competitive and economically strong.
    Lastly, I want to reiterate our support for NextGen air-traffic 
management. It is important to keep this vital aviation infrastructure 
project adequately funded because the long-term payback will be 
enormous. NextGen will enable airlines to fly far more efficiently, 
with real environmental benefits, and in the process will help our 
overall economy operate more efficiently. NextGen isn't just an airline 
issue or aerospace issue; it is an issue of national economic 
development and competitiveness.
Closing
    We are proud of the position that Boeing holds in the global 
economy and what our employees all across the country achieve on behalf 
of the company. Again, I thank the Committee for examining these issues 
and allowing me the opportunity to testify today.

    Senator Cantwell. Thank you, Mr. Muilenburg.
    Ms. Blakey, thank you very much for being here.

         STATEMENT OF HON. MARION C. BLAKEY, PRESIDENT

       AND CHIEF EXECUTIVE OFFICER, AEROSPACE INDUSTRIES

                     ASSOCIATION OF AMERICA

    Ms. Blakey. Chairwoman Cantwell, Ranking Member Ayotte and 
members of the Subcommittee, I certainly join with you in the 
sympathy that you've expressed and the concern about Flight 
370. And we all hope that this will be speedily resolved. I 
also appreciate the opportunity to testify and bring AIA's 
views on competitiveness of the U.S. aviation industry to the 
fore.
    U.S. aircraft manufacturers continue to hold a strong 
position in the world market due to a dedicated workforce, able 
executive leadership and, of course, technical excellence. 
Today, we're proud that commercial aviation manufacturing is 
the leading contributing factor to U.S. net exports. We had a 
positive trade balance of $72.1 billion last year. It's a 10 
percent gain over 2012. But we have to face at the same time 
that we may see this erode if the situation is not dealt with 
on a number of fronts.
    These numbers not only reflect air travel's growth in the 
developing world but also our commitment to invest billions of 
dollars in cutting-edge research and technology. We've raised 
jet engine fuel efficiency by 20 percent in the last decade and 
safety margins, already very impressive, have improved 
significantly.
    Industry forecasts predict rising global demand for large 
passenger aircraft, general aviation aircraft, and civil 
helicopters are going up. But, this opportunity for aerospace 
manufacturers is partly offset by the downturn in U.S. defense 
investment. With military aircraft, as many of you know, I'm 
sure, the last hearing discussed this--they're down at this 
point by 6 percent from last year. The decline of key military 
aircraft production lines is worrisome from the vantage point, 
particularly, of the entire aerospace and defense supply chain.
    Of course, other nations aren't sitting idly by. Private or 
government-sponsored manufacturers of Latin America, Russia, 
China, and elsewhere will increasingly compete, especially in 
the high growth markets for single-aisle aircraft and regional 
jets.
    I'll now turn to some of those other issues that could 
negatively impact U.S. civil aviation leadership. While we're 
pleased that the FAA Modernization and Reform Act pushed the 
agency to streamline its aircraft certification processes, it's 
imperative that the FAA follow through. We need these 
initiatives to expand delegated authorities wherever possible.
    We're also concerned that budget austerity will continue to 
impact the air traffic control modernization. Requested Fiscal 
Year 2015 NextGen funding is almost $200 million below the 
President's request of only 2 years ago. It's a steep drop for 
a critical program. If the FAA is forced to pick winners and 
losers in their modernization account, new technologies that 
could really transform aviation may not germinate.
    Let's not shut the door on progress, for example, by 
failing to adequately support the integration of Unmanned 
Aircraft Systems into the national airspace. The FAA is already 
falling behind on the proposed rule for small UAS and it's 
worrisome. We should remember that UAS markets develop not only 
domestically but internationally. And it's important from a 
U.S. competitiveness standpoint that our nation continues to be 
the leader in this emerging aviation field.
    Let me now turn to financial policies that are also 
critical to our industry. We urge favorable consideration of 
proposals to make permanent the R&D tax credit; an important 
business investment incentive. At a minimum, legislation is 
needed to restart the tax credit because it expired on January 
1. AIA also strongly supports congressional reauthorization of 
the Export-Import Bank, as Mr. Muilenburg just discussed. 
Eximbank plays a vital role in helping America manufacturing 
companies compete on a level playing field. And in fact, last 
year, $1.1 billion in profit to the government is very 
impressive. This is the return that the bank was able to make 
as well as aiding 3,400 companies, many of them medium and 
small, in supporting over 200,000 U.S. jobs. We need your 
support to make sure that there's no gap and certainly no 
shutdown in the bank's operations.
    Finally, for our industry to meet future market demand 
we'll need to address the aging industry workforce with a major 
commitment to STEM education and, in fact, customized workforce 
training programs; that, Madam Chairwoman, I know you've been a 
strong advocate for.
    In conclusion, let me just say we believe that U.S. 
aviation manufacturers are in a strong competitive position 
today, but there are risks to our maintaining that position 
over the next decade. However, with appropriate policies to 
spur innovation, improve air transportation infrastructure, and 
replenish the workforce, we can continue to lead aviation 
progress.
    Thank you for inviting us to testify. I look forward to 
your questions.
    [The prepared statement of Ms. Blakey follows:]

   Prepared Statement of Hon. Marion C. Blakey, President and Chief 
     Executive Officer, Aerospace Industries Association of America
Introduction
    The Aerospace Industries Association (AIA) appreciates the 
opportunity to present our views on the competitiveness of the U.S. 
aviation industry. Today, there is no sector of our economy that 
contributes more to U.S. net exports than commercial aviation 
manufacturing. This situation could change in the future if we are not 
careful.
    I am Marion Blakey, President and Chief Executive Officer of AIA, 
the Nation's largest trade association representing aerospace and 
defense manufacturers. Our 380 members represent an industry directly 
employing one million workers, and supporting another 2.5 million jobs 
either indirectly or as suppliers. First, let me discuss the state of 
commercial aircraft manufacturing today.
U.S. Competitiveness in Aircraft Manufacturing
    U.S. aircraft manufacturers continue to hold strong positions in 
the world market due to the dedication and hard work of American 
workers, the wisdom of executives leading those companies, and the 
pursuit of technological advances that drive world markets. In fact, 
the aerospace industry continues to be the United States' leading 
exporter of manufactured goods. By value, our industry exported $72.1 
billion more than we imported last year. This figure was up 10 percent 
over the previous year, even as the overall U.S. economy improved in 
fits and starts.
    Without a doubt, the success in net exports is related to our 
dominance in commercial aircraft manufacturing. U.S. exports of civil 
aircraft, engines, avionics, and related components represent 88 
percent of all aerospace exports and almost all of the increase we 
experienced last year. This is a sign of growth in the developing 
world. But it is also a testament to an industry which has invested 
billions of dollars in research and development to remain competitive 
through the use of increasingly sophisticated technologies. We have 
raised the fuel efficiency of jet engines by 125 percent since 1960 and 
by 20 percent in the past ten years. And while increasing efficiency, 
our manufacturers have also increased safety. In fact, aircraft safety 
margins have doubled since 1990. Because of these advancements, the 
competitiveness of our industry remains strong.
    Several of AIA's member companies analyze global market trends, and 
they reach similar conclusions. Aircraft manufacturing will continue to 
experience growth that outpaces the growth in global GDP. About 60 
percent of these new aircraft will be needed to accommodate global 
market growth. However, the high price of aviation fuel has been 
accelerating the replacement of older aircraft with more modern, fuel-
efficient aircraft. A disproportionate share of this growth involves 
smaller, single-aisle aircraft in emerging markets led by the Asia-
Pacific region and China in particular.
    We are pleased that the business aviation and rotorcraft sectors 
are poised to recover from the economic downturn that began a few years 
ago. General aviation aircraft shipments were up about 6 percent last 
year and the forecast for this year is in that range (8.5 percent). 
Business jet deliveries have also recovered, with shipments up 6.3 
percent last year. For the next five years at least, the majority of 
orders are expected to come from North America, and therefore will be 
largely dependent on the state of the U.S. economy. However, over the 
long term, our success in the business aviation market will become 
increasingly dependent on our market share in the developing world, 
particularly Asia and Latin America. Likewise, sales of civil 
helicopters are increasing, and we expect this trend will continue over 
the next few years with modest growth. These markets include oil and 
gas exploration and production, public safety, and emergency medical 
services.
    I should add that the downturn in U.S. military investment puts a 
drag on this positive message from our commercial industry. The U.S. 
military aircraft sector continues to shrink, falling 6.3 percent last 
year and almost 10 percent over the past three years. Many do not 
realize that several of our key military aircraft production lines are 
sustained today largely by exports. This situation contributes to a 
declining supplier base that can affect the commercial sector in its 
overall competitiveness.
    Of course, other nations are not sitting idly by; they are trying 
to cut into our edge. The growth in emerging markets is naturally 
stimulating other nations to improve or establish their own aircraft 
manufacturing capabilities. Two years ago, Russia joined the 
International Coordinating Council of Aerospace Industries Associations 
(ICCAIA), and China is expressing interest. Manufacturers in Latin 
America, Russia, China, and elsewhere will increasingly compete with 
U.S. industry, particularly in the high-growth markets for single-aisle 
aircraft and regional jets. And it is important for us to realize that, 
in many cases, U.S. companies are competing against foreign 
governments, not just foreign companies.
    AIA also believes the global liberalization of aviation treaties--
in ``open skies'' agreements and multilateral trade agreements--should 
continue to be supported by governments around the world. Initiatives 
such as these that increase the flow of goods, services and passengers 
provide economic growth for countries worldwide and benefit all of us.
    Considering this situation, it is also imperative that we address 
long-term risks or barriers to our global competitiveness. Let me 
highlight a few of those issues.
Barriers and Risks to Maintaining U.S. Competitiveness
    While the U.S. is in a stable position today, there are risks and 
barriers that will undercut our position over the next few years if not 
addressed. These include FAA budget concerns, the inability to maintain 
a properly skilled workforce, appropriate financial support, and tax 
incentives for the development of new technologies. Let me address each 
of these in turn.
FAA Funding and Future Sequestration
    The Federal Aviation Administration (FAA) provides critical 
services that directly affect the competitiveness of U.S. aviation 
manufacturers. Our industry has a wide range of aerospace products that 
are poised to enter the global marketplace. As a regulated industry, 
bringing these new products to the market requires FAA review, 
approval, and certification. However, in this fast-moving environment, 
we often find that FAA's certification process moves too slowly.
    We were pleased that Congress recognized this issue in section 312 
of the FAA Modernization and Reform Act of 2012 (Public Law 112-95). 
This section, commonly referred to as ``certification streamlining'', 
requires the FAA to examine the certification and approval process and 
provide recommendations for streamlining. The FAA commissioned an 
Aviation Rulemaking Committee and developed an implementation plan for 
those recommendations. We urge the agency to follow through on this 
plan as soon as possible. Given the current budget constraints facing 
the FAA, making this process more efficient will help ensure the 
industry does not have even longer wait times. The FAA needs to make 
maximum use of existing delegation systems and leverage best practices 
in their certification processes.
    AIA does not believe FAA can maintain today's level of service and 
invest adequately for the future if the agency is faced with additional 
Budget Control Act sequesters. We appreciate the near-term relief for 
Fiscal Years 2014 and 2015 that was provided in the Bipartisan Budget 
Act last December. However, sequestration returns with a vengeance in 
Fiscal Year 2016.
    If Fiscal Year 2013 is any guide, when additional sequesters go 
into effect the investment accounts will bear a heavier share of the 
reductions. In 2013, the agency lost $637 million from a sequester that 
occurred in the middle of the year. To avoid employee furloughs, 
Congress authorized a one-time transfer of airport grant funds to the 
operating account. However, even with this flexibility, the agency had 
to reduce NextGen programs by almost $140 million, taking this 
initiative back to its Fiscal Year 2011 funding level and disrupting 
dozens of programs. The FAA's NextGen budget request for Fiscal Year 
2015 does not recover from these reductions. In fact, that request is 
almost $200 million below the President's request of only two years 
ago. That is a steep funding drop for a critical program.
    In addition, if the agency is forced to take a ``today first'' 
attitude, new technologies that could transform aviation may end up on 
the cutting room floor. Foremost among these is the budding market for 
unmanned aircraft systems (UAS). We think it was wise and important 
that Congress promoted the integration of UAS into our national 
airspace by the year 2015. The application of UAS for public safety 
missions and a variety of commercial uses is enormous, and other 
nations are just as interested. Our manufacturers lead the world in 
these technologies, and if we make sure the Congressionally-mandated 
integration stays on course, we will see markets open up for our 
technologies, not only here in the United States, but around the world. 
We hope you will support funding for UAS integration activities, 
including the standards development efforts and the research and 
development programs that are needed for successful and safe NAS 
integration. And while we understand the desire to address privacy, we 
believe it can be adequately protected. We urge you to oppose any such 
legislation that would cripple or unduly restrict the growth of this 
important industry before it is given a chance to develop.
    If the FAA is constantly distracted by continuing resolutions and 
budget cuts, long-term investments will suffer the most. I understand 
the need to keep today's air traffic system running safely and 
smoothly. But to remain competitive over the next decade, our 
manufacturers also need continued investment in a twenty-first century 
infrastructure, including high technology and transformational systems 
like UAS.
    Our failure to make these investments, just as we are hitting our 
stride, would embolden our overseas competitors. It would send the 
wrong message to the developing world--a message that the U.S. may not 
be able to meet their needs in the future. Equally important, it would 
break the faith with a manufacturing industry that is investing 
billions to advance in growing worldwide markets. We are investing in 
new supply chains, new plants and equipment, and new jobs employing 
skilled workers all around the country. We need the government to do 
its part--to review and approve those products efficiently, support new 
markets, and expand our national aviation infrastructure.
Continuing to Improve Environmental Stewardship and Energy Efficiency
    Because aviation is fundamentally global, it is critical that the 
U.S. maintain its leadership role in the international bodies that set 
standards and harmonize technical specifications for aviation 
technologies--an issue with rising importance as market dynamics shift 
to developing nations.
    There is no better example than the critical technologies 
underpinning aircraft fuel efficiency and low emissions. The high cost 
of jet fuel on the global market has made engine fuel efficiency a 
major driver of aircraft purchase decisions. The FAA's commitment to 
the Continuous Low Emissions, Environment and Noise (CLEEN) program is 
important to our industry. This program is cost-shared with 
manufacturers on a dollar-for-dollar basis and is showing real results 
in the development of new engine technologies that dramatically reduce 
aviation noise, emissions and fuel burn. In addition, maintaining 
momentum in the multi-agency alternative fuels development program is 
an important initiative for the aviation industry as we work to reduce 
our dependence on petroleum-based energy sources.
Providing Globally Competitive Tax Policies
    The Research and Experimentation Tax Credit (commonly called ``R&D 
Tax Credit'') is an important incentive for national business 
investment in R&D. This is important for many sectors of our economy, 
but it is especially important for high-tech companies in the aerospace 
sector. Once again, the credit was allowed to expire at the end of last 
year, a political football caught up in the broader discussion of 
comprehensive tax reform.
    U.S. commercial aerospace manufacturers are at a substantial 
disadvantage vis-aa-vis foreign competitors whose home countries almost 
universally have more favorable and more predictable R&D tax credits. A 
permanent R&D credit has been proposed as part of the administration's 
corporate tax reform package, and was included in Chairman Camp's bill 
released earlier this month. We urge the Senate to act favorably on 
these proposals either separately or as part of comprehensive tax 
reform legislation. At a minimum, legislation is urgently needed to 
restart the R&D tax credit and apply its provisions retroactively to 
the beginning of calendar year 2014.
Providing a Skilled Aerospace Workforce
    American aerospace workers are among the most highly productive and 
skilled workers in the world. With a global market that is growing 
rapidly, we must maintain an adequate supply of workers with degrees in 
science, technology, engineering and math (STEM) disciplines and 
specific manufacturing skills for U.S. industry to continue to dominate 
and benefit from the aerospace export market. And for aviation markets 
to meet the forecasted demand, we will need to recruit and train 
hundreds of thousands of new pilots and maintenance technicians, as a 
recent Boeing study has verified. We want to sell those aircraft, train 
those pilots, and hire those mechanics.
    Unfortunately, today America is simply not producing enough workers 
with the right technical skills. The U.S. graduates around 300,000 
students a year with bachelors or associate degrees in STEM fields. The 
February 2012 report of the President's Council of Advisors on Science 
and Technology (PCAST) recommended that this be raised by one-third to 
meet our economic needs. One startling fact is that less than 40 
percent of students who start college intending to earn a STEM degree 
actually complete the degree requirements. We need to turn that around, 
and AIA and our member companies are working to do just that. We are 
collaborating with other stakeholders to increase retention rates in 
engineering programs by putting in place policies and practices, such 
as internships and mentoring, which encourage and support the success 
of qualified students.
    And this is not just about four year degrees. Community colleges 
and career technical education play an equally important role in 
meeting our workforce needs. In fact, today one third of our current 
STEM employees begin their education in community colleges. For years, 
aerospace companies have experienced challenges in filling certain 
manufacturing and other technical positions. Customized credentialing 
programs that prepare students with the specifically required skills 
are playing an important role in addressing the existing STEM skills 
gap and constitute another key element of our industry's workforce 
efforts.
    Our STEM workforce challenge is exacerbated by the fact that the 
aerospace industry is graying. In 2007, we found that almost 60 percent 
of the U.S. aerospace workforce was age 45 or older. Today, 9.6 percent 
of our industry is eligible to retire, and projections are that by 
2017--just three years from now--18.5 percent of the entire industry 
will be eligible to retire. At our largest corporations (those 
employing 100,000 or more), the percentage retirement eligible is 
already 18.6 percent. We are experiencing a shortage of STEM workers 
today, but the problem will be even greater when the bow wave of actual 
retirement hits us in the next couple of years.
    It was ten years ago that the Commission on the Future of the U.S. 
Aerospace Industry recommended ``the nation immediately reverse the 
decline in and promote the growth of a scientifically and 
technologically trained U.S. aerospace workforce''. Our industry paid 
attention, and AIA has been driving progress on STEM education and 
workforce issues for a number of years. We facilitate collaboration 
among our member companies and with other stakeholders--business 
groups, government, academia and the philanthropic community--at the 
national, state and local levels. We seek systemic change that will 
produce a prepared and competitive twenty-first century workforce. AIA 
further raised the profile and rigor of its engagement in 2013 with the 
formation of a new, high-level Workforce Policy Council, and we remain 
committed to meeting this challenge.
Implementing Improved Export Policies
    AIA strongly supports the goal of the National Export Initiative to 
double U.S. exports by the year 2014 and rationalize our outdated 
system of export controls. Export control reform is crucial to the 
success of the aerospace and defense industrial base to increase 
exports, and enhance interoperability with our allies and trading 
partners, while ensuring that advanced technologies are protected in 
the most appropriate manner. AIA appreciates the substantial 
achievements in satellite export reform enacted by Congress in 2012, 
and we are committed to working with the administration and Congress to 
see these reforms continue in other areas.
Missile Technology Control Regime and UAS Exports

    One example of a current barrier to U.S. competitiveness involves 
the application of the Missile Technology Control Regime (MTCR) to the 
export of unmanned aircraft systems (UAS). We believe the MTCR's 
``presumption of denial'' for UAS exports capable of greater than a 300 
KM range and a 500 KG payload must be balanced for risk management 
purposes on a consistent and clear basis. Other criteria to consider in 
overcoming the ``presumption of denial'' include the system's 
additional capabilities (or lack thereof) and the specific allies and 
partners with whom we are considering sharing this technology to 
protect and promote our common security interests. Absent such 
considerations, we run the risk of the same loss of market share and 
damage to the industrial base that occurred in the commercial satellite 
sector under similar one-size-fits-all export controls, and may also 
stifle the move to commercial use of such systems. We continue to work 
with the administration to develop a new way forward to control UAS 
systems for export appropriately in a way that benefits U.S. industry 
and jobs while protecting our valid national security interests.
FAA Authority to ``Promote'' Civil Aeronautics

    In the 1996 FAA Reauthorization Act (Public Law 104-264), Congress 
deleted FAA's authority to ``promote'' new aviation technology. The 
agency is still allowed to ``encourage'' these developments, but not to 
``promote'' them. We acknowledge the intent of Congress to have the 
agency focus solely on aviation safety. However, we believe FAA is 
interpreting this in an overly restrictive manner that affects the 
ability of U.S. manufacturers to sell our superior products overseas. 
One recent example is the agency's refusal to endorse basic information 
about air traffic control equipment currently in use by the agency out 
of concern that this could be construed as ``promotion''. We believe a 
clarification of Congressional intent or some modest exception 
authority would be helpful.
Export-Import Bank of the United States

    The Export-Import Bank of the United States also plays a vital role 
in helping American companies compete on a level playing field in the 
global marketplace. Last year, the bank aided 3,400 companies--large, 
medium and small--in supporting over 205,000 U.S. jobs, maintaining a 
robust network of aerospace suppliers, and facilitating a stronger U.S. 
presence in the global market. Significantly, nearly 88 percent of 
these jobs were at small businesses around the country. Many people do 
not realize that the bank is self-sustaining, and operates at no cost 
to U.S. taxpayers. In fact, through its fees and charges, the bank 
brought in more than $1 billion to the U.S. treasury in Fiscal Years 
2012 and 2013. Simply put, the Federal deficit will go up if the 
Export-Import Bank is shut down.
    At a time when defense cuts are causing smaller suppliers to shrink 
their operations, Ex-Im financing maintains the financial health of a 
large number of aerospace industry suppliers, providing assistance to 
30,000 of them. Many of these suppliers have looked to other aerospace 
sectors to compensate for lost revenue from the defense downturn. 
Furthermore, Ex-Im financing is a critical tool to the aerospace 
exporter in both general aviation and space services. From May 2012 to 
February 2014, Ex-Im financed over $1 billion in business jet exports, 
supporting over 5,000 jobs. Satellites and space launch services have 
become Ex-Im's fastest growing sector. Prior to 2010, Ex-Im financed 
roughly $50 million annually in space services. That number has risen 
to over $1 billion in each of the last two years. In fact, over 60 
percent of U.S.-built commercial satellite exports today are supported 
through Ex-Im financing.
    Equally important, the bank allows U.S. exporters to effectively 
compete with foreign firms that have their own government-assisted 
financing. Our Export-Import Bank is one of 59 export credit agencies 
around the world. Each of them supports the export of manufactured 
goods in a highly competitive global marketplace. And many of these 
governments extend more credit, at more favorable rates, than the 
United States. In fact, as a percentage of GDP, U.S. export credit in 
2012 ranked below six other countries. Germany and France extended 
nearly two and a half times as much export financing; China and India 
almost three times; and Korea ten times as much. The Export-Import Bank 
does not cost American taxpayers a dime. It helps our manufacturers 
compete and sell their products around the world. And since aircraft 
manufacturing is one of our Nation's biggest exports, it is not 
surprising that U.S. jobs depend on our government helping to maintain 
a level playing field. The bank's authority is set to expire on 
September 30, 2014, and we need your support to ensure there is no gap 
or shutdown in this important program's operations.
Conclusion
    In conclusion, we believe that U.S. aviation manufacturers are in a 
strong competitive position today, but there are risks to our 
maintaining this position over the next decade. As a nation, we need to 
ensure that our tax policies and financial support provide incentives 
to maintain jobs here in the United States and are competitive with the 
policies of other nations. We need to provide improved infrastructure 
in air traffic control technology, not only for our own economic health 
but for its export potential. And we need to ensure that our aerospace 
workforce is prepared to handle the challenges and changes coming to 
the global marketplace over the next decade or two. Thank you for the 
opportunity to submit testimony on this important subject.

    Senator Cantwell. Thank you very much for that testimony. I 
think you hit it right on the head exactly. There is good news 
but there is a ``but'' to the question about what we have to do 
to compete.
    So thank you.
    Mr. Calio, welcome. Thank you very much for being here.

  STATEMENT OF NICHOLAS CALIO, PRESIDENT AND CHIEF EXECUTIVE 
                 OFFICER, AIRLINES FOR AMERICA

    Mr. Calio. Thank you, Madam Chairwoman, Senator Ayotte, 
Senator Klobuchar, Senator Fischer. We appreciate the 
opportunity to testify here today.
    We hope that this will be the first of many hearings that 
this committee holds and that you will specifically broaden the 
scope of your inquiry to all sectors and jobs in aviation. You 
know, we all say that we recognize the unique and vital role 
that aviation plays in driving the U.S. economy in jobs. It's 
time that we matched a more practical, focused policy reality 
to that recognition and that vision. I say that because there 
have been a bunch of Federal commissions which have talked 
about that we've talked about this and that committee before 
the recommendations lay fallow. It's time to move on.
    You know, the expansion and transformation of the global 
aviation sector that currently is underway, that's been 
referenced, presents both the unique challenge and opportunity 
for the U.S. aviation industry. It's also a unique challenge 
and opportunity for this Congress since you and we are all 
business partners together on a daily basis. The industry is on 
leashed, or it's constrained, by the policies that you create 
and the policies that you will oversee.
    In a previous appearance before this committee, A4A 
advocated for the creation of a national airline policy which 
would give life to that vital and unique role that aviation 
plays in our economy. Unlike many foreign governments which 
treat their airlines as strategic assets, the U.S. Government 
currently encumbers our carriers with tax, regulatory and 
infrastructure systems that put us at a distinct competitive 
disadvantage. You, and we, currently have a unique opportunity. 
While we all, I think, agree that has been shown that Congress 
doesn't always operate the way we like, it has also been shown, 
and shown recently, that it can come together on bipartisan 
legislation on important issues. This committee did it in the 
2012 FAA Reauthorization bill; the time to do it and do it 
better in the next reauthorization bill starts now.
    House T&I Chairman, Bill Shuster, and Frank LoBiondo, and 
their democratic counterparts, Nick Rahall and Rick Larsen, 
have banded together to already start reaching out to all 
stakeholders in informal roundtables to gain views on what it 
would take to provide an FAA Reauthorization bill that is, in 
their words, transformational. We hope that the Senate will 
join that effort as A4A has so that we can begin to resolve 
rather than just talk about what needs to be done to make the 
U.S. aviation industry the world leader.
    Now's the time, we believe, to go big; if we can put it 
that way. Go big in a way that moves past the Government 
mindset that harkens back, in too many cases, to a pre-
deregulation mindset of the 1970s. The path forward to 
fundamentally transforming the way Americans travel and ship 
goods would include, or should include, an examination of air 
traffic control reform. Reform can provide a broad-based 
approach to changing governance, financing and delivery of 
service to travelers and shippers. Putting a new framework in 
place is what would be a long overdue first step toward 
creating a system that isn't dependent on an annual funding 
cycle that furloughs our air traffic controllers and too often 
delays passengers and the shipment of goods.
    This reform can deliver benefits by ensuring that 
stakeholders are actively engaged in the implementation of 
NextGen. Airlines have invested billions of dollars in NextGen 
with very little to show in return to our customers. We can do 
better and there are models in other controls that show the 
way. They may or may not work here but the examination is worth 
it because it would provide a transformation that would get us 
a lot for--would get us forward a lot faster than we're 
currently going.
    Since 1972 the aviation industry and its customers have 
seen their tax burden rise thirtyfold. Airlines currently, and 
their passengers, have 17 individual taxes and fees for which 
we paid the Federal Government $19 billion last year. 
Nonetheless, as the budget agreement at the end of 2013 showed, 
as consideration of the omnibus appropriations bill at the 
beginning of this year showed, and as the President's budget 
shows again this year, airlines and their passengers remain the 
go-to people whenever the Government wants to raise money. ATC 
reform would have the benefit also of catalyzing making sense 
out of a patchwork tax structure that's grown hodgepodge over 
the years and it's a structure that cripples competitiveness 
and progress.
    Similarly, we have a regulatory burden that is outdated. We 
face a competitive global disadvantage as a result of decades 
of accumulated regulations that are simply unnecessary. To say 
that the airline industry is outdated is something of the 
nature of a bad joke. And, I'm not talking about safety 
regulations here, safety and security regulations; we're 
talking about the economic regulations, just to be clear. We 
need a new regulatory paradigm which forces the application of 
commonsense to the review of old and to the creation of new 
regulations.
    Also on fuel, and Madam Chairwoman, you've been a leader in 
this regard. We need the commitment to continue to develop 
viable options for alternative fuels. A4A has committed to 
that; working very closely with the government and with you on 
that.
    In short, the global airline industry of 2014 is very 
different than that of 1978. Foreign governments recognize that 
and have adapted accordingly. The U.S. must catch up. We can 
catch up if we start now to create policies that recognize our 
failures, build on our successes, and provide a policy vision 
that matches what airlines and aviations can do for our economy 
and the growth of jobs.
    Thank you very much.
    [The prepared statement of Mr. Calio follows:]

              Prepared Statement of Airlines for America
    The U.S. airline industry is a powerful engine to improve the well-
being of America and Americans. Yet, Federal Government policies have 
repeatedly throttled-back our industry. That must change.
    The U.S. airline industry has been extraordinarily successful in 
fulfilling Congress' mandates that safety be maintained as the highest 
priority and that maximum reliance should be placed on market forces in 
providing our services. In doing so, our industry has shown remarkable 
adaptiveness and resilience. We have experienced seismic events--first, 
deregulation and, more recently, the wrenching aftermath of 9/11--and 
persevered. Since 2001, U.S. airlines lost over $55 billion. Our 
perseverance, however, has been rewarded and is paying off for our 
customers. We've now bounced back from the upheaval that the airline 
industry experienced in the first decade of this century, albeit with 
significant levels of debt remaining on our balance sheets.
    It is a stunning accomplishment. Because of it, we should be 
looking at a brighter future, yet it is far from that. We continue to 
suffer from government policies that exhibit indifference and, often, 
outright hostility to our industry and, by implication, our employees, 
customers, the communities that we serve and the aviation manufacturers 
upon which we rely.
Overview
    Commercial air travel remains one of the best bargains in America, 
especially given its superior speed and price versus other means of 
travel.
    Despite starting 2014 with $71.5 billion in debt, U.S. airlines' 
modest but encouraging financial progress has allowed them to 
accelerate investments in employees, products and technology to enhance 
the customer experience and to cope more effectively with operational 
impediments, such as extreme weather. In addition to capacity growth, 
and the continuation of stable employment and rising wages, airlines 
plan to invest an additional $11 billion--12 billion in 2014. 
Investments will be made in such areas as new aircraft, spare engines, 
larger overhead bins, premium seating, airport terminal and lounge 
improvements, ground equipment, mobile technology, customer kiosks, in-
flight entertainment, and Wi-Fi, and baggage handling.
    Despite these tangible commitments, non-investment-grade balance 
sheets continue to burden most airlines. The airline industry remains a 
low-margin business, significantly lagging (Standard & Poor's) average 
net profitability (7.9 percent of revenues for airlines versus 10.4 
percent of revenues for the S&P 500 in 2013). Moreover, airlines -as 
ever--remain highly susceptible to volatile jet fuel prices. Jet fuel 
costs in 2013 exceeded $50 billion for the third straight year.
    U.S. airline workers have benefited from improving airline 
finances, through enhanced job security, higher wages and benefits, and 
reduction of airline debt. Enhanced employee well-being is one of the 
most important outcomes of that improvement.
    The carriers continue to demonstrate that the flying public, 
employees, investors and the U.S. economy all are vastly better off 
with a financially strong U.S. airline industry that can cover its full 
costs over an entire business cycle and attract investments. It is with 
such financial health that we will be able to compete effectively on 
the global stage. In other words, we need sustained, meaningful 
profitability.
    Despite all of the above, the Federal Government does not have a 
holistic perspective that encourages government policies that enable 
the airline industry to thrive and thereby contribute as much as it can 
to the U.S. economy and U.S. employment. That shortcoming needs to be 
corrected. We are not asking the government to put its thumb on the 
scale. Instead, we are asking it to remove the yoke of ever-rising 
taxes and fees, and regulatory programs that neither benefit the 
consumer nor the airline and thus curb U.S. economic growth.
Basic Considerations
    An effective U.S. Government aviation policy should be based on 
four fundamental considerations.
    First, there must be a recognition that the U.S. airline industry 
is indispensable to our Nation and its economy. What that means, of 
course, is that the healthier our industry is, the more that we 
contribute to the prosperity of America.
    To place this in some context, the Federal Aviation Administration 
(FAA) estimated that in 2009 civil aviation supported more than 10 
million jobs, contributed $1.3 trillion in total economic activity and 
accounted for 5.2 percent of total U.S. Gross Domestic Product. Civil 
aviation in general and the airline industry in particular are thus 
central to the U.S. economy.
    An important element of this economic contribution is international 
trade and tourism. Air travelers journeying to and from the United 
States reached a record 185.4 million in 2013. Significantly, non U.S. 
citizens represented 5.1 percent of year-over-year growth, compared 
with 3.6 percent growth in U.S. citizen international travel. The 
Department of Commerce has reported that international visitor spending 
in the United States totaled $180.7 billion in 2013. U.S. airline 
receipts totaled $41.2 billion of that sum.
    The value of international air cargo transportation is similarly 
significant. The United States traded a record $940 billion of 
merchandise by air last year, much of it in high-value items, including 
$431 billion in exports. The value of a kilogram exported by air was 
129 times the value of a kilogram transported by sea.
    These examples illustrate the need to scrutinize legislative and 
regulatory initiatives to assure that they do not wrongly inhibit U.S. 
airlines' ability to deliver air transportation services efficiently 
and economically. Taxes and fees, as well as unnecessary regulations, 
impose a hefty, ongoing drag on airlines and consequently their ability 
to serve the public.
    Second, there is nothing sinful about being profitable. 
Profitability directly benefits our employees, customers and the 
businesses from which we buy goods and services. This is the simple 
reality. Airlines are now in the position to reduce debt, invest in 
staffing and training, purchase new aircraft and better meet customer 
demand by offering new and improved products, destinations and seats. 
As JP Morgan airline equity analyst Jamie Baker recently observed, 
``With airlines in the U.S. now generating acceptable returns, their 
ability to reinvest in their product has been greatly enhanced.'' Most 
importantly, the recently improved finances have allowed the airlines 
to sustain more air service than would be possible under unprofitable 
or less profitable conditions.
    Profitably also means more stability and better remuneration for 
our employees. Over the last three years, employment levels at U.S. 
passenger airlines have stabilized while wages and benefits have risen 
substantially. In harsh contrast, the last decade was brutal for 
airline employment. The number of full-time equivalent employees at 
U.S. passenger airlines declined from 520,600 in 2000 to 378,066 in 
2010, a 27-percent decline. The FTE figure was 380,853 last year. With 
the recent recovering financial health of the industry, average 
employee compensation per FTE rose from $85,372 in 2010 to an estimated 
$93,856. That 10 percent increase is a concrete example of the benefit 
of profitability.
    Third, the marketplace is the best guarantor of consumer welfare. 
The passenger or shipper will reward or punish the airline based on the 
price and quality of service it offers. That is how it should be. We're 
prepared to take our lumps. What we don't want is to have someone who 
is not in the arena turning the dials and deciding our fate.
    Finally, where the Federal Government has the responsibility to 
provide services related to air transportation, such as customs and air 
traffic control functions. It must meet the demand for those services 
and do so efficiently. This means that Customs and Border Protection 
(CBP) should not be constructing new preclearance facilities overseas. 
Instead, it should concentrate on assuring improved service at U.S. 
airports of entry. Congress should also recognize this imperative 
legislatively. Similarly, the FAA should concentrate on exploiting 
proven, available technology to improve air traffic procedures so that 
airlines can leverage the investments they have already made in 
existing equipment.
The Government's ATM Culture: The Relentless Rise in the Burden of 
        Taxes and Fees
    The ever-rising Federal aviation tax burden rose 30 times from 1972 
to 2013, hindering the industry's ability to grow and facilitate 
broader economic growth and job creation, and putting it at a 
competitive disadvantage vis-aa-vis our foreign airline competitors. 
Unhappily, airlines continue to be regarded as the ``go-to guy'' for 
financing the Federal Government.
    This was illustrated in December in the congressional budget deal 
which changed Transportation Security Administration (TSA) security 
fees from $2.50 per leg of a connecting flight with a $5 per trip cap, 
to a flat $5.60 each way. This increase will generate an estimated 
$12.6 billion over the next decade, which the legislation says would be 
deposited in the general government fund with no incremental benefit to 
air travelers whatsoever. Thus, passengers were involuntarily and 
uniquely conscripted into the Federal Government's budget travails.
    The Administration's Fiscal Year 2015 budget proposal starkly 
demonstrates that we remain the ``go-to-guy.'' That dubious distinction 
would mean an increase in Federal aviation taxes and fees of $4.2 
billion annually. Left unsaid in it is the inevitable outcome if the 
Administration is successful: downward pressure on services and upward 
pressure on prices. This would not be a winning combination for air 
travelers and shippers.
    More specifically, the FY 2015 budget proposal has four alarming 
elements.
    First, the White House is proposing to increase the TSA aviation 
security tax from $5.60 per one way trip to $6.00, which would cost 
airline passengers more than $217 million per year. This comes on the 
heels, as noted above, of Congress increasing the tax to pay for 
deficit reduction. Moreover, despite the fact that Congress recently 
eliminated the TSA's Aviation Security Infrastructure Fee (ASIF), the 
White House proposes to reinstate ASIF, which would cost the industry 
$420 million annually.
    Second, the budget proposal would create an 18th unique tax on 
aviation--a mandatory $100 charge for every aircraft departure, costing 
the U.S. aviation industry another $1 billion annually.
    Third, the budget proposal would raise the Passenger Facility 
Charge (PFC) cap from $4.50 per flight segment to $8, which would cost 
passengers an additional $2.2 billion annually.
    Fourth, the budget proposal would increase the Department of 
Homeland Security's (DHS) customs fee from $5.50 to $7.50 and 
immigration fee paid by passengers from $7 to $9, further increasing 
their overall aviation tax burden by $318 million annually.
    The astonishing bottom line is that if the Administration's 
proposed new, higher taxes and fees were enacted, the tax bite on a 
typical $300 one-stop domestic round-trip ticket would increase from 
$62.98, or 21 percent, to $76.75, or 25.6 percent. That would be a 
deplorable disregard of the consumer. The Administration's proposal 
also ignores the fact that air travel is often discretionary; higher 
costs count when consumers make the decision to fly or stay home, or to 
ship an item. The elasticity in demand in for air travel has been well 
documented. In 2012, the U.S. Government Accountability Office (GAO) 
found that a 1 percent increase in the cost of an airline ticket 
(including taxes and fees) would result in a 1.12 percent reduction in 
the quantity of tickets sold. That unmistakably implies that further 
increases in government-imposed taxes and fees would dampen demand, 
reduce airline revenue and diminish overall U.S. economic activity.
    Congress should recognize the need to leverage commercial 
aviation--as a key enabler of job growth and U.S. economic activity 
rather than as a source of U.S. deficit reduction--by rejecting the 
White House's proposed aviation tax and fee increases.
The International Landscape
    The international aviation landscape has been shifting 
dramatically; indeed, by all appearances, change is accelerating. One 
fact has been clear for some time: the days of North American and 
European domination of air transportation are long gone.
    Governments in key countries have recognized the increased and 
critical role global air traffic will play in future economic 
development. They have created clear, national strategic aviation plans 
that have served to develop integrated aviation eco-systems that are 
very effective vehicles for national economic growth.
    These aviation ``ecosystems'' consist of airlines, airports, 
airport concessions (e.g., duty free shops), ground services, 
maintenance, aircraft leasing, aircraft financing and aviation policy-
maker authorities, that work under the same government umbrella to 
serve a common government goal and purpose: drive overall economic 
growth.
    Strategic growth is being executed in different ways--organic 
growth through acquisition of aircraft and the utilization of sixth- 
and fifth-freedom rights, growth through equity investments in other 
airlines that open up access to new territories, or growth through 
industry consolidations backed by the governments.
    Global airline traffic activity is shifting south and east in the 
world, with fast-growing international airlines, such as the Middle 
East and Chinese carriers emerging as top airlines in terms of revenue 
and capacity. For example, rapid growth in the last decade has resulted 
in Middle East carriers' share of all international capacity increasing 
from 2 percent in 2002 to 11 percent in 2012, equaling U.S. widebody-
operator carriers' capacity, which decreased from 14 percent to 11 
percent in the same period.
    These foreign-flag carriers benefit from smart, forward-looking 
governmental strategies to stimulate passenger growth by setting low 
airport fees, low corporate taxes and minimal passenger-related fees 
and taxes. These decisions generate significant economic benefits to 
the host countries as traffic increases dramatically. Moreover, some of 
these carriers have structural business model advantages such as low 
labor costs (e.g., 36 percent lower average employee costs) and 
relaxed labor regulations. These benefits combine to create low-cost 
and resilient business models.
    These dynamics have several noteworthy implications.
    First, they highlight how critical government policy is in the 
development of air transportation in these countries. Whether one 
agrees with the nature of the governmental involvement, there is a 
precise focus and abiding discipline exhibited in the execution of the 
policies.
    Second, at the core of the policies is a recognition that a vibrant 
airline industry inevitably and significantly promotes overall economic 
development.
    Third, the shift to the south and the east will continue unabated. 
We are not witnessing a temporary phenomenon.
    Fourth, given the role of some governments, the U.S. Government 
must make clear to civil aviation authorities in other countries that a 
basic tenet of U.S. aviation policy is the maintenance of fair 
competition.
    We are not suggesting that the U.S. Government adopt all of the 
policies of the governments that oversee rapidly expanding foreign-flag 
airlines. We, however, firmly believe that the existence of such 
policies means that the United States must develop a coherent National 
Airline Policy that enables us to respond with maximum effectiveness to 
our foreign-flag competitors.
    We have demonstrated time and again that we have the wherewithal to 
compete effectively--domestically and internationally. Customers, 
airline employees, communities and businesses have been the 
beneficiaries of that ability. We need government's help, however. Not 
to tilt the playing field but unshackle us from exorbitant taxes, fees, 
and regulations that all-to-often are uncalled-for.

    Senator Cantwell. Thank you, Mr. Calio.
    And Mr. Wytkind, thank you for being here. We appreciate 
your testimony.

 STATEMENT OF EDWARD WYTKIND, PRESIDENT, TRANSPORTATION TRADES 
                      DEPARTMENT, AFL-CIO

    Mr. Wytkind. Thank you very much for having me here, Madam 
Chair, Ranking Member Ayotte and members of the Subcommittee. 
I'm pleased to be here on behalf of our 32 transportation 
unions that are part of the Transportation Trades Department of 
the AFL-CIO.
    This is a very important hearing and it is very timely. We 
find ourselves at a tipping point in the state of this industry 
and I'll talk about a couple of key points. First, I also want 
to associate myself with the comments by others about the 
Malaysia Airlines situation. The labor movement is deeply 
concerned and obviously grieves with everyone else for the 
situation around that flight.
    First, trade and other policies as well as the acceleration 
of globalization often unchecked, threaten the aviation 
industry and middle-class jobs. That is if our government fails 
to act with purpose. Second, FAA regulation is not keeping up 
with the torrid pace of aircraft maintenance outsourcing, which 
undermines aviation safety and security and denies U.S. airline 
mechanics the chance to compete on a level playing field. 
Third, the failure to properly fund the expansion and 
modernization of our aviation system, meant to ensure adequate 
resources for the FAA and its employees is threatening the 
competitiveness, safety and efficiency of this industry.
    One very clear example of what we think is liberalization 
of aviation run amok is the Norwegian Air Shuttle's operating 
scheme that is currently pending and becoming a very 
controversial item in this country. Norwegian Air International 
is the name of the company; NAI.
    A few facts: Norwegian Air Shuttle was incorporated in 
Norway and holds an air operator certificate in that nation. 
Its so-called new company, NAI, was created to exploit European 
aviation and labor law, circumvent the U.S.-E.U. Open Skies 
Agreement, especially its labor article, and gain an unfair 
advantage over U.S. and European carriers that play by the 
rules. Norwegian has registered its aircraft in Ireland and 
attained an Irish air operator certificate but it will not 
service Ireland. The airline is also contracting, or more 
accurately renting, its flight crews and they're largely based 
in Thailand and covered under individual employment contracts 
under the laws of Singapore. That's right. A Norwegian company 
created an Irish airline that will not fly in Ireland, will 
rent Asian flight crews, and will use expanded benefits under 
the U.S.-European aviation trade accord to compete unfairly 
with U.S. and European air carriers.
    Fortunately, this is not a done deal because the NAI must 
first secure approval from the U.S. Department of 
Transportation. The administration must very clearly reject 
NAI's application and send a clear signal that those seeking to 
exploit U.S.-European aviation trade relations with a rogue 
``flag of convenience'' operations will not be rewarded with 
expanded access into the very lucrative U.S. marketplace. We're 
pleased that yesterday 38 senators sent a letter to 
Transportation Secretary Foxx that raises many of our concerns. 
I wanted to thank Madam Chair, Senator Cantwell, for joining 
that letter, as well as Chairman Rockefeller and Senator Schatz 
and Blunt for leading the effort.
    Another very critical international issue that we face 
involves TTIP negotiations between the U.S. and the E.U. The 
history is that aviation has always been left out of broad 
trade negotiations. There's a very simple reason for it. The 
strategic importance of the airline industry as expressed by my 
colleagues here on the panel, cannot be understated. And yet, 
the E.U. seeks to upend the current policy and include aviation 
in TTIP negotiations. We think that's a huge mistake. The aim 
of the European Union is clear; it wants to force unwise and 
unpopular changes to U.S. policies on foreign ownership and 
control of change the rules that currently limit point-to-point 
domestic service to U.S.-controlled carriers. These laws ensure 
a strong airline industry for Mr. Calio's members, protects 
against unfair competition and preserve the rights of our 
members. It would be irresponsible in our judgment to throw air 
traffic rights into broader free trade talks with the Europeans 
and then have aviation traded away as part of some broader 
trade or geopolitical objective.
    We've seen decades of unfair trade policy ravage many 
industries in our country. We're committed to making sure that 
bad trade policy doesn't ravage U.S. airline employees. Our 
Government must also ensure the safety and security and 
oversight of aircraft maintenance performed overseas.
    There are 700 facilities that dot the globe now that 
maintain aircraft that our carriers use. The FAA is now a year 
late in issuing a rule mandated by the Congress to make sure 
that those employees in FAA certified facilities around the 
world are drug tested the same way they are here in the United 
States. It's not about imposing our will on other countries, 
it's about imposing a level playing field to make sure that if 
you're going to fly the seal of the FAA on a facility around 
the world and say you are approved, that you will comply by the 
same rules that any facility or air carrier in this country 
complies by. That rule is overdue and we really need it to be 
issued.
    Last, the U.S. must invest in the FAA's workforce and its 
aging infrastructure. I join my colleagues here in talking 
about not only NextGen but the overall modernization of 
aviation. We still use too much 1950s technology and it puts us 
at a very competitive disadvantage in the global marketplace. 
We've already witnessed the impacts of the FAA shutdown and the 
overall sort of budget impacts in Washington and what that 
means to the FAA and its programs. You can't run large 
infrastructure projects and have them go through fits and 
starts. You can't put them on the shelf and then turn them back 
on just like that as the government does its sort of fits-and-
starts approach to how we fund aviation. And meanwhile, the 
members I'm honored to represent and the FAA members of the air 
traffic controllers and PASS, are becoming scapegoats in this 
battle. And we'd like to see that end with a more dependable, 
reliable funding stream that deals with the real modernization 
needs of the system.
    And there is a major staffing crisis at the FAA. One third 
of its workforce, including controllers, inspectors and system 
specialists are eligible to retire. This is unsustainable and 
must be addressed because we believe it's going to not only 
impact operations for the airline industry, but also the safety 
of the system as you see this brain drain of high-quality 
people retiring and we're not hiring and replacing them fast 
enough. It's time for Congress to fully fund the aviation 
investment needs of the country.
    I look forward to working with my colleagues here and many 
others in trying to get that done. And I believe the issues 
we've raised in our formal testimony about international trade, 
about the way we regulate the outsourcing of aircraft 
maintenance, the way we treat the FAA workforce, and the way 
that we make sure we build a STEM program in this country that 
has as many machinists working in America as possible who are 
members of the IAM at Boeing and many other companies, who can 
build that workforce up to be the best in the world, as it is 
today, and compete with the rest of the world as it does today.
    Thank you. Appreciate the opportunity.
    [The prepared statement of Mr. Wytkind follows:]

           Prepared Statement of Edward Wytkind, President, 
               Transportation Trades Department, AFL-CIO
    Chairwoman Cantwell, Ranking Member Ayotte, and members of the 
Senate Commerce, Science, and Transportation Committee's Aviation 
subcommittee, thank you for the opportunity to testify today on the 
international competitiveness of the U.S. aviation industry.
    As the President of the Transportation Trades Department, AFL-CIO 
(TTD), I am honored to speak on behalf of the employees who operate, 
maintain, service and build our Nation's aviation system. By way of 
background, TTD consists of 32 affiliated unions that represent workers 
in every mode of transportation, private and public sector, including 
those who work in aviation.\1\ Today, America is confronted with 
enormous challenges as the effects of globalization ripple throughout 
the aviation sector and its workforce. The policy and trade decisions 
of our government and the business decisions of our air carriers in the 
next few years will determine the fate of this vital sector of the U.S. 
economy.
---------------------------------------------------------------------------
    \1\ A complete list of TTD affiliates is attached.
---------------------------------------------------------------------------
    With trade liberalization policies taking hold around the world, 
our government--with appropriate congressional oversight--has the 
responsibility to ensure U.S. airlines can compete on a level playing 
field worldwide and to protect and expand middle class aviation jobs. 
Specifically, the Administration and Congress must carefully manage 
aviation trade relationships to ensure we avoid the land mines and pit 
falls of unscrupulous liberalization, protect against outsourcing of 
critical safety and security work, oppose regulatory overreaches by 
foreign states, and provide stable and robust financing for our 
aviation infrastructure and FAA workforce.
    We are currently faced with a particularly dangerous instance of 
liberalization run amok that could have far-reaching negative 
implications for the U.S. aviation industry and its employees. 
Norwegian Air Shuttle (NAS), which is incorporated in Norway and holds 
an air operators certificate (AOC) in that country has developed a 
business model that is designed to exploit European aviation and labor 
laws and the U.S.-EU Air Transport Agreement (ATA) in order to evade 
its collective bargaining obligations in Norway and Norway's laws. NAS 
has created a subsidiary, Norwegian Air International (NAI) which 
applied for and received an Irish AOC even though it will not serve 
Ireland. NAI has also registered its 787 aircraft in Ireland and has 
applied for a foreign air operators certificate with the U.S. 
Department of Transportation (DOT) as an Irish carrier. Despite being a 
subsidiary of a Norwegian company and registering as an Irish airline, 
NAI is using pilots who will be based in Thailand and employed under 
individual employment contracts that are governed by the laws of 
Singapore to crew these flights. The pilot crew will not be employed 
directly by NAI but by a pilot recruitment company that will then 
contract, or more accurately ``rent'' them to NAI. A similar 
arrangement will apply to the flight attendants who will work on the 
787s.
    The goal here is clear. NAI is using the unique nature of EU 
aviation laws to effectively shop around for the labor laws and 
regulations that best suit its bottom line. It's using a ``Flag of 
Convenience'' strategy at the expense of high labor standards. NAI is 
also taking advantage of the liberalized transatlantic aviation market 
provided by the U.S.-EU ATA, and claiming that this agreement alone 
provides unlimited access to the U.S. market. NAI has never disputed 
the assertion by TTD and other U.S. and European labor organizations as 
well as major air carriers on both sides of the Atlantic that they are 
simply using this business model to avoid Norwegian labor, tax and 
other laws. The airline has presented a number of economic reasons for 
registering in Ireland, but each of these is unsubstantiated and has 
only been recently presented. Rather than presenting legitimate, fact-
based economic benefits, NAI's claims appear to be part of a publicity 
campaign designed to distract the general public and Federal regulators 
from their true goal and purpose: to undermine labor standards and 
secure access to the transatlantic aviation market with bottom of the 
barrel labor costs.\2\
---------------------------------------------------------------------------
    \2\ Attached are joint comments by AFL-CIO president Richard Trumka 
and TTD president Edward Wytkind, submitted to DOT docket number OST-
2013-0204 on December 12, 2014.
---------------------------------------------------------------------------
    We raise this not just to complain about a foreign airline operator 
or to insulate U.S. carriers from legitimate competition. If allowed to 
proceed, the NAI business model will have an immediate impact on U.S. 
airlines and their employees. With plans to serve Los Angeles, Oakland, 
Orlando and other American cities if its application secures DOT 
approval, NAI would undercut U.S. air carriers and their employees that 
serve those same markets by as much as 50 percent. If NAI's plan is 
approved, in the long term this type of ``Flag of Convenience'' model 
could become the norm, with more and more airlines seeking to compete 
by scouring the globe for cheap labor and lax regulations.
    Fortunately, negotiators for the EU-U.S. ATA foresaw this type of 
nefarious business model as a potential problem and included, for the 
first time ever, a labor article designed to prevent benefits from the 
ATA from having adverse effects on aviation jobs. This provision, 
Article 17 bis (``Social Dimension''), states that ``the opportunities 
created by the Agreement are not intended to undermine labour standards 
or the labour-related rights and principles contained in the Parties' 
respective laws.'' It further states that ``the principles in paragraph 
1 shall guide the Parties as they implement the Agreement.''
    The inclusion of Article 17 bis in the ATA represented important 
progress in our global effort to ensure that market-opening trade 
initiatives are not used to harm good jobs and undermine labor 
standards, and was praised by both U.S. and European negotiators. The 
article is also consistent with U.S. law that requires DOT to apply, 
among other factors, a public interest standard as it considers these 
aviation policy questions. We believe that NAI's business model is a 
clear violation of Article 17 bis and U.S. public interest standards, 
and gives DOT ample grounds on which to reject the application. We are 
also pleased that over a quarter of the U.S. Senate, including many of 
you here today, joined a letter that was led by Senators Schatz, Blunt 
and Rockefeller to DOT raising many of these concerns, and urging 
Secretary Foxx to ensure the NAI application is fully compliant with 
U.S. law and the U.S.-EU ATA. I want to thank these Senators for their 
support. Our government must make it clear that NAI's operating scheme 
runs contrary to the faith and intent of the U.S.-EU ATA and will not 
be rewarded with expanded access to our lucrative aviation market.
    In addition to the NAI dispute, another pending trade issue that is 
vital to our aviation sector is the U.S.-EU negotiations over a 
Transatlantic Trade and Investment Partnership, better known as TTIP. 
These negotiations encompass a wide variety of trade issues, yet 
despite the historical precedent of excluding air services in these 
types of broad trade negotiations, the EU is attempting to include 
aviation liberalization in these talks. We are strongly opposed to this 
approach, as it is an attempt by the EU to force changes to U.S. rules 
that limit foreign ownership and control of U.S. airlines and reserve 
domestic point-to-point service, or cabotage, to U.S.-controlled 
carriers. Because the EU has failed in its attempts to force unwanted 
reforms to these U.S. laws, it is attempting to do so in complex TTIP 
talks with hopes that somehow our aviation interests would be ``traded 
away'' for other trade objectives. This strategy must be rejected and 
we have communicated these views to the Administration and the EU.\3\
---------------------------------------------------------------------------
    \3\ Attached are TTD's comments on the Transatlantic Trade and 
Investment Partnership, submitted to USTR docket number USTR-2013-07430 
on May 10, 2013.T
---------------------------------------------------------------------------
    The good news is that risking our aviation interests in a broader 
trade negotiation isn't necessary if the objective is opening aviation 
markets and expanding trade and jobs. Over 100 trade liberalization 
pacts, referred to as ``Open Skies'' agreements already exist between 
the U.S. and various governments, and new and expanded agreements are 
on the table. In other words, aviation trade is expanding through 
existing negotiating frameworks overseen by the subject-matter experts 
at the Departments of Transportation and State. There is no need for 
our government to throw aviation into a larger, more complex pot of 
trade issues.
    We know that the expansion of international air transportation 
opportunities can offer lucrative business opportunities for U.S. 
airlines and, if done the right way, create good aviation jobs. At the 
same time, we know that globalization without checks and balances can 
have devastating effects on entire industries and middle class American 
jobs.\4\ TTD has always rejected efforts that seek aviation 
liberalization at any cost and without adequate protections for the men 
and women who work in our aviation industry. Decades of unfair trade 
policy have ravaged workers in many U.S. industries, and we will not 
relent in our commitment to ensuring that aviation trade liberalization 
does not have the same result for U.S. aviation employees.
---------------------------------------------------------------------------
    \4\ Bivens, J. (2008, May 6). Trade, Jobs and Wages. Economic 
Policy Institute. Issue Brief #244.
---------------------------------------------------------------------------
    As noted above, we were pleased to see the inclusion of a labor 
article in the U.S.-EU ATA as well a process through which the parties 
can seek to address adverse effects of the agreement on aviation 
employees. The U.S. also wisely rejected efforts by the EU to force 
changes to our rules and regulations governing foreign ownership and 
control of U.S. airlines. It was decided by our government that foreign 
investment in our airlines was appropriate but not to a degree that 
ceded actual control to foreign investors.
    Foreign ownership and control rules, and prohibitions against 
foreign carriers engaging in cabotage have ensured a viable U.S. 
airline industry and have protected U.S. aviation workers against 
unfair competition, preserved workers' rights and ensured our Nation's 
status as the world's leader in air transportation. Foreign states have 
long lobbied to loosen these restrictions in order to gain a foothold 
in the lucrative U.S. aviation market, the world's largest, and syphon 
away good middle class jobs. In rejecting these proposals, despite the 
heavy-handed tactics of the EU, the final U.S.-EU accord proved again 
that liberalization agreements can be reached that include important 
protections for a vital U.S. industry and good jobs. With companies 
such as NAI already seeking to exploit an Open Skies agreement with a 
clear labor protection article, it would be particularly dangerous to 
further muddy the regulatory waters by throwing air traffic rights 
issues into a broad free trade agreement.
    The expanding web of aviation liberalization agreements throughout 
the world is making the global aviation system increasingly 
interconnected and integrated. With this comes a host of regulatory 
issues and concerns that will need to be addressed. One such issue is 
the impact of aircraft carbon emissions on the environment and global 
climate change. TTD is committed to working with U.S. carriers and the 
U.S. Government to seeking a global solution to reducing aviation 
emissions, but we believe that any solution must be truly global in 
order to provide meaningful results and ensure competitive balance. 
Piecemeal unilateral attempts to curb carbon emissions would place an 
unreasonable financial burden on U.S. carriers and their employees and 
only further delay the process of reaching an international, consensus-
based agreement. This includes the EU's Emissions Trading Scheme (ETS), 
a plan that if implemented would apply to all flights entering and 
leaving EU airspace.
    I would like to thank Senators Thune and McCaskill for leading the 
effort last year to pass legislation that allowed the Secretary of 
Transportation to combat the harmful effects \5\ of the EU ETS and 
ensured that U.S. airlines were not subject to the EU cap-and-trade tax 
penalties. Because of this legislation and other international 
pressure, the EU postponed implementation of ETS for a year to give the 
International Civil Aviation Organization (ICAO) an opportunity to 
draft a global plan. We were pleased, then, when late last year ICAO's 
general assembly approved a plan that will provide for the development, 
over the next three years, of a global framework for addressing 
aviation's impact on climate change, with the goal of implementing the 
plan worldwide by 2020. The ICAO action was an important step toward 
implementing a global solution to this problem, and we look forward to 
working with ICAO to develop a framework that will substantially reduce 
global emissions, improve the efficiency and cost-effectiveness of our 
aviation system, and promote sound environmental stewardship while 
maintaining competitive balance and fairness in the international 
aviation marketplace.
---------------------------------------------------------------------------
    \5\ Attached is TTD's policy statement ``Supporting a Global 
Solution to Aviation Emissions,'' which was adopted by the TTD 
Executive Committee on October 29, 2013.
---------------------------------------------------------------------------
    We are also pleased that EU officials have tentatively backed off a 
plan to continue pushing the misguided ETS scheme. In the aftermath of 
the ICAO general assembly meeting, the European Commission (EC) 
proposed revising the EU law so that the ETS would cover all flights 
over EU airspace, including those flown by international carriers. Last 
week EU officials announced that they would not pursue this course of 
action, but a final vote is pending in April. We hope that the EU will 
completely suspend its plans to unilaterally implement its ETS scheme 
and work with the U.S. and others toward a truly global solution 
through ICAO.
    We also must ensure that the more than 700 foreign-based aircraft 
repair stations certified by the FAA to work on U.S. aircraft are held 
to the same safety and security rules that we require for work done in 
this country. Too often this has not been the case. For example, 
aircraft mechanics working in the United States either employed at air 
carriers or at domestic contract repair stations are required to 
undergo various drug and alcohol screenings to ensure their ability to 
perform safety-sensitive repairs. Yet employees working at repair 
stations based overseas are exempt from these tests despite the fact 
that they work on the same U.S. aircraft and at repair stations 
certified by the FAA. To address this and other safety loopholes, 
Senator McCaskill championed a number of reforms to aircraft repair 
station regulations in the context of the FAA Modernization and Reform 
Act of 2012. I want to thank and recognize the Senator for her 
leadership on this issue. Specifically, the final law included a 
provision (Section 308(d)(2)) directing the FAA, within one year of 
enactment, to issue a proposed rule requiring all repair station 
employees responsible for safety-sensitive maintenance on U.S. aircraft 
to be subject to an alcohol and controlled substance testing 
program.\6\ While we are pleased that Congress moved to address this 
safety issue, the FAA is now over a year late in fulfilling this 
mandate and the provision will have no impact until it is formally 
implemented by the FAA. This delay is unacceptable and particularly 
grievous since additional time will be needed to implement the final 
regulations after the proposed rule is finally released.
---------------------------------------------------------------------------
    \6\ Separately, Section 308(d)(1) directs the Secretary of 
Transportation and the Secretary of State to request that member 
countries of ICAO establish international standards for alcohol and 
controlled substance testing of persons that perform safety-sensitive 
maintenance functions on U.S. commercial aircraft.
---------------------------------------------------------------------------
    We are also extremely disappointed in the final security rule on 
foreign and domestic repair stations issued by the Transportation 
Security Administration (TSA) in January. When TSA issued an NPRM in 
2010, we raised significant concerns that the proposal did not go far 
enough to address the security questions that have been raised. We 
agree with TSA's assessment, noted in the agency's NPRM, that as TSA 
``tightens security in other areas of aviation, repair stations 
increasingly may become attractive targets for terrorist organizations 
attempting to evade aviation security protections currently in place.'' 
That is why we were dismayed that the final rule further rolls back the 
already weak security requirements TSA proposed in 2010, fails to 
address security loopholes we identified in the proposed rule, and runs 
counter to the congressional requirement that TSA ensure the security 
of maintenance work performed at contract repair stations.
    The final rule eliminates the proposal that repair stations 
certified by the FAA that work on U.S. aircraft adopt and implement a 
security program to help control access to a facility. Instead, limited 
and weak security measures will apply only to stations that are on or 
adjacent to an airport. The security challenges raised by the heavy use 
of contract maintenance are not limited to stations at airports and 
Congress clearly did not identify this distinction when it mandated 
security enhancements.
    The final rule also did nothing to address concern with adequate 
background checks of contract station employees. In fact, it went in 
the opposite direction by only applying these reviews to individuals at 
a repair station designated as a TSA point of contact and those who 
have the means to prevent the unauthorized operation of large aircraft.
    Finally, TSA does not intend to fully inspect FAA certified repair 
stations, weakening the agency's ability to ensure their security. This 
rule also fails to give TSA the clear authority to conduct unannounced 
inspections of foreign repair stations. While the rule extols the 
virtues of unannounced inspections at domestic stations, it notes that 
for foreign stations ``it will always coordinate any inspection with 
the host government prior to starting an inspection.'' The final rule 
fails to fulfill the intent of Congress, and we look forward to working 
with this Committee to improve the safety and security of foreign 
repair stations.
    Beyond TTIP, Open Skies negotiations and ICAO global aviation 
emission issues, the U.S. Government must embrace policies that promote 
the competitiveness of U.S. airlines and protect and expand U.S. 
airline jobs. It also must not advance policies that provide a 
competitive advantage to foreign airlines, particularly state owned or 
subsidized airlines. Unfortunately the Department of Homeland Security 
(DHS) has been doing the latter. Earlier this year DHS opened a Customs 
and Border Protection (CBP) pre-clearance facility at the Abu Dhabi 
International Airport in the United Arab Emirates (UAE), despite an 
outpouring of objections from the U.S. aviation community, including 
labor, U.S. airlines and airports. CBP pre-clearance facilities are 
popular with passengers and can help relieve congestion at customs 
check points in U.S. airports. However, no U.S. carrier currently flies 
between the U.S. and Abu Dhabi. This facility is staffed by U.S. 
customs agents at significant cost to the U.S. taxpayer, yet it only 
benefits Etihad--the state-owned air carrier of the UAE. This is also a 
significant departure from the prevailing construct of preclearance 
operations, which is to facilitate U.S. travel and to benefit U.S. 
travelers. Preclearance should not be a vehicle to put U.S. air 
carriers and U.S. airline jobs at risk by advantaging a foreign 
competitor exclusively. And given that Etihad only operates three 
routes between Abu Dhabi and the U.S., we believe CBP resources and 
personnel would be better used here at home to relieve overburdened 
customs lines in U.S. airports. While the Abu Dhabi facility is now up 
and running, we are concerned that this will lead to other pre-
clearance facilities in airports that have a minimal U.S. presence such 
as Dubai and Doha. We will work closely with Congress in the coming 
months to ensure that our customs resources are used in a way that help 
alleviate congestion at our airports while also promoting the 
competitiveness of U.S. airlines.
    In order to remain competitive in the global marketplace and 
continue in our commitment to serving the flying public, the U.S. must 
invest in the FAA's workforce and aging infrastructure, stabilize the 
FAA's operating budget, ensure enhanced oversight of the industry and 
airspace, and continue modernizing the National Airspace System (NAS) 
through the Next Generation Air Transportation System (NextGen) 
initiative. We have all witnessed the impact that government shutdowns 
have had on these programs and each time this occurs, these 
initiatives, designed to make air travel safer and more efficient and 
to expand capacity, are grounded or idled.
    The Government shutdown is just the latest disruption for the FAA. 
Passage of the 2012 FAA Reauthorization Act was delayed over three 
years with 23 extensions before finally being signed into law. In fact, 
when an agreement could not be reached on the 21st extension, the FAA 
was partially shut down for two weeks during the summer of 2011, 
costing the government nearly $30 million a day. More recently, in 
April 2013, sequestration forced the FAA to furlough every employee, 
including air traffic controllers and safety inspectors, and look at 
closing towers in order to achieve the mandated spending cuts. 
Sufficient and predictable long-term funding is desperately needed to 
ensure that our aviation system is as safe and efficient as possible.
    This lack of stable funding has already caused damage, some of 
which will be difficult if not impossible to reverse. For example, 
stop-and-start funding means that the FAA can't plan for the future, 
making long term improvement and modernization projects even more 
difficult. In addition, restarting modernization projects is very 
expensive and some projects may need to begin again from square one. 
The April 2013 furloughs caused delays to modernization projects like 
En Route Automation Modernization (ERAM) that are costing $6 million 
per month of delay (currently estimated to be about $42 million).
    Due to budget cuts, preventative maintenance has been halted, and 
engineers and systems specialists must contend with a fix-on-fail 
policy, meaning they must wait until equipment actually breaks before 
replacing it. This creates an obvious safety concern and may also 
result in excessive and avoidable air traffic delays. Sequestration-
mandated furloughs in April 2013 caused severe delays: during the week 
of April 21-27 2013, delays nearly tripled at our Nation's airports, 
from 5,103 delays to 13,694. These funding cuts are problematic, and 
will continue until Congress finds a responsible way to end 
sequestration. Until then, our NAS is in jeopardy of falling behind on 
efficiency, safety, and capacity.
    The FAA also continues to face serious problems regarding staffing, 
especially considering that one-third of its workforce, including air 
traffic controllers, aviation safety inspectors and systems 
specialists, will be eligible to retire starting this year. 
Furthermore, even if the FAA replaced these retiring workers 
immediately, the training for employees throughout the agency is 
extensive and it can take two to five years to fully train new hires. 
In addition, FAA operations within the current budget environment are 
presenting major challenges for the FAA workforce and the aviation 
system, which is resulting in limited funding for travel, challenges 
performing inspections and other surveillance activity, reduced or 
delayed maintenance of critical systems and equipment, and difficultly 
in meeting growing industry demands with its manufacturing and 
certification process. Without clear funding in place to ensure the 
current workforce remains on the job and a new generation of employees 
is in place with access to thorough on-the-job training, there is no 
way the FAA can guarantee there will be enough aviation safety 
inspectors, air traffic controllers, systems specialists and other 
employees in place to secure the safety and efficiency of the system.
    The U.S. must also foster programs that will help develop a 
workforce with the skills and expertise necessary for the manufacture 
and maintenance of modern, technologically advanced aircraft. U.S. 
aviation cannot compete globally without maintaining its world 
leadership in producing the highest quality aircraft. To that end the 
International Association of Machinists and Aerospace Workers (IAM), a 
TTD affiliate, has partnered with the Boeing Company to create the 
Quality Through Training Program. The IAM and Boeing jointly design and 
administer a host of programs designed to continually upgrade the 
skills and abilities of the incumbent workforce. These programs 
comprise career planning, education assistance, and a variety of onsite 
training programs including apprenticeships.
    We also want to refer the Committee to the Modular Manufacturing 
Development Project, developed by IAM in collaboration with Goodwin 
College, the Connecticut Center for Advanced Technology (CCAT) and 
other manufacturing organizations. This project is a shining example of 
a program designed to increase our manufacturing capabilities to meet 
the demands of U.S. aviation and around the world. This project has 
identified gaps in our manufacturing capabilities and brings together 
industry stakeholders, including labor, to recognize and address the 
needs of our manufacturing workforce. I commend IAM, led by President 
R. Thomas Buffenbarger, for its leadership and vision in collaborating 
on this project, and hope that it will serve as model for workforce 
development and technological advancement in aviation manufacturing.
    The U.S. aviation industry and its workers face significant 
challenges and opportunities as globalization and liberalization become 
more prevalent. Already, U.S. aviation crews have seen their jobs 
threatened by corporate schemes such as alliances between U.S. and 
foreign air carriers, and the ``flag of convenience'' scheme being 
advanced by NAI. Similarly, foreign outsourcing of aircraft maintenance 
and passenger service functions is sending good U.S. aviation jobs 
overseas, while our own FAA remains paralyzed by sequestration and 
budgetary uncertainly. The U.S. aviation system remains the best and 
safest in the world, however, and through smart government policies and 
investment that promote U.S. competitiveness, middle class job 
creation, and technological modernization we can thrive in the 
international marketplace.
    Thank you for the opportunity to testify today, and I look forward 
to working with the Committee to promote the competitiveness of the 
U.S. aviation industry and to protect and expand our middle class 
aviation industry workforce.
                                 ______
                                 
                              Attachment 1
Transportation Trades Department, AFL-CIO
A bold voice for transportation workers
TTD MEMBER UNIONS
        Air Line Pilots Association (ALPA)

        Amalgamated Transit Union (ATU)

        American Federation of Government Employees (AFGE)

        American Federation of State, County and Municipal Employees 
        (AFSCME)

        American Federation of Teachers (AFT)

        Association of Flight Attendants--CWA (AFA-CWA)

        American Train Dispatchers Association (ATDA)

        Brotherhood of Railroad Signalmen (BRS)

        Communications Workers of America (CWA)

        International Association of Fire Fighters (IAFF)

        International Association of Machinists and Aerospace Workers 
        (IAM)

        International Brotherhood of Boilermakers, Iron Ship Builders, 
        Blacksmiths, Forgers and Helpers (IBB)

        International Brotherhood of Electrical Workers (IBEW)

        International Longshoremen's Association (ILA)

        International Organization of Masters, Mates & Pilots, ILA 
        (MM&P)

        International Union of Operating Engineers (IUOE)

        Laborers' International Union of North America (LIUNA)

        Marine Engineers' Beneficial Association (MEBA)

        National Air Traffic Controllers Association (NATCA)

        National Association of Letter Carriers (NALC)

        National Conference of Firemen and Oilers, SEIU (NCFO, SEIU)

        National Federation of Public and Private Employees (NFOPAPE)

        Office and Professional Employees International Union (OPEIU)

        Professional Aviation Safety Specialists (PASS)

        Sailors' Union of the Pacific (SUP)

        Sheet Metal, Air, Rail and Transportation Workers (SMART)
        SMART--Transportation Division

        Transportation Communications Union/IAM (TCU)

        Transport Workers Union of America (TWU)
        UNITE HERE!

        United Mine Workers of America (UMWA)

        United Steel, Paper and Forestry, Rubber, Manufacturing, 
        Energy, Allied Industrial and Service Workers International 
        Union (USW)
 These 32 labor organizations are members of and represented by the TTD
                                 ______
                                 
                              Attachment 2
                               BEFORE THE
                   U.S. DEPARTMENT OF TRANSPORTATION
                             WASHINGTON, DC

 
Application of                                  )
 
                                                )                         Docket No. OST-2013-0204
NORWEGIAN AIR INTERNATIONAL                     )
LIMITED                                         )
                                                )
for an exemption under 49 U.S.C. Sec.  40109    )
and a foreign air carrier permit pursuant to    )
49 U.S.C. Sec.  41301 (US-EU Open Skies         )
 

 ANSWER OF THE AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL 
             ORGANIZATIONS, AND THE TRANSPORTATION TRADES 
              DEPARTMENT, AFL-CIO TO DOT NOTICE OF MOTION
    On behalf of the American Federation of Labor and Congress of 
Industrial Organizations (AFL-CIO), and the Transportation Trades 
Department, AFL-CIO, we write in response to the written summary of the 
January 8, 2014 U.S.-EU Joint Committee meeting as it pertained to the 
current and planned long haul operations of Norwegian Air Shuttle ASA 
(NAS) and its affiliated companies, Norwegian Long Haul AS (NLH) and 
Norwegian Air International Limited (NAI).
    The AFL-CIO and TTD support the comments filed by the Air Line 
Pilots Association (ALPA), and we refer you to the analysis and 
response to each point made by the European delegation detailed in 
ALPA's filing. As those comments discuss, the DOT Summary states that 
during a closed-door session of the Joint Committee Meeting, the 
European delegation gave the Joint Committee what the Summary 
characterized as ``some detailed factual information.'' We do not 
believe that this characterization accurately reflects the nature of 
the information provided by the European delegation, as the information 
is in most cases not detailed or not factual, or both. Much of the 
justification being provided for NAS/NLH/NAI business model, including 
their decision to seek an Air Operators Certificate in Ireland rather 
than Norway, has only been recently presented. Furthermore, as detailed 
in the ALPA filing, the economic claims for basing long haul operations 
out of Ireland seem to be insubstantial. Rather, we believe that these 
claims are merely part of a publicity campaign designed to distract the 
general public and Federal regulators from their true goal and purpose: 
to avoid Norway's labor and other social laws, evade their existing 
collective bargaining agreements, and to undercut existing U.S. and 
European airlines and their workers.
    Perhaps the most troubling thing about the written summary is what 
is what the EU delegation did not mention. The EU-U.S. Air Transport 
Agreement (ATA) includes, for the first time ever, a labor article 
designed prevent an agreement from having adverse effects on aviation 
workers. This provision, Article 17 bis (``Social Dimension''), states 
that ``the opportunities created by the Agreement are not intended to 
undermine labour standards or the labour-related rights and principles 
contained in the Parties' respective laws.'' It further states that 
``the principles in paragraph 1 shall guide the Parties as they 
implement the Agreement.''
    The inclusion of Article 17 bis in the ATA represented important 
progress in our global effort to ensure that market-opening trade 
initiatives are not used to harm good jobs and undermine labor 
standards, and was praised by both U.S. and European negotiators. On 
March 25, 2010 Siim Kallas, the European Commission Vice President 
Responsible for Transport released a statement proclaiming that ``For 
the first time in aviation history, the agreement includes a dedicated 
article on the social dimension of EU-U.S. aviation relations. This 
will not only ensure that the existing legal rights of airline 
employees are preserved, but that the implementation of the agreement 
contributes to high labour standards.'' \1\
---------------------------------------------------------------------------
    \1\ European Commission, Office of the Vice President for 
Transport. Breakthrough in EU-U.S. second-stage Open Skies 
negotiations: Vice-President Kallas welcomes draft agreement. Retrieved 
from: http://europa.eu/rapid/press-release_IP-10-371_en.htm?locale=en
---------------------------------------------------------------------------
    Despite such a strong statement supporting high labors standards 
and worker protections, the European delegation appears to be walking 
away from commitments they agreed to in Article 17 bis. At no point in 
the written summary of the European delegation's presentation was 
Article 17 bis mentioned or referenced. Nor does it appear that the 
European delegation has factored this article into its determination 
that the U.S. DOT should grant NAI a foreign air carrier permit.
    As TTD detailed in its previous filing, NAI's intentions leave 
little in doubt. Its business model was developed explicitly to evade 
its collective bargaining obligations in its home country and Norwegian 
labor laws, and it is doing so using opportunities provided by the ATA. 
By basing its crews in Thailand and employing them on individual 
contracts governed by the laws of Singapore, NAI is clearly undermining 
labor standards on both sides of the Atlantic.
    The negotiators of the ATA recognized that the fact that each 
European signatory to the ATA has its own national labor law might 
entice airlines to ``shop around for a better deal.'' Article 17 bis 
was included to precisely to prevent this practice. Yet now, when NAI 
is attempting to do precisely that, the European delegation appears to 
be abandoning the principles that guided their negotiations, and 
walking away from their commitments under the agreement.
    Should NAI's business plans be allowed to move forward, we believe 
that it will set a devastating precedent that will have far reaching 
implications for the global aviation industry, U.S. and European 
airlines and airline employees. NAI's application is a critical test 
case for how the U.S.-EU air services agreement will be implemented, 
and whether the Article 17 bis labor protections will be enforced as 
intended.
    We believe that the case presented by the European delegation as 
detailed in the written summary is fundamentally flawed and ignores a 
crucial article in the ATA. It also ignored many serious questions that 
TTD and other organizations have posed in regards to the NAI business 
model. DOT should make clear that it will not ignore the ATA labor 
article, and seek further information from the European delegation and 
NAI about how they will address the serious labor concerns that we have 
presented.
            We appreciate your consideration of our views.

Richard Trumka
President, AFL-CIO
Edward Wytkind 
President, TTD
      
                                 ______
                                 
                              Attachment 3
                                                       May 10, 2013
Ms. Yvonne Jamison,
Office of the United States Trade Representative,
Washington, DC.

RE: Request for Comments on the Transatlantic Trade and Investment 
            Partnership Docket No. USTR-2013-07430

Dear Ms. Jamison,

    The Transportation Trades Department, AFL-CIO (TTD) appreciates the 
opportunity to submit its views on the proposed Transatlantic Trade and 
Investment Partnership (TTIP) between the United States and the 
European Union. TTD has previously submitted comments during the United 
States European Union High Level Dialogue process, and I gave an oral 
presentation of TTD's views at the US-EU High Level Regulatory 
Cooperation Forum on April 11, 2013. TTD's comments today will reflect 
those previously stated positions.
    We understand that the EU has asked that the ownership and control 
rules that pertain to airlines, the right of the carriers of two sides 
to operate in each other's domestic markets (``cabotage operations''), 
and maritime transport services be included as topics in the TTIP 
negotiations. For the purposes of air transport services, TTD's 
comments here are limited to whether or not air traffic rights and 
services directly related to those rights should be included in TTIP. 
TTD strongly believes that they should not. Likewise, TTD believes that 
maritime transport services and U.S. maritime laws such as the Jones 
Act should not be included in these negotiations.
    Air transport services have historically been excluded from general 
trade agreements such as GATS and bilateral and multilateral free trade 
agreements. Rather, such services have been subject to a separate 
administrative regime, under which the U.S. has negotiated air service 
specific agreements with foreign countries. These negotiations have 
been led by the Department of State and the Department of 
Transportation, two agencies with dedicated experts on air transport 
services. This regime has led to the steady and dramatic removal of 
barriers to trade in the air transport services sector and since 1993 
the U.S. has entered into ``open skies'' agreements with 107 countries 
agreements that have eliminated virtually all restrictions on the 
ability of carriers to select routes, to establish frequencies and to 
set prices.
    The U.S. and the EU have recently entered into such an open skies 
Agreement (``Agreement''). During the comprehensive discussions that 
resulted in the Agreement, the EU sought the exchange of cabotage 
rights and the elimination of restrictions on the ownership and control 
of airlines by the nationals of the parties. In fact, it is fair to say 
that consideration of altering the ownership and control rules was one 
of the central topics in the negotiations. Ultimately, the Agreement 
left in place the restrictions on cabotage. With respect to ownership 
and control, the Agreement left in place the statutory restrictions but 
did establish a Joint Committee (consisting of representatives of the 
two sides) that meets on a regular basis and is tasked, among other 
things, with considering possible ways of enhancing the access of U.S. 
and EU airlines to global capital markets.
    In TTD's view the existing administrative framework has been 
successful in opening markets and liberalizing trade in air transport 
services while at the same time taking into account the legitimate 
concerns of airline labor. The regime has also created an open market 
environment that has permitted the airlines of the two sides to receive 
antitrust immunity for ever-deeper alliance arrangements. Almost all 
major U.S. and EU passenger airlines are now members of immunized 
alliances that permit them to operate as virtually single entities in 
the international markets that are covered by the immunity grants. 
Additionally, the Agreement contains provisions that recognize the 
value of ``high labour standards'' and establishes a mechanism for 
considering and addressing adverse effects on airline workers that may 
result.
    While restrictions on cabotage and on ownership and control remain, 
there are good reasons for this. With respect to cabotage, the 
operation of foreign airlines in U.S. domestic markets would be at odds 
with a host of U.S. laws, including visa and labor laws. It would also 
be inconsistent with the treatment of other business sectors. For 
example, if a foreign automobile company wishes to set up a 
manufacturing operation in the U.S., that facility and its workforce 
are subject to U.S. laws and regulations. Granting cabotage rights to 
EU airlines, however, would allow these airlines to operate in the U.S. 
domestic market with a workforce that remains technically based in 
their home country and subject to that country's laws. This would allow 
the airlines to bypass U.S. laws and displace U.S. aviation employees. 
Additionally, given that the U.S. represents about half of the world's 
aviation market, it is unreasonable to argue that opening the U.S. 
domestic point-to-point market to foreign carriers would represent an 
even exchange of benefits with our EU trading partners.
    The request to eliminate the ownership and control restrictions 
raises its own set of difficult issues. If an EU airline were able to 
own a U.S. airline, it would be able to place the air crew of the U.S. 
carrier in competition with the air crew of the EU airline for the 
international routes flown by the previously U.S.-owned carriers. If 
the foreign owner sought to eliminate U.S. jobs and move this work to a 
foreign crew, it is unlikely that U.S. labor laws would provide an 
adequate remedy or protection for these workers. This is a very real 
threat, and the consequences of a similar arrangement are currently 
being felt by aviation workers in Europe where several airlines have 
taken advantage of the lack of a comprehensive labor law in the 
European common aviation area to undermine the ability of European 
flight crews to bargain over the flying done by their companies. We 
would be happy to provide specific examples of these actions if you 
wish to consider the issue in more depth.
    Changes to our ownership and control laws would have a negative 
impact on U.S. aircraft maintenance workers as well. If foreign 
carriers are allowed to take over U.S. airlines, the practice of 
outsourcing aircraft maintenance to foreign countries will only 
accelerate. This is already a major problem that has cost thousands of 
skilled U.S. jobs and lowered safety standards. And while there is 
currently a congressionally mandated moratorium on certifying new 
foreign repair stations, we are still awaiting long overdue security 
rules governing contract repair stations and drug and alcohol testing 
at foreign repair stations. Any actions that would further promote the 
outsourcing of aircraft maintenance work, particularly without adequate 
rules governing the oversight of these foreign repair stations, should 
be rejected by this administration. The U.S. Government should be 
pursuing market-opening aviation trade opportunities that create and 
sustain U.S. jobs both in the air and on the ground, not those that 
leave the future of U.S. aviation to foreign carriers (and their 
respective governments) that may have different economic agendas.
    In addition to the problems that relaxing foreign ownership and 
control rules would cause for our domestic aviation workforce, this 
proposal would strain our government's ability to mandate and enforce 
critical security standards. With a foreign interest so integrally 
involved in controlling the operations of a U.S. air carrier, it would 
be impossible to assert U.S. security interests. Moreover, the ability 
of our government to manage the Civil Reserve Air Fleet (CRAF) program, 
which assures U.S. air carrier capacity for our military's air 
transport needs during wars and conflicts, would be undermined. Under 
relaxed foreign ownership and control rules we question how a foreign 
executive that controls the commercial aspects of a U.S. carrier but 
does not support our military strategy would be compelled to provide 
CRAF air transport services during a war or conflict.
    Finally, we would note that the Bush Administration in 2005 
proposed a rule change to allow foreign entities to exercise actual 
control over U.S. airlines. This proposal was subject to fierce 
opposition in Congress and eventually had to be withdrawn by the 
Administration. It is clear that there remains little support in 
Congress for changing our current ownership and control standards at 
the demand of an international trading partner when there is no 
identifiable benefit to U.S. interests.
    The same principles noted above apply to any consideration of U.S. 
maritime transport laws and policies. The Jones Act has been a 
successful part of our Nation's national security and economic policy 
since 1922, and serves a critical economic role for our nation, 
sustaining over 500,000 good-paying American jobs and generating $100 
billion in total annual economic output. This law has ensured that the 
U.S. continues to have a reliable source of domestically built ships 
and competent American crews to operate them. Overall, the U.S.-flag 
maritime industry has played a vital role in supporting our armed 
forces, our trade objectives, food and other aid to other countries, 
and our national security. We should be promoting the growth of the 
U.S. merchant marine, not pursuing changes in our maritime policies 
through trade negotiations that weaken this vital segment of our 
transportation system.
    Any limitation of the Jones Act would harm American mariners, 
increase the unemployment rate, accelerate the decline of U.S.-flag 
operators and seriously damage our economic recovery and national 
security. This would also permit foreign entities that do not employ 
U.S. workers and do not pay taxes to our treasury to operate with 
impunity on our inland waterways and along our coasts. Any efforts to 
include maritime transport services in these negotiations or to 
otherwise weaken or infringe upon the Jones Act should be rejected by 
U.S. negotiators.
    TTD looks forward to working with the U.S. Government as it 
considers how to proceed with respect to the proposed TTIP. Thank you 
for your consideration of our views.
            Sincerely,
                                            Edward Wytkind,
                                                         President.
cc: Susan Kurland, Assistant Secretary for Aviation and International 
Affairs, DOT
Paul Gretch, Director, Office of International Aviation, DOT
Kris Urs, Deputy Assistant Secretary for Transportation Affairs, DOS
                                 ______
                                 
                              Attachment 4
           SUPPORTING A GLOBAL SOLUTION TO AVIATION EMISSIONS
    Earlier this month the International Civil Aviation Organization's 
(ICAO) general assembly approved a plan that will provide for the 
development, over the next three years, of a global framework for 
addressing aviation's impact on climate change, with the goal of 
implementing the plan worldwide by 2020. TTD applauds the adoption of 
this plan, and looks forward to working with ICAO to develop a 
framework that will substantially reduce global emissions, improve the 
efficiency and cost-effectiveness of our aviation system, and promote 
sound environmental stewardship while maintaining competitive balance 
and fairness in the international aviation marketplace.
    The U.S. aviation system plays a critical role in our national 
economy. It employs millions of workers both directly and indirectly, 
generates nearly $900 billion in economic activity annually, and is 
responsible for nine percent of our GDP. The aviation industry also 
faces significant financial head winds as profit margins remain thin 
and job losses continue at some carriers. Rising fuel costs have 
contributed greatly to these hardships. Despite technology driven 
reductions in jet engine fuel consumption and airline fuel conservation 
practices, jet fuel expenses have become the airlines' largest 
operating cost. As a result, U.S. airlines have acted proactively to 
both decrease their environmental footprint and combat volatile fuel 
expenses. The industry has improved fuel efficiency and lowered 
emissions, including a 1.5 percent annual average fuel-efficiency gain 
through 2020, carbon-neutral growth from 2020, and a 50 percent net 
reduction in emissions by 2050. The U.S. was also actively engaged in 
negotiating the ICAO global emissions plan.
    The ICAO agreement comes on the heels of a contentious period 
revolving around aviation emissions. In November of last year President 
Obama signed legislation that allowed the Secretary of Transportation 
to combat the harmful effects of the European Union's Emissions Trading 
Scheme (EU ETS) and ensured that U.S. airlines are not subject to the 
EU cap-and-trade tax penalties. TTD endorsed this legislation, the 
purpose of which was not to turn a blind eye to the effects of aviation 
emissions on global climate change, but to reaffirm our commitment to 
finding a global solution to reducing aviation emissions through ICAO.
    The U.S. and EU share the common goal of reducing carbon emissions 
in the aviation industry. However, while the U.S. was committed to 
working through the ICAO process, the EU moved forward by unilaterally 
subjecting all international flights arriving and departing from the EU 
to emissions standards mandated by the EU ETS. This would have placed 
an unreasonable financial burden on U.S. carriers and their employees, 
and would have only further delayed the process of reaching an 
international, consensus-based agreement. Fortunately, in the face of 
deep criticism from the international community including the 
legislation signed by President Obama, the EU delayed implementation of 
the EU ETS for one year to allow the ICAO process to deliver a global 
plan.
    A global solution is not only the most effective way to reduce 
aviation emissions in the environment that we all share, but also the 
most economically sound solution. Rather than a patchwork system of 
environmental standards set by various governments, a global system 
will address this problem without putting U.S. carriers and their 
workers at a competitive disadvantage. The emission payments under the 
EU ETS, for instance, were expected to cost the U.S. aviation industry 
over $3 billion dollars in the next several years--a prohibitive 
expense that could have cost thousands of jobs.
    Despite the international commitment to creating a global framework 
for reducing carbon emissions, EU officials have unfortunately 
expressed disappointment with the ICAO agreement and are pushing to 
implement the misguided ETS scheme regardless. In the aftermath of the 
ICAO general assembly meeting, the European Commission (EC) proposed 
revising the EU law so that the ETS would cover all flights over EU 
airspace, including those flown by international carriers. While we 
continue to support the responsible reduction of carbon emissions, the 
latest EU proposal only complicates the goal of reducing emissions on a 
truly global scale.
    TTD and its affiliated unions oppose the heavy handed, unilateral 
approach being taken by the EU and believe that these actions only harm 
the international community's ability to find a meaningful and 
permanent solution. We remain committed to working with U.S. carriers, 
the U.S. Government, and ICAO to build an international framework for 
combating global carbon emissions in the aviation system, but will 
oppose unilateral action by other governments that undermine U.S. 
airlines and their workers.

    Policy Statement No. F13-05 Adopted October 29, 2013

    Senator Cantwell. Thank you, Mr. Wytkind.
    And again, thank you to all the witnesses for your 
testimony. It was very thorough and brought up a lot of issues 
and hopefully my colleagues and I will have ample time to ask 
you some questions.
    And I want to start with you, Mr. Muilenburg, about the 
35,000 planes that are this market opportunity for us. Seventy 
percent of that market, or 24,000 of that demand is going to be 
single-aisle planes which is kind of evenly divided right now 
between Boeing and Airbus. There are new entrants into the 
market like China and Brazil who are making serious investment. 
So what is it we need to do to stay competitive in the U.S. in 
manufacturing of the single-aisle planes?
    Mr. Muilenburg. Senator, you bring up a very good point. 
And your statistics, they are very accurate. The majority of 
those 35,000 planes are in the single-aisle marketplace. 
Boeing, today, we have our 737 family of aircraft that compete 
in that market space against our principle competitor, Airbus. 
That is our most competitive market space.
    A couple of things I think are important to enable U.S. 
industry and the rest of the infrastructure as we look forward. 
One is continuing to invest in innovation. As you know, we are 
currently investing in the 737 MAX, the next version of the 
737, to make the airplane 14 percent more efficient than it 
already is today as we work in this competitive marketplace. 
But continuing to invest in aerospace R&D in the country to 
enable that innovation, I think, is very important.
    We know, also, that many of the airlines that are buying 
these single-aisle airplanes are leveraging government 
investment in Europe. We continue to be concerned about the 
illegal subsidies that we see in Europe that Airbus is taking 
advantage of. We think the WTO compliance panel, that's 
currently evaluating the compliance of Airbus to the previous 
WTO rulings that were made, it's important that that's brought 
to conclusion so that we can operate on a level playing field.
    EX-Im Bank reauthorization, as we talked about, is another 
important financing element here that will enable us to take 
advantage of that marketplace. As we said, 80 percent of those 
airplanes will likely be sold outside of the United States 
while 80 percent of the jobs will be in the United States. So 
it's in our best interest to help airlines finance and take 
those airplanes.
    And then last, I think, is workforce training. As you said, 
if we look at the demographics for our workforce across Boeing 
and much of the aerospace industry, about 50 percent of our top 
engineers and mechanics will be eligible to retire over the 
next, roughly, 5 years. If you look at the STEM pipeline in 
this country, just to give you an example, we have about four 
million children entering kindergarten this year. At current 
rates, that will produce about 60 to 70,000 engineers at the 
end of college. That's not even enough to satisfy the aerospace 
industry, let alone all sectors that need engineers.
    So investing in the future pipeline training across 
engineers, mechanics, all of those high-skilled areas, an 
important investment to the future, as well.
    Senator Cantwell. Thank you.
    And I have some follow-up for that but I also want to ask a 
question because I think, you know, many of us have mentioned 
this, Malaysian Flight 370 and the fact that the flight is 
missing and everybody is very anxious and concerned, including 
the family members who are living through this, but it seems to 
me that certain things shouldn't be missing. And that is 
information and data about what is the accuracy of either in-
flight information or--I wanted to ask Mr. Calio about this 
issue of Interpol. I found it surprising, maybe many Americans 
did, that U.S. carriers or flights in and out of the U.S. 
basically had background checks and yet some of these other 
foreign destinations don't.
    Ms. Blakey, I don't know if you know about these in-flight 
monitoring systems but these are, the 777, are one of the most 
technologically sophisticated flying machines out there. And I 
think people are anxious to know, is there data collected on 
these planes that's a normal part of engine maintenance and 
what is that information and how can it be made available to 
people?
    Ms. Blakey. Well, to speak to the last point because I'm 
sure that there are lots of expertise up here at the table, I 
certainly can't comment on the specifics of the Rolls-Royce 
engines that were on that flight. But it is true that 
airplanes, new airplanes, are flying computers and they do have 
tremendous amounts of data that is very helpful in maintaining 
the extraordinary safety record that we have because they do 
monitor in-flight, for example, the health and our activity of 
engines. That is something that newer engines will do. They do 
it periodically during the flight.
    If there are anomalies that begin to appear in terms of the 
data, then that monitoring becomes more intense and 
transmission to the ground is available, again, depending on 
the model. And then finally when they land, of course, you can 
download all of that so that from a maintenance standpoint, as 
well as from the standpoint of transit issues, we've got a 
tremendous amount of information available. So that certainly 
is a part of the picture in all of this.
    Senator Cantwell. So that communication is continuing 
during flight?
    Ms. Blakey. It depends, again, on the model, the engine 
itself, but it is sporadic, usually, with a healthy engine; it 
is not continuous.
    I would turn to Muilenburg, he also knows this.
    Mr. Muilenburg. That's an accurate description of the 
overall systems. So we can't yet comment on the details of that 
specific flight but the technology is sophisticated and 
available. Our in-flight monitoring systems are often used to 
enhance the safety and maintenance of the airplanes. So we have 
a team on the ground in Malaysia working with the safety board 
and we're providing technical assistance. So we will stay very 
closely engaged in that process.
    Senator Cantwell. And my time is up on this round. But, Mr. 
Calio, how do U.S. carriers look at this Interpol issue in the 
sense that they're providing the safety and security for 
systems flying in and out of the United States? Our U.S. 
carriers are doing in partnership with our government that work 
but Americans are now finding out that if they're on these 
other flights they're not basically going through the same 
Interpol system?
    Mr. Calio. Madam Chairwoman, I worry a little bit about 
commenting about anything right now because we don't really 
know. And I'm not intimately familiar with the Malaysian 
security but we do have agreements with many other countries 
and we work with our partners in flight on the security 
matters. Security is not something we normally compete on. You 
know, we've got the best system in the world we think. So we're 
going to have to wait to see what the facts say about the 
Interpol report.
    Senator Cantwell. OK.
    Well, I think Americans want to understand, as we have 
implemented----
    Mr. Calio. Sure.
    Senator Cantwell.--security regimes, what's happening to 
these systems around the globe? So, thank you.
    Senator Ayotte.
    Senator Ayotte. Thank you, Madam Chairwoman.
    Let me just follow up on what the Chair just raised. I 
think the issue is, at least the public reports have been that 
essentially Interpol has this data base but it's not being 
checked. And we may be checking it for, obviously, our 
carriers, but these other carriers are not checking whether 
it's, for example, a stolen passport issue or an invalid 
passport issue of some form.
    And so, I think this issue is incredibly important and all 
of you have tremendous technical background and expertise in 
this area. While this is ongoing, I hope that we can have 
follow up on this, Madam Chair, to get your advice and thoughts 
as the facts come forward as to what happens so that we can 
obviously take a look at this issue from a perspective of the 
safety of American passengers. And I appreciate that.
    And I think the other issue is you were talking about, Mr. 
Muilenburg, that Boeing has people on the ground in Malaysia. I 
really appreciate that. I know my people have raised with me, 
is this issue of the so called ``black box.'' And usually, that 
type of data survives and is designed, as I understand it, to 
survive not only water type situations but other weather 
conditions.
    Can you give us a sense, to the extent you can, of how that 
system works? And I understand that the facts are still being 
gathered here but I think that's one of the things that's an 
outstanding question in people's minds.
    Mr. Muilenburg. Yes.
    I can give you some of the basics of how that system is 
designed. It's certainly intended to be very robust and to 
survive any kind of physical encounter in the airplane. It's 
highly integrated. It records the overall flight path of the 
airplane, details of how the airplane is performing, pilot 
inputs. So it's a very thorough monitoring system. It is 
designed to survive any kind of impact that might occur. It is 
designed to survive any kind of electrical interference, as 
well. So it's a very robust system, one that we typically rely 
on for post-incident reviews. And I think it has contributed 
significantly to the safety and overall improvements of the 
aviation system over time. And we'll continue to stay very 
engaged in this particular incident as we would any time we see 
something that might raise concerns about the aviation system.
    Senator Ayotte. Absolutely; we appreciate it.
    I want to get to the issue, obviously, of how do we create 
a better competitive environment for the aviation industry and 
with all of the importance in it and the good news in terms of 
the exports.
    But, I wanted to ask you, Mr. Calio, about--you talked 
about looking at ATC reform on the tax structure. Can you give 
us a sense what, as we look in terms of your average airline's 
ticket, what is actually currently part of it in terms of 
taxes?
    And also, when you talk about this type of reform, I guess, 
Mr. Muilenburg, so all of you, what do you think we should do 
there as we look at if we go big on a reauthorization to help 
you be more competitive?
    Mr. Calio. Thank you.
    A couple of points. The most shocking fact in the world to 
most normal people is when you tell them that if they bought a 
$300 roundtrip ticket, $61 of that is currently Federal taxes 
and fees. That will rise come July as a result of the budget 
agreement where, in 2013 when the TSA Security fee was raised 
by $3.10, absolutely none of which is going to security.
    So one of the things that has to happen is more 
transparency in taxes and fees and, going forward, we'd like to 
see those taxes and fees reduced. You know, for the most part 
the taxes and fees are collected to fund the system, but it's a 
not very well thought out way to fund the system and a critical 
portion of that goes to fund ATC operations. If you were able 
to reform, make more efficient ATC operations which would have 
multiple benefits down the line, and the air traffic 
controllers agree with us on this, you could look at a new way 
to fund the system that made a lot more sense than this 
accumulation of taxes and fees that's built up over the last 20 
to 30 years.
    Senator Ayotte. And I wanted to follow up, Mr. Wytkind, I 
think there's a number, if we get a second round, of additional 
questions, on the issue that you talked about with regards to 
this Norwegian issue.
    Mr. Wytkind. Yes.
    Senator Ayotte. And could you help me understand, is there 
a precedent for this within DOT to deny this type of 
application? And also, what do you see the implications if it's 
not denied? And, if it is denied, do you think that there'll be 
any kind of retribution on the European's part?
    Mr. Wytkind. Well, let's sort of look back for a minute. 
Thank you for that question, by the way. The issue is very 
important.
    So this is an unprecedented moment. We just had a new U.S.-
E.U. Open Skies Agreement negotiated and finalized in 2010--and 
it did liberalize and open new markets--that we supported. It 
also had embedded in it a labor article that made it very clear 
that both sides of the Atlantic embrace high labor standards 
and that nothing in this agreement shall be used by any carrier 
to lower labor standards. And so, this NAI, this Norwegian 
operation, we think violates the agreement. It also violates 
our own public interest laws in the United States. And so, it 
is a bit of an unprecedented case because they are using a 
U.S.-E.U. agreement to form a new airline in Ireland that 
doesn't fly in Ireland and that employs people in Thailand who 
are under Singapore labor laws.
    So the precedent question is one where the DOT has denied 
applications by many carriers over the history. But, this is a 
very clear-cut slam-dunk case in front of DOT, as far as we're 
concerned. If our government is going to embrace a labor 
article that is enforceable and then you have the first case 
come before you that says we want to fly in the United States, 
we want to compete with U.S. and European air carriers on a 
very unleveled playing field, we want to use the benefits of 
the U.S.-E.U. Agreement to do so, but we don't want to play by 
the same rules as our competitors, we think the government 
needs to say no to this application. And so, the implication 
is, however, that we're going to be sending the signal if we 
approve this that it's OK to use ``flag of convenience'' 
operations that scour the globe for the cheapest labor costs 
under so-called liberalized trade agreements that are designed 
to create opportunities for U.S. aviation and for European 
aviation. So I think it's a clear-cut case, but obviously it's 
in the hands of DOT regulators and we believe, you know, 
they're moving a little closer toward a decision.
    Senator Ayotte. Thank you.
    Mr. Wytkind. Thank you.
    Senator Cantwell. Senator Klobuchar.

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Thank you very much, Chairman Cantwell. 
Thank you to all our witnesses.
    Minnesota is the home of the twelfth largest airfield, the 
Minneapolis St. Paul Airport. We're also the home of Cirrus, 
one of our Nation's major manufacturers of small jets and we're 
the home of Charles Lindberg. So, there you go.
    And I wanted to focus today on two issues really. The first 
is Small Airplane Revitalization Act; something that I led with 
Senator Murkowski, and we passed and signed into law. It 
doesn't happen a lot around here right now. And then, also, the 
export issue with growing markets in Asia and Latin America 
demanding more aircraft. And I did want to say, Mr. Wytkind, 
I'm on the letter with, I think there are 38 Senators----
    Mr. Wytkind. There are, thank you.
    Senator Klobuchar.--bipartisan Senator on that issue that 
you just discussed and share your concerns. So thank you for 
that.
    With eight aviation-related manufacturing, engineering and 
assembly facilities in my state, I'm interested in how aviation 
companies are able to get FAA approval for commercial use of 
their innovative products. The Small Airplane Revitalization 
Act that I introduced and I mentioned earlier, address a 
certification process for smaller airplanes, Part 23 category, 
given the FAA dates certain to streamline the process.
    I guess I go to you, Ms. Blakey. What more can we do to 
modernize and improve the certification process for other forms 
of aircraft such as larger cargo or passenger planes, as well 
as new aerospace innovation?
    Ms. Blakey. Well, I think this committee, that Act, have 
been appropriately focused on asking the FAA to streamline 
their operations and, in fact, move much more quickly, 
employing the expertise that is available, for example, under 
an ODA, an organizational designation authority. We feel that 
they have done a good job in pulling together through several 
aviation rulemaking committees with industry; working out 
processes that can really speed things up.
    The problem is they haven't implemented them. And I think 
that is where we really do need the ongoing scrutiny and 
attention from the Congress, because FAA does not have the 
resources to continue to operate the way they have in the past 
on certification nor is it appropriate from either a 
technological standpoint where expertise is, these days, very 
diffuse. We need to capitalize on the best possible ways and 
that often means working in coordination but not trying to 
provide all of that within the FAA's own structure. And that's 
what streamlining and ODA is all about.
    Senator Klobuchar. OK.
    I assume you agree, Mr. Muilenburg?
    Mr. Muilenburg. I agree fully with all of Marion's 
comments. And I also would offer that the progress the 
Committee has already made here on Sections 312 and 313 of the 
FAA reauthorization bill, big enablers here, down that path. We 
do think certification reform, streamlining the system, as 
Marion has described, is very important to the future. It's an 
important enabler and I appreciate the progress already made.
    Senator Klobuchar. Another issue with the exports; I just 
know from our own company employing thousands of people in 
Duluth, Minnesota, that--where it's really warm right now. 
Well, it's warming up. I'll put it that way. The issue is that 
we're seeing this growing export market. And, first of all, Mr. 
Muilenburg, does Boeing have a sense of what the demand is for 
cargo planes over the next decade? Is it expected to increase 
at the same rate as the demand for passenger aircraft when you 
look at exports?
    Mr. Muilenburg. It is.
    And, just to give you an overall sense of it, as we said, 
about 35,000 large aircraft, both single-aisle and dual-aisle 
large aircraft class, over the next 20 years.
    Senator Klobuchar. And that's a lot, you know, a lot of 
international demand?
    Mr. Muilenburg. A lot of international demand. About 80 
percent of those aircraft will be sold outside of the United 
States.
    Senator Klobuchar. Right. And that's what I see with our 
small jets. Different----
    Mr. Muilenburg. Yes.
    Senator Klobuchar.--obviously, different product.
    Mr. Muilenburg. Very similar.
    Senator Klobuchar. It's over 50 percent of their market and 
it's what they really built to get through the turn because of 
that.
    Mr. Muilenburg. Very similar dynamic and it's shared across 
passenger traffic and cargo traffic; as you're well pointing 
out.
    Senator Klobuchar. OK.
    The export control list, on October 28 of last year, the 
first export control reform list rules took effect. These rules 
include the revisions Category 8 regulations for aircraft and 
transition less sensitive items in this category from the State 
Department's jurisdiction to the Commerce Department, been a 
long-time advocate as we look at not just airline manufacturing 
but also defense manufacturing as a whole. We're seeing 
decreased spending. We'll want to keep these jobs and we've got 
to reform this export control list while still maintaining 
safety for the public.
    Mr. Muilenburg, do you feel that these efforts will help 
companies increase exports and if there are more you feel needs 
to be done--I actually raised this on the Export Council, the 
President's Export Council with your CEO and raised this issue 
recently in quite some detail about what I thought needed to be 
done.
    Mr. Muilenburg. Yes.
    Senator Klobuchar. But do you want to comment on that?
    Mr. Muilenburg. Yes.
    As you noted, Jim McNerney, our Chairman and CEO, is part 
of the Export Reform Council. We think the actions on export 
reform that have already been taken are very important and we 
appreciate the progress that has been made. Much more still to 
do; we believe. So we'd like to continue on that urgent path. 
This is an enabler for both commercial aircraft and for defense 
products and also for commercial satellites.
    So the recent actions to move satellites to the Commerce 
List, largely, has been a real enabler for the commercial 
satellite business in the U.S. So those are all important 
features for us. We would urge continued aggressive action 
there. And, in many cases, our broad supply chain is enabled by 
export reform because much of their work supports both 
commercial aircraft and defense aircraft.
    Senator Klobuchar. Thank you.
    I have a question on Export-Import Bank but I'll put that 
on the record.
    Thank you, all of you.
    Senator Cantwell. Thank you.
    Senator Fischer.

                STATEMENT OF HON. DEB FISCHER, 
                   U.S. SENATOR FROM NEBRASKA

    Senator Fischer. Thank you, Madam Chair, and Ranking Member 
Ayotte and thank you to our panelists for being here today.
    Mr. Calio, it's my understanding that in January of 2012 we 
saw a new rule come out from the DOT with regard to the full 
fare advertising. I also understand the House has now 
introduced legislation that's going to reverse that rule and 
allow airlines to, again, separate the fees and taxes from what 
the airline ticket truly costs. As a consumer, I think that's 
really important. And I know all of my colleagues agree that 
transparency is always good. Our constituents like that; we 
like that.
    Can you tell me your feelings on that?
    Mr. Calio. Thank you for the question.
    Our feelings are very strong. We thought that the rule was 
wrong-headed. It's an example of the type of economic 
regulation that predates deregulation. It's also one that makes 
no sense and, as is the case, and often the airline industry is 
held to a different standard. There's no other product or 
service you can name, I don't think, that requires you to take 
the taxes and publish them as part of the price. If you buy an 
automobile, you get a base price and then you add things on and 
the taxes are separate. If you buy a hotel room, the same thing 
happens. You have a base price. Taxes are listed separately. I 
could go on but you get the point.
    So with us being required to advertise a ticket at costing 
$300, consumers naturally think that the airlines are taking 
$300 out of that, not $239. When ticket prices go up because of 
the new TSA security fee July 1, if that rule stays in effect, 
the new price will be published and it will look like we just 
raised our fare $3.10. So we believe that repeal should happen. 
We hope that the Senate will join in that because it will 
provide greater transparency to consumers. That rule has 
allowed the government to effectively hide the ball on tax 
increases.
    Senator Fischer. Thank you. I agree with that.
    Senator Ayotte had talked about the taxes and fees with you 
and you brought up the example of the $300 ticket, which is 
fascinating to me, that we aren't able to see what the true 
costs are on that. You also briefly mentioned in passing the 
President's new budget proposal. It's coming up for Fiscal Year 
2015. Can you tell me how that is now going to impact the 
ticket price? That's that $3.00 that we're going to see in 
addition, another addition?
    Mr. Calio. Yes.
    If the President's budget were fully implemented, airlines 
and their passengers would end up taking that $61 up to $76.
    Senator Fischer. OK, thank you.
    Mr. Calio. And that dampens demand which is considerable. 
You know, there's very little price elasticity in any airline 
price which is why sometimes when we raise prices to cover the 
cost of fuel or other expenses you'll see those were increases 
rejected because consumers won't buy into it.
    Senator Fischer. Exactly, thank you.
    Ms. Blakey, on your testimony you discuss the ways that 
American companies are at a disadvantage in the global market. 
And you talked about the increase in taxes and regulations, as 
well as some export controls that are there. Where do you see 
the trends moving in terms of our competitiveness on a global 
scale? And what can we do? What can Congress do to address that 
competitive issue that is so very important to this industry as 
well as others?
    Ms. Blakey. Well I think there's no doubt about the fact 
that we are seeing competitors move up behind us. You can hear 
the feet. You can feel the hot breaths. So we should recognize 
that. Now I have tremendous confidence in American innovation 
and technology. And I do believe that we can continue to lead 
the world in terms of our aviation industry. You only have to 
look at the most recent products that are out there; 787 is a 
great example. And you see that we are doing well, but we need 
to be very careful about both government policies and our 
workforce.
    On government policies we've got to extend that R&D tax 
credit. Other countries throughout the world are providing very 
significant monies to their industries in terms of supporting 
research and innovation. We're not the first; we're not even 
the sixth. We're way back there. And so we basically must 
complete that.
    We also have to reauthorize the Export-Import Bank. This is 
a debate we shouldn't be having. A Federal agency that is 
supporting American jobs and American industry in a way that 60 
other nations do, many of them outdistancing us, this really is 
not a debate and we need to accomplish it.
    And, turning to the broader issue of workforce, STEM 
education is something that the Federal Government, state and 
local, all of us need to move together to emphasize the 
importance of science, technology, engineering and math. And I 
do mean in terms of both vocational training as well as the 
kind of efforts that, for example, we're making with state 
universities and others to net up their engineering 
departments' offerings with the actual jobs that we have in our 
industry so that there really are the opportunities and smooth 
transference into the workforce.
    Those are several things I'd mention.
    Senator Fischer. Thank you.
    My time is up but, for the record, I would like to ask all 
of you, how we can improve the cost and the access for my 
constituents in Nebraska when it comes to these issues?
    Thank you.
    Senator Cantwell. Thank you.
    Senator Scott.

                 STATEMENT OF HON. TIM SCOTT, 
                U.S. SENATOR FROM SOUTH CAROLINA

    Senator Scott. Thank you, Madam Chairwoman.
    I did listen to Amy asking her question about streamlining. 
Really, it was one of the questions I had. So I was 
appreciative of her asking that question.
    To the panel, I spend a lot of my time working on finding a 
way to look at all the duplicative job training programs that 
we have, more than 30, and have the overhead collapse down in 
the ``Skills Act'' that passed the House that I've introduced 
in the Senate. So to focus my attention like a laser on the 
needs of our future workforce, we have certainly had a lot of 
economic development announcements in South Carolina. We have, 
hopefully, some good news coming in the upstate with automotive 
expansions, as you all are aware of the wonderful opportunities 
we now have in Charleston because of Boeing; 5,000 employees 
growing to, hopefully, a couple thousand more. And then, I 
assume over the next several years, you guys will just move the 
whole shop to South Carolina. But that's just my personal 
perspective. You don't need to answer to that comment.
    But there are four million jobs available today in America 
that go unfilled because the skills necessary to fill those 
jobs are very hard to find in the workforce. According to, I 
think, it's the National Association of Manufacturers, there 
are over 500,000 jobs that could be filled in their industries 
that can't be filled because of skills. I'd love to hear your 
perspective on ways that you would like us to focus to improve 
the skill set and the workforce and, perhaps specifically, in 
the workforce development space where we use technical schools. 
I think that should be a major part of the opportunities moving 
forward, as well as other vocational training schools because 
some of the jobs that we're looking for aren't necessarily the 
STEM areas, they are simply the ability to have the skill set, 
from welding and other areas, that are impacting the 
transportation sector significantly.
    So I'd love to hear some of your responses.
    Mr. Muilenburg. Senator, perhaps I could take a cut at 
that.
    I certainly share your high interest here and appreciate 
your focus on workforce development. And as mentioned, STEM 
skills are very important to us, but machinists' skills, the 
skill to build airplanes is also a skill where we see a 
shortage going forward. And we think the investment talent 
needs to be both broader and deeper, needs to start earlier. 
And this is getting children interested in aerospace-related 
career fields early on. Things like the FIRST Robotics program, 
I think, are wonderful examples. They're jointly working 
together with colleges and universities, intern programs, 
vocational schools; very important to bring those machinists' 
skills in early so that as they enter the workforce they can 
quickly ramp up as we try to produce airplanes.
    So I think there are opportunities for government and 
industry to partner together each step of that career 
progression to fill the size of the pipeline and also to build 
the depth of that pipeline early on, in particular, in some of 
those high-end skills, both STEM and machinists-related.
    Senator Scott. I have it noted that Boeing, specifically in 
Charleston, has a program for high school students at a couple 
of high schools to try to help overcome that chasm in the 
workforce, that seems to be certainly a very strong tool. I 
read a study; I think it was recently. It may have been a 
comment by Dr. Thomas Sowell that suggests that it is sixth or 
seventh grade, not high school, sixth or seventh grade is when 
we start seeing the bifurcation of education as it relates to 
STEM and the machinists or the blue collar workers that we know 
we're going to need in the future.
    Is there any approach that you've seen that's been 
effective around the country and perhaps getting in the 
pipeline those students between the first and sixth grades?
    Mr. Muilenburg. Yes.
    Well, we have, and as you rightly mention, those early 
decisions are happening. And, I would offer that in many cases 
aerospace machinists' skills----
    Senator Scott. Yes.
    Mr. Muilenburg.--although sometimes labeled as blue collar 
skills, those are technically very sophisticated to build 
airplanes with aerospace qualities. So those are high-end high 
paying jobs in the end. We see the opportunity to take that 
vocational training earlier.
    So as you've mentioned the high school examples in 
Charleston, in fact, we're doing it in many sites around the 
country including in the State of Washington, participating 
with high schools now for early vocational training and even 
looking earlier in the pipeline with programs like FIRST 
Robotics as I mentioned, which trains some machinists' skills.
    Senator Scott. Thank you very much.
    Senator Cantwell. Senator Thune.

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Madam Chair, and Senator Ayotte 
for having this hearing. I want to thank our panelists for 
being here. And I have a statement I'd like to have included in 
the record.
    Senator Cantwell. Without objection.
    [The prepared statement of Senator Thune follows:]

 Prepared Statement of Hon. John Thune, U.S. Senator from South Dakota
    I would like to thank Chairwoman Cantwell and Ranking Member Ayotte 
for holding this hearing today, and thanks to the witnesses for 
testifying.
    The United States is a leader in aerospace design and 
manufacturing. The sector is a source of thousands of high-quality jobs 
for businesses large and small.
    While it is good news that many segments of the aviation industry 
appear to be rebounding from the recession, the industry continues to 
face a number of challenges. Fuel prices remain volatile, pressures 
from our international competitors are growing, and tax and regulatory 
burdens are drags on our global competitiveness.
    I am keeping a close eye on developments regarding the European 
Union Emissions Trading Scheme (EU ETS). This is an issue Senator 
McCaskill and I, along with Senator Ayotte and others, have been 
confronting head on for quite some time. The EU ETS is little more than 
a unilateral tax-grab that would hurt American operators and the 
traveling public when flying into and out of Europe.
    In 2012, we led an effort to protect U.S. interests from this 
controversial tax, culminating in the EU Emissions Trading Scheme 
Prohibition Act, which was signed into law in November 2012. That law 
required the Secretary of Transportation to hold U.S. operators of 
civil aircraft harmless from the EU ETS, and directed the Secretary to 
conduct negotiations at the International Civil Aviation Organization 
(ICAO) charting a path for a global, consensus-based approach to 
aviation emissions.
    I am pleased with the positive outcome on the global aviation 
emissions agreement at ICAO's 38th General Assembly, which rejected 
unilateral approaches. At the end of last year, the EU had announced 
proposed changes to the EU ETS that appeared inconsistent with the ICAO 
agreement. However, recent press reports indicate the EU may extend the 
moratorium through 2016. This would be a positive development, and I 
look forward to hearing from the witnesses on this issue, including how 
the absence of a continued moratorium could affect aviation 
competitiveness, U.S. consumers, and trade relations with the EU.
    During his confirmation process, Secretary Foxx was clear that the 
Department of Transportation would enforce the provisions of the EU ETS 
Prohibition Act. I look forward to continuing to work with my 
colleagues and the Department to confront this challenge.
    Another issue on the international front that I look forward to 
hearing about today is the impact of state sponsorship of foreign air 
carriers on the competitive landscape of international markets.
    While the Middle Eastern carriers have been important customers of 
our aviation manufacturing sector, we should be careful to consider the 
impacts state sponsorship may have on U.S. air carriers' ability to 
compete in international markets, as well as the potential consequences 
of Open-Skies agreements and what that could potentially mean for 
domestic service that exists today--including service to small and 
rural communities.
    Today, I hope to hear our witnesses' views on what U.S. Government 
policies help or hurt our carriers' competitiveness in this regard. 
Thank you, Chairwoman Cantwell.

    Senator Thune. Thank you.
    I'd like to direct this question--I guess it has to do with 
the E.U.-ETS issue. And I'm kind of opening this up, I suppose, 
to whoever wants to answer it but I think presents a real 
challenge to U.S. operators and that's why Congress gave the 
DOT the authority to protect our air carriers and the traveling 
public from what is unilateral taxation, in effect. And I'm 
encouraged to hear that E.U. negotiators are considering 
extending the current ``stop the clock,'' at least to 2016. And 
I guess my question has to do with, while we hope for an 
extension that continues that existing moratorium, how would 
the expiration of this stop the clock affect aviation 
competitiveness, U.S. consumers and U.S.-E.U. trade relations?
    Mr. Calio, perhaps, take that.
    Mr. Calio. First of all, Senator Thune, thank you very much 
for all your support and leadership on the issue and the 
leadership of this committee. Frankly, if Congress had not done 
what it had done last year, the E.U. never would have backed 
off and never would have put the ``stop the clock'' in place.
    That ``stop the clock'' in their statement was based on 
progress at ICAO in September and October of this year. We 
believe considerable progress was made. But, I guess I would 
say to you that--that Congress is going to have to remain 
vigilant on this issue. Experience with the E.C. and the E.U. 
suggests that there will be constant reconsideration of this 
even if that vote is positive in the next few weeks. If they 
move the clock ahead or if they put the stop the clock to 2016, 
all positive, but I would bet there would be another effort to 
roll it back at times. And it does put us at a disadvantage and 
it's just wrong. There's nothing about the tax that goes toward 
the aviation or making aviation any better. It's extra 
territorial, as you all know, and it's something that should 
have been done in the first place.
    So again, thank you very much, all of you, for your help on 
that issue. Without your help and what DOT did on the 
administration last year, that would be in place right now.
    Senator Thune. And, just as a follow up, compared to the 
past, how engaged would you say that U.S. stakeholders and 
foreign bodies are when it comes to utilizing ICAO to find a 
comprehensive solution to the issue of aviation emissions?
    Mr. Calio. From our perspective, from the airline's 
perspective, we are very engaged. I say that, you know, if I 
were to be glib about it and say you've never seen so many e-
mails and meetings in your entire life on any issue. But it's 
all positive. People are working very diligently. It's to our 
great benefit to come up with solutions because it means less 
fuel burn, better customer service, less noise, everything 
along the way. There's a real vested interest here as well as a 
common good.
    Mr. Wytkind. Senator, may I add----
    Senator Thune. Yes.
    Mr. Wytkind. I really want to, first, on behalf of our 32 
unions, to really thank you for your leadership on this issue. 
As you know, our unions all completely came on board in support 
of your effort and the effort of the airlines to stop what we 
thought was a very heavy-handed tactic. And, unfortunately for 
us in the labor movement, the European Union's heavy-handed 
tactics on these kinds of issues have become the norm. That's 
the same strategy they're deploying in trying to force changes 
to our foreign ownership of control roles; it's the same 
strategy they're using to try to allow their carriers to serve 
domestic markets in the United States point to point.
    And so, we're completely on board. We're very engaged at 
ICAO. We've embraced an ICAO solution, a global solution, not 
one that's unilaterally imposed by the Europeans. So we're 
completely with you and all your colleagues and members of this 
committee. We think it's the right approach and your leadership 
in 2013 brought us to the point we are today.
    But I'm with Nick, Mr. Calio. I think this ``stop the 
clock'' strategy, while it's better than the alternative which 
is trying to force it on us, that issue is coming back and 
we're going to have to be very, very aggressive.
    Thank you.
    Senator Thune. I'm sure Nick is going to want to use that 
``I'm with Nick'' statement over and over again.
    [Laughter.]
    Ms. Blakey. Let me also add from the manufacturers' 
standpoint, that at ICAO, working jointly, the manufacturers, 
and particularly the engine manufacturers, have done what is 
very difficult to do and that is come up with a carbon 
standard. You know, you have to measure this. There has to be 
science behind it----
    Senator Thune. Right.
    Ms. Blakey.--at the end of the day. And we're making real 
technical progress through this international effort. So we're 
right at the forefront.
    Senator Thune. Good.
    And I want to come back to something that you just stated 
and that has to deal with the issue of foreign ownership.
    Mr. Wytkind. Yes.
    Senator Thune. And, you know, increasingly we're seeing 
competition from aircraft that are, you know, aircraft 
manufacturing from countries like Brazil and China. And I think 
it was mentioned in testimony earlier that U.S. aviation 
companies are competing against foreign governments, not just 
foreign companies.
    So I guess the question is how does that state sponsorship 
in other countries impact U.S. air carriers' ability to compete 
in international markets? And I should say as a follow up to 
that question, what risk does expanded direct foreign ownership 
and competition mean in the long-term for domestic service here 
in the United States? Will we always have more, or fewer, 
carriers and flight options domestically for the traveling 
public, say, 10 to 15 years down the road?
    Mr. Wytkind. Well, I might say, look, the vision of those 
that are proposing to dramatically reform our foreign ownership 
rules, is to turn the U.S. essentially into a feeder country. 
Even though we're the world's largest aviation industry market, 
they want to turn us into a feeder.
    And so, there have been many attempts led mostly by the 
Europeans to try and change our rules and here's how it would 
work. You would make our employees have to work for foreign 
companies that come and decide who flies the planes; who 
maintains the planes; who services the planes; where they fly; 
where they don't fly; are they going to become ticket sellers 
where all they want to do is feed the foreign carriers' market 
opportunities abroad; and at the end of the day we think the 
strategic significance of aviation and its connection to 
national security cannot be ignored in this debate.
    We run a very robust aircraft program which gives our 
military the auxiliary support it needs from our airline 
industry to be able to use its aircraft during times of 
military and international emergencies. And, for us to just 
turn the keys over to foreign interests that want to take over 
our airlines, we think it would be one of the great strategic 
blunders that this country has made; especially given the fact 
that we've already seen bad decisions ravage all sorts of U.S. 
industries that are now completely overseas and we've lost them 
here. And so, I think we have to act with great caution. That's 
why we're strongly against their agenda.
    Mr. Calio. Senator, if I could address that as well.
    People are surprised to allow it, the ``I'm with Nick'' and 
``I'm with Ed,'' but we are together on a lot of things and 
we're together on foreign direct ownership. It's a very 
divisive issue on the past. We believe it's almost a sidelight 
issue. What we, and our partners in labor, have done is try to 
partner up on issues that matter most to the industry because 
we both agree. You need the U.S. Airline industry to be 
sustainably profitable to have good jobs, better jobs, better 
product, buy more product. And we're working toward that end.
    In terms of state owned enterprises, we are facing very 
stiff competition from a lot of state-owned enterprises. We 
have information. We'd be happy to share the--brilliant, 
actually, the way they've created it. If we could start from 
scratch it would be much easier, but they've created these 
aviation ecosystems where, for instance, in the case of one 
airline, one country, there's one person at the top of the 
entire chain; runs the airport, the duty free, the operations, 
the maintenance, the airline itself. And they are taking 
product away. And what that means in terms of the small and 
medium sized communities that you ask about is significant 
because U.S. airlines use the profit from international routes 
which are their most lucrative parts of their business to 
subsidize most of the domestic flying. It's a little known fact 
that for years we've been flying people from point A to point B 
in the United States at a loss. And it's the international 
profits that subsidize the loss on those. And to the degree 
that you see a diminution of services down the line, and in 
many cases currently, it's because those routes simply become 
unsubsidizable.
    Senator Cantwell. Well, I want to thank our witnesses. 
We're out of time because we had a 15-minute roll call vote 
start about 10 minutes ago. So we're going to have to adjourn 
the hearing. But I do want, to Mr. Muilenburg and Ms. Blakey, 
to follow up on your FAA certification process.
    We are going to have more hearings about this. I would like 
to, obviously, got to work with our Senator Ayotte on this, but 
to focus on what other additional FAA certification process 
focus this committee can give to helping us expedite that 
process. And to your point, Mr. Calio, would love to hear more 
feedback from you on what you want to see in the FAA 
reauthorization bill that you would think will also help us in 
this process of competitiveness.
    Mr. Calio. Thank you.
    Senator Cantwell. Senator Ayotte.
    Senator Ayotte. First of all, I absolutely agree with the 
Chair to have more hearing follow-up on the certification 
process. And I do want to hear from all of you what the 
priorities should be on the authorization and two other issues 
we talked about.
    Mr. Calio, the issue of the fees that are on the airline 
bills and, obviously, openness of those fees and how people 
know. But also, I'd like to get your thoughts on the overall 
tax code and what you think needs to be done to ensure that 
we're more competitive as these discussions about tax reform 
keep bubbling up.
    And finally, on the STEM education piece. Obviously, we've 
had a great discussion about it today and how we can improve 
the pipeline, which I think we're all committed to, but also 
what role you believe that raising the H-1B visa caps in the 
interim until we have that pipeline.
    Thank you.
    Senator Cantwell. Well, I, again, want to thank all the 
witnesses and all the members. I think we can see from today's 
attendance that aviation is a very important issue all across 
the America. I think you have laid out an agenda that the 
opportunities are great but so are the risks. So we want to be 
a partner in helping to minimize those. And so, we'll look 
forward to having more discussions and more hearings on this 
subject.
    We're adjourned.
    [Whereupon, at 12:27 p.m., the hearing was adjourned.]
                            A P P E N D I X

                    Aeronautical Repair Station Association
                                     Alexandria, VA, March 13, 2014

Hon. John D. Rockefeller IV,
Chairman,
Commerce, Science, and Transportation Committee,
Washington, DC.
Hon. Maria Cantwell,
Chairman,
Aviation Operations, Safety, and Security Subcommittee,
Washington, DC.
Hon. John Thune,
Ranking Member,
Commerce, Science, and Transportation Committee,
Washington, DC.
Hon. Kelly Ayotte,
Ranking Member,
Aviation Operations, Safety, and Security Subcommittee,
Washington, DC.

 New Data Highlights Economic Strength of Aviation Maintenance Industry

Chairmen Rockefeller and Cantwell and Ranking Members Thune and Ayotte:

    I am writing to provide a new report from the Aeronautical Repair 
Station Association (ARSA) quantifying the aviation maintenance 
industry's economic and employment footprint nationally, and in your 
respective states (see attached state-by-state chart). Please visit 
http://bit.ly/1i83gCb to view the full study.
    The study makes clear that, although maintenance may be the least 
visible segment of the aviation industry, in addition to helping U.S. 
airlines become safer and more competitive, repair stations are 
significant economic contributors throughout the country. The study 
found that the U.S. civil aviation maintenance industry employs 311,614 
people and generates $44.4B in economic activity. Additionally, 84 
percent of maintenance, repair, and overhaul (MRO) companies in the 
United States are small-medium sized entities.
    The report also details the broader aviation sector's significant 
growth overseas. To ensure the U.S. aviation maintenance industry 
remains internationally relevant, repair stations must be able to 
compete globally. Congress and the administration should encourage the 
negotiation of more bilateral aviation safety agreements (BASAs), 
respect our current international aviation accords, and refrain from 
micromanaging the aviation maintenance sector through unnecessary 
mandates that offer no flight safety benefit.
    Additionally, indiscriminate cuts to FAA funding further threaten 
the viability of the industry. Congress requires that the agency 
provide strict oversight of the industry. However, when lawmakers don't 
give FAA the resources to retain adequate certification and inspection 
personnel to carry out congressional mandates, the aviation maintenance 
industry's ability to efficiently service customers is at risk.
    When considering legislative proposals, ARSA asks Congress to keep 
our industry's contributions and safety record in mind. Thank you for 
your consideration and please contact me if you have questions.
            Sincerely,
                                          Daniel B. Fisher,
                             Vice President of Legislative Affairs.
cc: Members of the U.S. House
Members of the U.S. Senate
                                 ______
                                 

          Global MRO Market Economic Assessment--January 2014

               U.S. Employment & Economic Impact by State

Overview
    The U.S. civil aviation maintenance industry employs 311,614 people 
and generates $44.4B in economic activity. (Figure 1.) MRO accounts for 
78 percent of the total employment in the U.S. with 244,144 employees. 
Within the MRO industry, companies that are certificated by the FAA 
under part 145 are the largest employers with some 195,114 employees. 
The remaining 49,030 are employed by other companies involved in civil 
aviation. Parts manufacturing and distribution accounts for the 
remaining 22 percent of employment with 67,470 employees. MRO generates 
48 percent of the economic activity or $21.3B. With 22 percent of the 
total employment, parts manufacturing and distribution, accounts for 52 
percent of the total economic activity or $23.1B.


    Source: FAA/BLS/RITA/TeamSAI Consulting Services analysis
    Analyzing the MRO industry at the state level, TeamSAI estimates 
that California, Florida, Georgia, and Texas combined represent 35 
percent of the total U.S. civil aviation maintenance employment with an 
estimated 110,330 employees. The top ten states represent 62 percent of 
the total employment in the U.S. (Figure 2.)


    Source: FAA/BLS/RITA/TeamSAI Consulting Services analysis

    California and Texas also generate the most economic activity 
followed by Arizona, Connecticut, Georgia, and Washington. Together, 
these six states generate 49 percent of the total economic activity. 
(Figure 3.)


    Figure 4 presents the detailed employment and economic impact at 
the state level.

                                    Figure 4. 2014 U.S. Aviation Maintenance Industry Employment And Economic Impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Aviation Maintenance Industry Employment                 Aviation Maintenance Industry Economic Activity
                                ------------------------------------------------------------------------------------------------------------------------
                                 Maintenance, Repair  and Overhaul
             State                             (MRO)                      Parts                         Maintenance,         Parts             Total
                                -----------------------------------  Manufacturing  /       Total        Repair and     Manufacturing  /     Economic
                                    FAA  Repair                        Distribution      Employment    Overhaul (MRO)     Distribution       Activity
                                      Station         Air Carrier
--------------------------------------------------------------------------------------------------------------------------------------------------------
AK                                             490             417                  9             916         $65,833             $3,084         $68,917
AL                                           5,065              --                 28           5,093        $367,634             $9,595        $377,229
AR                                           2,927              79                 61           3,067        $218,185            $20,903        $239,088
AZ                                           6,306             978              9,907          17,191        $528,697         $3,394,869      $3,923,566
CA                                          26,296           3,170              5,493          34,959      $2,138,739         $1,882,307      $4,021,046
CO                                           1,211           1,535                 15           2,761        $199,314             $5,140        $204,454
CT                                           5,042             240              7,067          12,349        $383,385         $2,421,676      $2,805,061
DE                                             893              25                 83           1,001         $66,631            $28,442         $95,073
FL                                          16,536           3,780                976          21,292      $1,474,602           $334,450      $1,809,052
GA                                          16,225           3,338              1,435          20,998      $1,419,947           $491,737      $1,911,684
GU                                              21              54                 --              75          $5,444                 $0          $5,444
HI                                             158             863                  8           1,029         $74,108             $2,741         $76,849
IA                                           2,738              --              4,443           7,181        $198,733         $1,522,500      $1,721,233
ID                                             501              95                 33             629         $43,260            $11,308         $54,568
IL                                           4,010           4,501              1,441           9,952        $617,756           $493,793      $1,111,549
IN                                           3,450             618              1,164           5,232        $295,269           $398,872        $694,141
KS                                           5,479              53              4,932          10,464        $401,531         $1,690,067      $2,091,598
KY                                             538             965                 44           1,547        $109,093            $15,078        $124,170
LA                                           2,040             135                187           2,362        $157,869            $64,080        $221,949
MA                                           2,060             486                268           2,814        $184,797            $91,837        $276,634
MD                                           1,102             246                593           1,941         $97,842           $203,206        $301,048
ME                                             923              --                129           1,052         $66,994            $44,205        $111,199
MI                                           4,377           1,946              2,531           8,854        $458,944           $867,307      $1,326,251
MN                                           2,367           1,557                360           4,284        $284,817           $123,363        $408,179
MO                                           1,630             276                 23           1,929        $138,344             $7,881        $146,225
MP                                               6              --                 --               6            $435                 $0            $435
MS                                           1,076              23                140           1,239         $79,769            $47,974        $127,743
MT                                             367              --                 18             385         $26,638             $6,168         $32,806
NC                                           3,788           1,031                384           5,203        $349,779           $131,587        $481,366
ND                                             233              --                 99             332         $16,912            $33,925         $50,837
NE                                           1,079              --              1,297           2,376         $78,317           $444,448        $522,765
NH                                             661              --                 33             694         $47,978            $11,308         $59,286
NJ                                           4,060           1,735                449           6,244        $420,620           $153,861        $574,481
NM                                             462              --                 47             509         $33,533            $16,106         $49,639
NV                                             545           1,175                116           1,836        $124,843            $39,750        $164,593
NY                                           5,761           3,438              2,743          11,942        $667,694           $939,954      $1,607,648
OH                                           6,052             937              3,174          10,163        $507,285         $1,087,647      $1,594,931
OK                                          12,188             335                523          13,046        $908,961           $179,218      $1,088,179
OR                                           1,645             552                116           2,313        $159,465            $39,750        $199,216
PA                                           3,411           1,536                114           5,061        $359,070            $39,065        $398,134
PR                                             116              55                 --             171         $12,412                 $0         $12,412
RI                                             251              --                 44             295         $18,218            $15,078         $33,296
SC                                           2,197             164                 10           2,371        $171,369             $3,427        $174,796
SD                                              83              --                170             253          $6,024            $58,255         $64,279
TN                                           2,633           2,055                601           5,289        $340,270           $205,947        $546,217
TX                                          21,871           7,300              3,910          33,081      $2,117,327         $1,339,854      $3,457,182
UT                                             342             697                458           1,497         $75,414           $156,945        $232,359
VA                                           1,179           1,557              2,336           5,072        $198,588           $800,486        $999,074
VI                                               2              --                 --               2            $145                 $0            $145
VT                                             171              --                297             468         $12,412           $101,774        $114,186
WA                                           8,838             888              9,012          18,738        $705,945         $3,088,176      $3,794,121
WI                                           2,155             195                 94           2,444        $170,571            $32,211        $202,782
WV                                           1,483              --                 38           1,521        $107,641            $13,022        $120,663
WY                                              74              --                 17              91          $5,371             $5,825         $11,197
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total                                      195,114          49,030             67,470         311,614     $17,720,775        $23,120,200     $40,840,975
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: FAA/BLS/RITA/TeamSAI Consulting Services analysis

                                 ______
                                 
    Response to Written Question Submitted by Hon. Amy Klobuchar to 
                         Hon. Marion C. Blakey
    Question. In September, the authorization of the Export-Import Bank 
will expire. There is no doubt that many U.S. businesses benefit from 
Ex-Im Bank financing, but there have also been concerns raised during 
past reauthorizations. Why is it important that the U.S. provide these 
financial guarantees? Please comment on the controversy of wide-body 
aircraft financing to countries that subsidize their airlines.
    Answer. The reauthorization of the Export-Import Bank of the United 
States (Ex-Im) is a high priority for the Aerospace Industries 
Association. With 95 percent of the world's consumers living outside 
the United States, and with GDP rising at faster rates in many of those 
countries, it is imperative for policy makers to support the export of 
U.S. manufactured products. The Ex-Im plays a vital role in helping 
American aerospace companies compete on a level playing field in the 
global marketplace. Ex-Im is crucial to supporting U.S. jobs, 
generating export revenue, maintaining a robust network of aerospace 
suppliers, and facilitating a strong U.S. presence in the global 
market. The backbone of the aerospace industry is supported by more 
than 30,000 small and medium-sized suppliers--all who benefit when our 
products are exported. The benefits don't stop there. The Ex-Im Bank is 
a self-sustaining entity, actually returning more than $1 billion to 
the Treasury Department last year.
    Our foreign competitors have their own export credit agencies that 
provide financial support to their domestic manufacturers. Without Ex-
Im, U.S. aerospace companies would be unable to compete on a level 
playing field for overseas orders. It will undermine our global 
competitiveness, in a field where we lead the world today.
    We believe that without the support of the Ex-Im Bank, foreign 
airline carriers will decide to purchase non-U.S. manufactured aircraft 
financed by foreign export credit agencies.
                                 ______
                                 
    Response to Written Question Submitted by Hon. Amy Klobuchar to 
                             Nicholas Calio
    Question. In September, the authorization of the Export-Import (Ex-
Im) Bank will expire. There is no doubt that many U.S. businesses 
benefit from Ex-Im Bank financing, but there have also been concerns 
raised during past reauthorizations. Why is it important that the U.S. 
provide these financial guarantees? Please comment on the controversy 
of wide-body aircraft financing to countries that subsidize their 
airlines.
    Answer.The financing of large, wide-body aircraft is not an Ex-Im 
Bank problem--it is an export credit structural problem. Today our 
foreign airline competitors can save millions of dollars on financing 
costs because export credit assistance from the Ex-Im Bank or a 
European export credit agency allows them to finance aircraft at below 
market rates. U.S. airlines, however, are blocked from export credit. 
Both sides--the U.S. and Europe--support their aircraft manufacturers 
and neither can disengage unilaterally. We understand that. But the 
cost is U.S. airline jobs and U.S. airline global competitiveness. U.S. 
airlines, their employees and, ultimately, consumers, pay the price of 
this market distortion.
    The solution, which Congress identified in the 2012 Ex-Im Bank 
reauthorization bill, is for the U.S to reach agreement with Europe to 
eliminate export credit for wide-body aircraft. That way nobody is 
harmed--the manufacturers and the airlines are free to compete on a 
level playing field. It is critical to the global competitiveness of 
our industry that export credit does not place U.S. airlines at a 
competitive disadvantage, particularly as to state-owned and state-
supported airlines and those with strong credit ratings who can access 
the credit and capital markets to finance their aircraft purchases.

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