[Congressional Record Volume 141, Number 207 (Friday, December 22, 1995)]
[Senate]
[Pages S19237-S19239]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   U.S. INTERNATIONAL AVIATION POLICY

  Mr. PRESSLER. Mr. President, I rise today to discuss a very important 
development in U.S. international aviation policy that occurred over 
the past year. I do not refer to any particular bilateral aviation 
agreement, although the number of new international air service 
opportunities created in 1995 was impressive and unprecedented. 
Instead, I wish to highlight the critical lesson we learned during the 
year and, hopefully, will continue to apply.
  Simply put, the best way for the United States to secure the 
strongest possible international aviation agreements is for our 
negotiators to make decisions based on economic analysis with the goal 
of maximizing benefits for the U.S. economy. In other words, 
international aviation decisions should turn on what is best for our 
country, not which carriers can generate the most political support. In 
1995, Transportation Secretary Pena did an excellent job in this regard 
and the results speak for themselves. U.S. passenger and cargo carriers 
are capitalizing on a plethora of new international opportunities, 
while the increased competition brings consumers lower air fares, 
reduced shipping costs, and greater choices.
  This new focus on economic analysis, which I have advocated and 
enthusiastically support, is beneficial in several other regards. 
First, it has the practical effect of elevating U.S. international 
aviation policy to the status of a national trade issue. Second, it 
clearly defines the criteria the United States applies in assessing 
international aviation agreements and, by doing so, gives foreign 
nations a clearer understanding of what will and will not be acceptable 
to our negotiators. Finally, it prevents foreign nations from 
exploiting parochial disagreements between our carriers.
  Looking ahead to 1996, it is imperative that sound economic analysis 
continues to be the guiding principle in our international aviation 
negotiations. We face a number of significant challenges, most notably 
aviation policy with Japan and the United Kingdom. Also, we have a 
golden opportunity to obtain an open skies agreement with Germany which 
would be a catalyst for further liberalization of air service 
opportunities throughout Europe. Next year is shaping up to be a very 
important year for U.S. international aviation policy.
  Mr. President, let me emphasize that I believe the best bilateral 
aviation agreement for all parties involved is one which is open and 
permits market forces to determine what air service is provided in 
particular markets. Open skies agreements ensure consumers pay a 
competitive air fare, maximize consumer choice, and promote greater 
efficiencies for all carriers. Having made that important point, let me 
briefly turn to our relations with our three most important aviation 
trading partners overseas: Japan, the United Kingdom, and Germany.
  As I have said in this body before, the major impediment to 
liberalizing aviation relations with the Government of Japan is the 
high operating costs of Japanese carriers. Due in large part to Japan's 
tightly regulated airline industry, Japanese carriers have operating 
costs significantly higher than United 

[[Page S19238]]
States competitors. Until the Government of Japan permits its carriers 
to become more competitive, there will be enormous pressure within 
Japan to continue to protect the Japanese air service market.
  The Government of Japan, along with other Asia-Pacific Economic 
Cooperation [APEC] members including the United States, recently 
committed to work toward the goal of free and open trade between all 
member nations. The so-called Bogor Declaration has the potential to 
have a major impact on United States-Japan aviation relations. Time 
will tell.
  One thing, however, is certain in United States-Japan aviation 
relations. The continued refusal of the Government of Japan to abide by 
the terms of United States-Japan bilateral aviation agreement 
concerning beyond rights guaranteed to several of our carriers will 
undoubtedly complicate aviation relations between our two countries.
  Currently, the Government of Japan is refusing to honor United 
Airlines' right to provide service between Osaka and Seoul, Korea. 
Also, Federal Express Corporation is being wrongfully denied the right 
to provide service between Japan and China. In August, this body 
unanimously passed a resolution I sponsored calling on the Government 
of Japan to respect the beyond rights of our so-called 1952 carriers. 
Apparently that message has not yet been heard.
  Why have beyond rights become such a point of contention between the 
United States and Japan? From a long-term perspective, I suspect it has 
something to do with the fact that passenger and cargo service 
opportunities in the Asia-Pacific market beyond Japan are booming. For 
example, the International Air Transport Association [IATA] estimates 
by the year 2010 there will be around 288 million international 
passengers traveling within the intra-Asian air service market alone. 
Beyond rights from Japan are absolutely essential if U.S. carriers are 
to fully participate in the booming Asia-Pacific market.
  Turning to aviation relations with the United Kingdom, I continue to 
be very concerned about the extremely restrictive United States-United 
Kingdom bilateral aviation agreement. Of all our international aviation 
agreements, I believe the most restrictive agreement--and therefore our 
most anticonsumer bilateral--is the so-called Bermuda II agreement with 
the United Kingdom. Ironically, in areas other than aviation, our trade 
relations with the British are generally based on free market 
principles.
  How lopsided is the United States-United Kingdom bilateral aviation 
agreement? For starters, recent statistics indicate approximately 58 
percent of the passenger traffic between the United States and the 
United Kingdom is carried on British carriers. Due to capacity controls 
and other restrictions, our carriers are forced to settle for 42 
percent of that traffic.
  Moreover, according to a recent report prepared by the Commission of 
European Communities [EC], between 1984 and 1994 British carriers 
improved their market share vis-a-vis United States carriers by 21 
percent. During the same period, a majority of carriers from other 
European Community countries lost market share. These statistics are 
particularly remarkable when one considers the fact that operating 
costs of European carriers generally are higher than those of U.S. 
carriers. Clearly, market factors are not controlling the distribution 
of air service opportunities between the United States and Britain.
  Mr. President, the principal problem in United States-United Kingdom 
international aviation relations continues to be access for our 
passenger carriers to London's Heathrow Airport. Access to Heathrow is 
particularly important since it is arguably the most important gateway 
airport in the world. It offers connecting service opportunities 
worldwide. In fact, approximately one-third of all passengers traveling 
to Heathrow connect to flights elsewhere.
  So why is access to Heathrow such a sticking point? The British argue 
the sole explanation is airport congestion. This may be part of the 
problem but, as I explained to this body several months ago, the 
British could create significant new take-off and landing opportunities 
at Heathrow simply by switching their runway operations to a more 
efficient operating mode. Perhaps another factor is yields on flights 
to Heathrow are generally 15 percent higher than those to London 
Gatwick Airport. Heathrow is the hub of British Airways, the most 
profitable airline in the world.
  Since October, phase 2 negotiations with the British have been 
suspended. I believe, however, we owe it to consumers on both sides of 
the Atlantic to continue to press for further liberalization of the 
United States-United Kingdom bilateral aviation agreement. In that 
regard, I recently wrote Sir Colin Marshall, the chairman of British 
Airways, in response to his call for a ``bigger, bolder and braver 
approach'' to liberalizing air service opportunities between our two 
countries. I hope his enthusiasm is shared by the British Government.

  I ask unanimous consent that a copy of my correspondence to Sir Colin 
Marshall to which I have referred be printed in the Record at the 
conclusion of my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 2.)
  Mr. PRESSLER. Mr. President, in contrast to the reluctance of the 
British to liberalize air service opportunities between our countries, 
a very important opportunity has presented itself in Germany. Based on 
a recent meeting with German Transport Minister Matthias Wissmann, I 
believe the German Government is enthusiastic about promptly securing 
an open skies agreement with the United States. For this reason, I 
recently wrote Secretary Pena and Secretary Christopher urging them to 
intensify our negotiating efforts with Germany. I ask unanimous consent 
that a copy of that correspondence be printed in the Record at the 
conclusion of my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 2.)
  Mr. PRESSLER. What would an open skies agreement with Germany mean 
for United States carriers? Such an agreement would produce significant 
direct and indirect benefits for our carriers. Let me explain.
  In terms of direct benefits, an open skies agreement with Germany 
would immediately produce new air service opportunities for our 
carriers between the United States and Germany. Equally important, 
German airports would provide well-situated gateway opportunities for 
our carriers to serve points beyond Germany such as the Middle East and 
the booming Asia-Pacific market. In that regard, the Germans recently 
have expanded airport capacity in Frankfurt and Munich, and a new 
international airport is planned in Berlin-Brandenburg.
  The potential of Germany as a gateway to the Asia-Pacific market is 
particularly intriguing. IATA estimates that by the year 2010, 10 
percent of all international passengers traveling to the Asia-Pacific 
region annually will originate in Europe. Significantly, that is the 
same percentage of Asia-Pacific passengers IATA estimates will 
originate in North America.
  With respect to indirect benefits, an open skies agreement with 
Germany would be an important catalyst for further liberalization of 
air service opportunities throughout Europe. To put this point in 
perspective, an open skies agreement with Germany--in combination with 
liberalized air service agreements we already secured with the 
Netherlands in 1992 and with nine other European countries earlier this 
year--would mean nearly half of all passengers traveling between the 
United States and Europe would be flying to or from European countries 
with open skies regimes.
  Under such a scenario, tremendous competitive pressure would be 
brought to bear on European countries with whom we do not have 
liberalized aviation relations. The recent European Commission report 
on EC/U.S. aviation relations supports my assessment of the competitive 
impact of an open skies agreement with Germany. In its report, the EC 
astutely concluded that as a result of our successful initiatives to 
secure open skies agreements with some European countries, other 
European countries which resist liberalization ``will either have to 
follow the open skies policy, or risk being left behind in the 
competition and in market share.'' 

[[Page S19239]]

  Mr. President, I believe the competitive impact of an open skies 
agreement with Germany would be particularly acute in the United 
Kingdom and France. As a result, such an agreement would have the 
significant collateral benefit of strengthening our hand in 
negotiations with both the British and the French. Let there be no 
mistake, both British and French airports are today competing with 
other European airports for international travelers and statistics 
clearly show the trend favors countries with an open skies policy.
  For instance, between 1992 and 1994, total passenger traffic between 
the United States and the Netherlands grew an astounding 56 percent. 
During the same period, total passenger traffic between the United 
States and the United Kingdom grew just 7.5 percent. What does this 
illustrate? It demonstrates that Amsterdam's Schiphol Airport is 
drawing passenger traffic originating in the United States away from 
United Kingdom airports, particularly Heathrow. The significance of 
this point is not fully appreciated until it is understood that 
currently passengers connecting onto British carriers at Heathrow alone 
account for more than 1 billion pounds a year in export earnings for 
the United Kingdom.
  Since this is such a critical point, let me share another example of 
market forces driving passengers to European countries that have an 
open skies agreement with the United States. Between 1992 and 1994, the 
number of passengers traveling from Germany to the United States was 
more or less stable. During that same period, the number of German 
passengers choosing to travel to the United States via Amsterdam's 
Schiphol Airport increased approximately 80 percent.
  The potential direct and indirect benefits of an open skies agreement 
with Germany are tremendous. As I have said, I believe Secretary Pena 
and Secretary Christopher should aggressively pursue this opportunity.
  Mr. President, let me conclude by saying that the international 
aviation challenges we face in 1996 make it imperative that our 
negotiators continue to make decisions based on economic analysis with 
the goal of maximizing benefits for the United States economy. This was 
a successful formula in our 1995 international aviation negotiations. 
In 1996, it is critical we build on the lesson we learned over the past 
year.

                               Exhibit 1

         U.S. Senate, Committee on Commerce, Science, and 
           Transportation,
                                Washington, DC, November 21, 1995.
     Sir. Colin Marshall,
     Chairman, British Airways, Berkeley Square House, 6th Floor, 
         London, England.
       Dear Sir Colin: With great interest I read your speech on 
     United States/United Kingdom aviation relations delivered to 
     the Wings Club in New York last week. Your call for a 
     ``bigger, bolder and braver approach'' to liberalizing air 
     service opportunities between our countries peaked the 
     interest of many on this side of the Atlantic.
       I agree with you that no two nations are better suited to 
     have a fully liberalized transatlantic air service market 
     than the United States and the United Kingdom. To the extent 
     nations worldwide have embraced the Bermuda I and Bermuda II 
     agreements as a model for restricting air service 
     opportunities in their markets, such an initiative would 
     undoubtedly serve as a shining example for open aviation 
     markets globally. As you correctly observed, consumers 
     benefit most when markets are open and competition is robust.
       I hope we can continue the dialogue we started in London in 
     July on how this vision can come to pass. In the meantime, 
     please contact me or Michael Korens of my staff if I can be 
     of assistance.
           Sincerely,
                                                   Larry Pressler,
                                                         Chairman.

                               Exhibit 2

         U.S. Senate, Committee on Commerce, Science, and 
           Transportation,
                                 Washington, DC, December 1, 1995.
     Hon. Federico Pena,
     Secretary, Department of Transportation, 400 Seventh Street, 
         SW, Washington, DC.
       Dear Secretary Pena: As Chairman of the Senate Committee on 
     Commerce, Science, and Transportation, I am writing to urge 
     you to intensify your efforts to obtain an open skies 
     aviation agreement with the Federal Republic of Germany. I am 
     aware that some progress has been made in this regard. I 
     believe, however, the importance of this initiative calls for 
     renewed vigor on the part of both the Department of 
     Transportation and the Department of State.
       In addition to immediately creating additional new 
     opportunities for our carriers in Germany, such an agreement 
     would be enormously beneficial to our national interest in 
     liberalizing air service markets throughout Europe. Simply 
     put, an open skies agreement with Germany would bring 
     considerable competitive pressure to bear on all European 
     countries which currently restrict air service opportunities 
     to our carriers.
       For instance, I believe an open skies agreement with 
     Germany would contribute significantly to our efforts to 
     liberalize our air service relationship with the United 
     Kingdom. Moreover, such an agreement would provide invaluable 
     leverage in securing a bilateral aviation agreement with 
     France.
       Mr. Secretary, I am aware that you share my vision of an 
     open skies agreement with Germany. As your efforts in that 
     regard intensify, please contact me if I can be of 
     assistance.
           Sincerely,
                                                   Larry Pressler,
     Chairman.

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