[House Report 117-651]
[From the U.S. Government Publishing Office]


117th Congress   }                                     {        Report
                        HOUSE OF REPRESENTATIVES
 2d Session      }                                     {       117-651

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



 
                        FAIR AND OPEN SKIES ACT

                                _______
                                

 December 20, 2022.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. DeFazio, from the Committee on Transportation and Infrastructure, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 3095]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 3095) to ensure that authorizations 
issued by the Secretary of Transportation to foreign air 
carriers do not undermine labor rights or standards, and for 
other purposes, having considered the same, reports favorably 
thereon without amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose of Legislation...........................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Legislative History and Consideration............................     3
Committee Votes..................................................     3
Committee Oversight Findings.....................................     4
New Budget Authority and Tax Expenditures........................     4
Congressional Budget Office Cost Estimate........................     4
Performance Goals and Objectives.................................     5
Duplication of Federal Programs..................................     5
Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
  Benefits.......................................................     5
Federal Mandates Statement.......................................     5
Preemption Clarification.........................................     5
Advisory Committee Statement.....................................     5
Applicability to Legislative Branch..............................     6
Section-by-Section Analysis of the Legislation...................     6
Changes in Existing Law Made by the Bill, as Reported............     6
Additional Views.................................................    17

                         Purpose of Legislation

    The purpose of H.R. 3095 is to ensure that future foreign 
air carrier permits granted by the U.S. Department of 
Transportation (DOT), which allow foreign operators to conduct 
revenue air service to the United States, include additional 
DOT review and analysis in order to preserve fair competition 
and labor standards in international aviation.

                  Background and Need for Legislation

    On December 2, 2016, the DOT issued a foreign air carrier 
permit to Norwegian Air International (NAI). Numerous U.S. 
aviation stakeholders objected to the DOT decision, arguing, 
among other things, that NAI's business model was an attempt to 
subvert fair competition and labor standards. Specifically, 
although the majority of NAI's long-haul flights to the United 
States operate from Scandinavian countries and others in 
continental Europe, the carrier organized itself under the laws 
of Ireland, thereby permitting the carrier to hire crewmembers 
on short-term contracts governed under Singapore law.
    Opponents of the issuance of a foreign air carrier permit 
to Norwegian contended that such an outsourcing practice runs 
contrary to U.S. labor laws and afoul of the fair labor 
principles of Norway, the European Union, and the United States 
incorporated by reference in the multilateral United States-
European Union-Norway-Iceland Air Transportation Agreement of 
April 2007 (as amended) (U.S.-EU Open Skies Agreement). This 
``flag of convenience'' business model offered NAI an unfair 
competitive advantage in the transatlantic market, according to 
U.S. aviation stakeholders.
    In addition to the threat posed by ``flag of convenience'' 
business models to U.S. aviation industry and labor interests, 
other foreign air carriers are similarly venturing into 
atypical employment models. For example, some foreign air 
carriers employ pilots and flight crew members under individual 
or temporary contracts, like NAI, which remove the direct 
relationship between the carrier and flight crew. Such business 
models undermine labor standards by allowing the carrier to 
exploit employees through a third party when negotiating 
employment terms, salaries, and benefits, according to U.S. 
aviation stakeholders.
    H.R. 3095 precludes the DOT from permitting a future 
foreign air carrier to serve the United States under the U.S.-
EU Open Skies Agreement unless the Secretary of Transportation 
determines the foreign air carrier permit or exemption is 
consistent with the fair labor standards and fair competition 
requirements of the U.S.-EU Open Skies Agreement and imposes on 
the permit any conditions necessary to ensure compliance with 
those standards and requirements. H.R. 3095 further requires 
the Secretary, when granting a permit to a future foreign air 
carrier, to find that the foreign air transportation to be 
provided under the permit will be in the public interest. H.R. 
3095 provides that preventing entry into U.S. markets by a 
``flag of convenience'' carrier--defined in the legislation as 
a carrier established in a country other than the home country 
of its majority owner to avoid regulations of its home 
country--or otherwise undermining labor standards is within the 
public interest.
    This legislation is necessary because a foreign air carrier 
seeking to serve the United States under an existing 
international air transportation agreement, such as the U.S.-EU 
Open Skies Agreement, should not per se be deemed in the U.S. 
public interest, as the DOT determined when it granted the 2016 
foreign air carrier permit to NAI. In fact, such determinations 
can incentivize other foreign air carriers to follow suit. A 
foreign air carrier, like NAI, that establishes itself in a 
location outside of its home country in order to take advantage 
of more permissive labor, tax, and safety laws than those of 
the United States and certain other countries poses a threat to 
U.S. aviation commercial, economic, and labor interests. This 
legislation seeks to help prevent market access opportunities 
created under the U.S.-EU Open Skies Agreement and other 
international air transport agreements from undermining and 
eroding the highest fair competition principles, labor and wage 
standards, and aviation safety rules.

                                Hearings

    For the purposes of rule XIII, clause 3(c)(6)(A) of the 
117th Congress, the following hearing was used to develop or 
consider H.R. 3095:
    On Thursday, March 25, 2021, the Full Committee held a 
hearing titled ``The Administration's Priorities for 
Transportation Infrastructure.'' The Committee received 
testimony from Secretary of DOT Pete Buttigieg. This hearing 
examined the administration's priorities for transportation 
infrastructure, work to advance surface transportation 
authorization and infrastructure investment, future needs and 
America's competitiveness, funding to provide greater local 
decision-making, foreign air carrier permits, the Federal 
Aviation Administration's implementation of the bipartisan 
aircraft certification reform bill, and open mandates.

                 Legislative History and Consideration

    H.R. 3095 was introduced in the House on May 11, 2021, by 
Mr. DeFazio, Mr. Larsen of Washington, Ms. Davids of Kansas, 
Mr. Lamb, Mr. Kahele, Mr. Rodney Davis of Illinois, Mr. 
Ferguson, Mr. Bacon, Mr. Bergman, and Mr. Johnson of Ohio and 
referred to the Committee on Transportation and Infrastructure. 
Within the Committee, H.R. 3095 was referred to the 
Subcommittee on Aviation.
    The Subcommittee on Aviation was discharged from further 
consideration of H.R. 3095 on July 28, 2021.
    The Committee considered H.R. 3095 on July 28, 2021, and 
ordered the measure to be favorably reported to the House by 
voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires each committee report to include the 
total number of votes cast for and against on each record vote 
on a motion to report and on any amendment offered to the 
measure or matter, and the names of those members voting for 
and against.
    No recorded votes were requested during consideration of 
H.R. 3095.

                      Committee Oversight Findings

    With respect to the requirements of clause 3(c)(1) of rule 
XIII of the Rules of the House of Representatives, the 
Committee's oversight findings and recommendations are 
reflected in this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives does not apply where a cost estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974 has been timely submitted prior to the filing of the 
report and is included in the report. Such a cost estimate is 
included in this report.

               Congressional Budget Office Cost Estimate

    With respect to the requirement of clause 3(c)(3) of rule 
XIII of the Rules of the House of Representatives and section 
402 of the Congressional Budget Act of 1974, the Committee has 
received the enclosed cost estimate for H.R. 3095 from the 
Director of the Congressional Budget Office:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    H.R. 3095 would amend the criteria that the Department of 
Transportation (DOT) must consider when processing permit 
applications for foreign air carriers to provide foreign air 
transportation in the United States. Specifically, the bill 
would prohibit DOT from issuing new permits to foreign air 
carriers unless the carrier adheres to labor standards 
reflected in the guidelines to the United States-European Union 
Air Transport Agreement of April 2007 (as amended).
    H.R. 3095 would increase DOT's administrative costs related 
to processing and reviewing permit applications. The bill also 
could affect DOT's collections of permit filing fees if the 
legislation caused certain foreign air carriers to not apply 
for permits. However, most filing fees, which are treated as 
discretionary offsetting collections, are waived under current 
law as part of international agreements with approximately 80 
countries. Using information from DOT, CBO estimates that 
implementing H.R. 3095 would cost about $2 million over the 
2022-2026 period; any spending would be subject to the 
availability of appropriated funds.
    The CBO staff contact for this estimate is Aaron Krupkin. 
The estimate was reviewed by H. Samuel Papenfuss, Deputy 
Director of Budget Analysis.

                    Performance Goals and Objectives

    With respect to the requirement of clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives, the 
performance goal and objective of this legislation is to 
provide that when considering whether to grant a foreign air 
carrier permit to an applicant to perform revenue service to 
the United States, the DOT undertakes additional review and 
analysis to examine whether the applicant is undermining fair 
competition and labor standards and ensures the granting of a 
permit is in fact within the U.S. public interest.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that no provision 
of H.R. 3095 establishes or reauthorizes a program of the 
federal government known to be duplicative of another federal 
program, a program that was included in any report from the 
Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

   Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    In compliance with clause 9 of rule XXI of the Rules of the 
House of Representatives, this bill, as reported, contains no 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of the rule 
XXI.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act (Public Law 104-4).

                        Preemption Clarification

    Section 423 of the Congressional Budget Act of 1974 
requires the report of any Committee on a bill or joint 
resolution to include a statement on the extent to which the 
bill or joint resolution is intended to preempt state, local, 
or tribal law. The Committee finds that H.R. 3095 does not 
preempt any state, local, or tribal law.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section provides that this bill may be cited as the 
``Fair and Open Skies Act''.

Sec. 2. Foreign air transportation Under United-States-European Union 
        Air Transport Agreement

    This section precludes the DOT from issuing a new foreign 
air carrier permit or exemption to a person seeking to provide 
foreign air transportation to the United States under the U.S.-
EU Open Skies Agreement unless the DOT determines that issuance 
of such a permit or exemption is consistent with Article 17 bis 
of the U.S.-EU Open Skies Agreement--declaring that the 
``opportunities created by the Agreement are not intended to 
undermine labour standards or the labour-related rights and 
principles contained in the [signatories'] respective laws''--
and imposes on the permit or exemption such conditions 
necessary to ensure compliance with Article 17 bis.

Sec. 3. Public interest test

    This section requires DOT, when issuing a foreign air 
carrier permit to a foreign airline to operate to and from the 
United States, to make a finding that the foreign air service 
will be in the U.S. public interest.

Sec. 4. Public interest requirements

    This section establishes that preventing entry into U.S. 
markets by foreign airlines exploiting flags of convenience or 
undermining labor standards is in the U.S. public interest, 
which DOT is required to consider when conducting economic 
regulation of air transportation; requires labor standards be 
considered by DOT and the State Department when formulating 
U.S. policy regarding international air transportation as well 
as negotiating open skies agreements with other countries; and 
defines a ``flag of convenience carrier'' in statute as a 
foreign airline established in a country other than the home 
country of its majority owner(s) in order to avoid regulations 
of the home country.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

      In compliance with clause 3(e) of rule XIII of the Rules 
of the House of Representatives, changes in existing law made 
by the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

                      TITLE 49, UNITED STATES CODE




           *       *       *       *       *       *       *
SUBTITLE VII--AVIATION PROGRAMS

           *       *       *       *       *       *       *


PART A--AIR COMMERCE AND SAFETY

           *       *       *       *       *       *       *


SUBPART I--GENERAL

           *       *       *       *       *       *       *


CHAPTER 401--GENERAL PROVISIONS

           *       *       *       *       *       *       *



Sec. 40101. Policy

  (a) Economic Regulation.--In carrying out subpart II of this 
part and those provisions of subpart IV applicable in carrying 
out subpart II, the Secretary of Transportation shall consider 
the following matters, among others, as being in the public 
interest and consistent with public convenience and necessity:
          (1) assigning and maintaining safety as the highest 
        priority in air commerce.
          (2) before authorizing new air transportation 
        services, evaluating the safety implications of those 
        services.
          (3) preventing deterioration in established safety 
        procedures, recognizing the clear intent, 
        encouragement, and dedication of Congress to further 
        the highest degree of safety in air transportation and 
        air commerce, and to maintain the safety vigilance that 
        has evolved in air transportation and air commerce and 
        has come to be expected by the traveling and shipping 
        public.
          (4) the availability of a variety of adequate, 
        economic, efficient, and low-priced services without 
        unreasonable discrimination or unfair or deceptive 
        practices.
          (5) coordinating transportation by, and improving 
        relations among, air carriers, and encouraging fair 
        wages and working conditions.
          (6) placing maximum reliance on competitive market 
        forces and on actual and potential competition--
                  (A) to provide the needed air transportation 
                system; and
                  (B) to encourage efficient and well-managed 
                air carriers to earn adequate profits and 
                attract capital, considering any material 
                differences between interstate air 
                transportation and foreign air transportation.
          (7) developing and maintaining a sound regulatory 
        system that is responsive to the needs of the public 
        and in which decisions are reached promptly to make it 
        easier to adapt the air transportation system to the 
        present and future needs of--
                  (A) the commerce of the United States;
                  (B) the United States Postal Service; and
                  (C) the national defense.
          (8) encouraging air transportation at major urban 
        areas through secondary or satellite airports if 
        consistent with regional airport plans of regional and 
        local authorities, and if endorsed by appropriate State 
        authorities--
                  (A) encouraging the transportation by air 
                carriers that provide, in a specific market, 
                transportation exclusively at those airports; 
                and
                  (B) fostering an environment that allows 
                those carriers to establish themselves and 
                develop secondary or satellite airport 
                services.
          (9) preventing unfair, deceptive, predatory, or 
        anticompetitive practices in air transportation.
          (10) avoiding unreasonable industry concentration, 
        excessive market domination, monopoly powers, and other 
        conditions that would tend to allow at least one air 
        carrier or foreign air carrier unreasonably to increase 
        prices, reduce services, or exclude competition in air 
        transportation.
          (11) maintaining a complete and convenient system of 
        continuous scheduled interstate air transportation for 
        small communities and isolated areas with direct 
        financial assistance from the United States Government 
        when appropriate.
          (12) encouraging, developing, and maintaining an air 
        transportation system relying on actual and potential 
        competition--
                  (A) to provide efficiency, innovation, and 
                low prices; and
                  (B) to decide on the variety and quality of, 
                and determine prices for, air transportation 
                services.
          (13) encouraging entry into air transportation 
        markets by new and existing air carriers and the 
        continued strengthening of small air carriers to ensure 
        a more effective and competitive airline industry.
          (14) promoting, encouraging, and developing civil 
        aeronautics and a viable, privately-owned United States 
        air transport industry.
          (15) strengthening the competitive position of air 
        carriers to at least ensure equality with foreign air 
        carriers, including the attainment of the opportunity 
        for air carriers to maintain and increase their 
        profitability in foreign air transportation.
          (16) ensuring that consumers in all regions of the 
        United States, including those in small communities and 
        rural and remote areas, have access to affordable, 
        regularly scheduled air service.
          (17) preventing entry into United States markets by 
        flag of convenience carriers.
          (18) preventing the undermining of labor standards.
  (b) All-Cargo Air Transportation Considerations.--In carrying 
out subpart II of this part and those provisions of subpart IV 
applicable in carrying out subpart II, the Secretary of 
Transportation shall consider the following matters, among 
others and in addition to the matters referred to in subsection 
(a) of this section, as being in the public interest for all-
cargo air transportation:
          (1) encouraging and developing an expedited all-cargo 
        air transportation system provided by private 
        enterprise and responsive to--
                  (A) the present and future needs of shippers;
                  (B) the commerce of the United States; and
                  (C) the national defense.
          (2) encouraging and developing an integrated 
        transportation system relying on competitive market 
        forces to decide the extent, variety, quality, and 
        price of services provided.
          (3) providing services without unreasonable 
        discrimination, unfair or deceptive practices, or 
        predatory pricing.
  (c) General Safety Considerations.--In carrying out subpart 
III of this part and those provisions of subpart IV applicable 
in carrying out subpart III, the Administrator of the Federal 
Aviation Administration shall consider the following matters:
          (1) the requirements of national defense and 
        commercial and general aviation.
          (2) the public right of freedom of transit through 
        the navigable airspace.
  (d) Safety Considerations in Public Interest.--In carrying 
out subpart III of this part and those provisions of subpart IV 
applicable in carrying out subpart III, the Administrator shall 
consider the following matters, among others, as being in the 
public interest:
          (1) assigning, maintaining, and enhancing safety and 
        security as the highest priorities in air commerce.
          (2) regulating air commerce in a way that best 
        promotes safety and fulfills national defense 
        requirements.
          (3) encouraging and developing civil aeronautics, 
        including new aviation technology.
          (4) controlling the use of the navigable airspace and 
        regulating civil and military operations in that 
        airspace in the interest of the safety and efficiency 
        of both of those operations.
          (5) consolidating research and development for air 
        navigation facilities and the installation and 
        operation of those facilities.
          (6) developing and operating a common system of air 
        traffic control and navigation for military and civil 
        aircraft.
          (7) providing assistance to law enforcement agencies 
        in the enforcement of laws related to regulation of 
        controlled substances, to the extent consistent with 
        aviation safety.
  (e) International Air Transportation.--In formulating United 
States international air transportation policy, the Secretaries 
of State and Transportation shall develop a negotiating policy 
emphasizing the greatest degree of competition compatible with 
a well-functioning international air transportation system, 
including the following:
          (1) strengthening the competitive position of air 
        carriers to ensure at least equality with foreign air 
        carriers, including the attainment of the opportunity 
        for air carriers to maintain and increase their 
        profitability in foreign air transportation.
          (2) freedom of air carriers and foreign air carriers 
        to offer prices that correspond to consumer demand.
          (3) the fewest possible restrictions on charter air 
        transportation.
          (4) the maximum degree of multiple and permissive 
        international authority for air carriers so that they 
        will be able to respond quickly to a shift in market 
        demand.
          (5) eliminating operational and marketing 
        restrictions to the greatest extent possible.
          (6) integrating domestic and international air 
        transportation.
          (7) increasing the number of nonstop United States 
        gateway cities.
          (8) opportunities for carriers of foreign countries 
        to increase their access to places in the United States 
        if exchanged for benefits of similar magnitude for air 
        carriers or the traveling public with permanent linkage 
        between rights granted and rights given away.
          (9) eliminating discrimination and unfair competitive 
        practices faced by United States airlines in foreign 
        air transportation, including--
                  (A) excessive landing and user fees;
                  (B) unreasonable ground handling 
                requirements;
                  (C) unreasonable restrictions on operations;
                  (D) prohibitions against change of gauge; 
                [and]
                  (E) similar restrictive practices[.]; and
                  (F) undermining labor standards.
          (10) promoting, encouraging, and developing civil 
        aeronautics and a viable, privately-owned United States 
        air transport industry.
  (f) Strengthening Competition.--In selecting an air carrier 
to provide foreign air transportation from among competing 
applicants, the Secretary of Transportation shall consider, in 
addition to the matters specified in subsections (a) and (b) of 
this section, the strengthening of competition among air 
carriers operating in the United States to prevent unreasonable 
concentration in the air carrier industry.

Sec. 40102. Definitions

  (a) General Definitions.--In this part--
          (1) ``aeronautics'' means the science and art of 
        flight.
          (2) ``air carrier'' means a citizen of the United 
        States undertaking by any means, directly or 
        indirectly, to provide air transportation.
          (3) ``air commerce'' means foreign air commerce, 
        interstate air commerce, the transportation of mail by 
        aircraft, the operation of aircraft within the limits 
        of a Federal airway, or the operation of aircraft that 
        directly affects, or may endanger safety in, foreign or 
        interstate air commerce.
          (4) ``air navigation facility'' means a facility 
        used, available for use, or designed for use, in aid of 
        air navigation, including--
                  (A) a landing area;
                  (B) runway lighting and airport surface 
                visual and other navigation aids;
                  (C) apparatus, equipment, software, or 
                service for distributing aeronautical and 
                meteorological information to air traffic 
                control facilities or aircraft;
                  (D) communication, navigation, or 
                surveillance equipment for air-to-ground or 
                air-to-air applications;
                  (E) any structure, equipment, or mechanism 
                for guiding or controlling flight in the air or 
                the landing and takeoff of aircraft; and
                  (F) buildings, equipment, and systems 
                dedicated to the national airspace system.
          (5) ``air transportation'' means foreign air 
        transportation, interstate air transportation, or the 
        transportation of mail by aircraft.
          (6) ``aircraft'' means any contrivance invented, 
        used, or designed to navigate, or fly in, the air.
          (7) ``aircraft engine'' means an engine used, or 
        intended to be used, to propel an aircraft, including a 
        part, appurtenance, and accessory of the engine, except 
        a propeller.
          (8) ``airman'' means an individual--
                  (A) in command, or as pilot, mechanic, or 
                member of the crew, who navigates aircraft when 
                under way;
                  (B) except to the extent the Administrator of 
                the Federal Aviation Administration may provide 
                otherwise for individuals employed outside the 
                United States, who is directly in charge of 
                inspecting, maintaining, overhauling, or 
                repairing aircraft, aircraft engines, 
                propellers, or appliances; or
                  (C) who serves as an aircraft dispatcher or 
                air traffic control-tower operator.
          (9) ``airport'' means a landing area used regularly 
        by aircraft for receiving or discharging passengers or 
        cargo.
          (10) ``all-cargo air transportation'' means the 
        transportation by aircraft in interstate air 
        transportation of only property or only mail, or both.
          (11) ``appliance'' means an instrument, equipment, 
        apparatus, a part, an appurtenance, or an accessory 
        used, capable of being used, or intended to be used, in 
        operating or controlling aircraft in flight, including 
        a parachute, communication equipment, and another 
        mechanism installed in or attached to aircraft during 
        flight, and not a part of an aircraft, aircraft engine, 
        or propeller.
          (12) ``cargo'' means property, mail, or both.
          (13) ``charter air carrier'' means an air carrier 
        holding a certificate of public convenience and 
        necessity that authorizes it to provide charter air 
        transportation.
          (14) ``charter air transportation'' means charter 
        trips in air transportation authorized under this part.
          (15) ``citizen of the United States'' means--
                  (A) an individual who is a citizen of the 
                United States;
                  (B) a partnership each of whose partners is 
                an individual who is a citizen of the United 
                States; or
                  (C) a corporation or association organized 
                under the laws of the United States or a State, 
                the District of Columbia, or a territory or 
                possession of the United States, of which the 
                president and at least two-thirds of the board 
                of directors and other managing officers are 
                citizens of the United States, which is under 
                the actual control of citizens of the United 
                States, and in which at least 75 percent of the 
                voting interest is owned or controlled by 
                persons that are citizens of the United States.
          (16) ``civil aircraft'' means an aircraft except a 
        public aircraft.
          (17) ``civil aircraft of the United States'' means an 
        aircraft registered under chapter 441 of this title.
          (18) ``conditional sales contract'' means a 
        contract--
                  (A) for the sale of an aircraft, aircraft 
                engine, propeller, appliance, or spare part, 
                under which the buyer takes possession of the 
                property but title to the property vests in the 
                buyer at a later time on--
                          (i) paying any part of the purchase 
                        price;
                          (ii) performing another condition; or
                          (iii) the happening of a contingency; 
                        or
                  (B) to bail or lease an aircraft, aircraft 
                engine, propeller, appliance, or spare part, 
                under which the bailee or lessee--
                          (i) agrees to pay an amount 
                        substantially equal to the value of the 
                        property; and
                          (ii) is to become, or has the option 
                        of becoming, the owner of the property 
                        on complying with the contract.
          (19) ``conveyance'' means an instrument, including a 
        conditional sales contract, affecting title to, or an 
        interest in, property.
          (20) ``Federal airway'' means a part of the navigable 
        airspace that the Administrator designates as a Federal 
        airway.
          (21) ``flag of convenience carrier'' means a foreign 
        air carrier that is established in a country other than 
        the home country of its majority owner or owners in 
        order to avoid regulations of the home country.
          [(21)] (22) ``foreign air carrier'' means a person, 
        not a citizen of the United States, undertaking by any 
        means, directly or indirectly, to provide foreign air 
        transportation.
          [(22)] (23) ``foreign air commerce'' means the 
        transportation of passengers or property by aircraft 
        for compensation, the transportation of mail by 
        aircraft, or the operation of aircraft in furthering a 
        business or vocation, between a place in the United 
        States and a place outside the United States when any 
        part of the transportation or operation is by aircraft.
          [(23)] (24) ``foreign air transportation'' means the 
        transportation of passengers or property by aircraft as 
        a common carrier for compensation, or the 
        transportation of mail by aircraft, between a place in 
        the United States and a place outside the United States 
        when any part of the transportation is by aircraft.
          [(24)] (25) ``interstate air commerce'' means the 
        transportation of passengers or property by aircraft 
        for compensation, the transportation of mail by 
        aircraft, or the operation of aircraft in furthering a 
        business or vocation--
                  (A) between a place in--
                          (i) a State, territory, or possession 
                        of the United States and a place in the 
                        District of Columbia or another State, 
                        territory, or possession of the United 
                        States;
                          (ii) a State and another place in the 
                        same State through the airspace over a 
                        place outside the State;
                          (iii) the District of Columbia and 
                        another place in the District of 
                        Columbia; or
                          (iv) a territory or possession of the 
                        United States and another place in the 
                        same territory or possession; and
                  (B) when any part of the transportation or 
                operation is by aircraft.
          [(25)] (26) ``interstate air transportation'' means 
        the transportation of passengers or property by 
        aircraft as a common carrier for compensation, or the 
        transportation of mail by aircraft--
                  (A) between a place in--
                          (i) a State, territory, or possession 
                        of the United States and a place in the 
                        District of Columbia or another State, 
                        territory, or possession of the United 
                        States;
                          (ii) Hawaii and another place in 
                        Hawaii through the airspace over a 
                        place outside Hawaii;
                          (iii) the District of Columbia and 
                        another place in the District of 
                        Columbia; or
                          (iv) a territory or possession of the 
                        United States and another place in the 
                        same territory or possession; and
                  (B) when any part of the transportation is by 
                aircraft.
          [(26)] (27) ``intrastate air carrier'' means a 
        citizen of the United States undertaking by any means 
        to provide only intrastate air transportation.
          [(27)] (28) ``intrastate air transportation'' means 
        the transportation by a common carrier of passengers or 
        property for compensation, entirely in the same State, 
        by turbojet-powered aircraft capable of carrying at 
        least 30 passengers.
          [(28)] (29) ``landing area'' means a place on land or 
        water, including an airport or intermediate landing 
        field, used, or intended to be used, for the takeoff 
        and landing of aircraft, even when facilities are not 
        provided for sheltering, servicing, or repairing 
        aircraft, or for receiving or discharging passengers or 
        cargo.
          [(29)] (30) ``large hub airport'' means a commercial 
        service airport (as defined in section 47102) that has 
        at least 1.0 percent of the passenger boardings.
          [(30)] (31) ``mail'' means United States mail and 
        foreign transit mail.
          [(31)] (32) ``medium hub airport'' means a commercial 
        service airport (as defined in section 47102) that has 
        at least 0.25 percent but less than 1.0 percent of the 
        passenger boardings.
          [(32)] (33) ``navigable airspace'' means airspace 
        above the minimum altitudes of flight prescribed by 
        regulations under this subpart and subpart III of this 
        part, including airspace needed to ensure safety in the 
        takeoff and landing of aircraft.
          [(33)] (34) ``navigate aircraft'' and ``navigation of 
        aircraft'' include piloting aircraft.
          [(34)] (35) ``nonhub airport'' means a commercial 
        service airport (as defined in section 47102) that has 
        less than 0.05 percent of the passenger boardings.
          [(35)] (36) ``operate aircraft'' and ``operation of 
        aircraft'' mean using aircraft for the purposes of air 
        navigation, including--
                  (A) the navigation of aircraft; and
                  (B) causing or authorizing the operation of 
                aircraft with or without the right of legal 
                control of the aircraft.
          [(36)] (37) ``passenger boardings''--
                  (A) means, unless the context indicates 
                otherwise, revenue passenger boardings in the 
                United States in the prior calendar year on an 
                aircraft in service in air commerce, as the 
                Secretary determines under regulations the 
                Secretary prescribes; and
                  (B) includes passengers who continue on an 
                aircraft in international flight that stops at 
                an airport in the 48 contiguous States, Alaska, 
                or Hawaii for a nontraffic purpose.
          [(37)] (38) ``person'', in addition to its meaning 
        under section 1 of title 1, includes a governmental 
        authority and a trustee, receiver, assignee, and other 
        similar representative.
          [(38)] (39) ``predatory'' means a practice that 
        violates the antitrust laws as defined in the first 
        section of the Clayton Act (15 U.S.C. 12).
          [(39)] (40) ``price'' means a rate, fare, or charge.
          [(40)] (41) ``propeller'' includes a part, 
        appurtenance, and accessory of a propeller.
          [(41)] (42) ``public aircraft'' means any of the 
        following:
                  (A) Except with respect to an aircraft 
                described in subparagraph (E), an aircraft used 
                only for the United States Government, except 
                as provided in section 40125(b).
                  (B) An aircraft owned by the Government and 
                operated by any person for purposes related to 
                crew training, equipment development, or 
                demonstration, except as provided in section 
                40125(b).
                  (C) An aircraft owned and operated by the 
                government of a State, the District of 
                Columbia, or a territory or possession of the 
                United States or a political subdivision of one 
                of these governments, except as provided in 
                section 40125(b).
                  (D) An aircraft exclusively leased for at 
                least 90 continuous days by the government of a 
                State, the District of Columbia, or a territory 
                or possession of the United States or a 
                political subdivision of one of these 
                governments, except as provided in section 
                40125(b).
                  (E) An aircraft owned or operated by the 
                armed forces or chartered to provide 
                transportation or other commercial air service 
                to the armed forces under the conditions 
                specified by section 40125(c). In the preceding 
                sentence, the term ``other commercial air 
                service'' means an aircraft operation that (i) 
                is within the United States territorial 
                airspace; (ii) the Administrator of the Federal 
                Aviation Administration determines is available 
                for compensation or hire to the public, and 
                (iii) must comply with all applicable civil 
                aircraft rules under title 14, Code of Federal 
                Regulations.
                  (F) An unmanned aircraft that is owned and 
                operated by, or exclusively leased for at least 
                90 continuous days by, an Indian Tribal 
                government, as defined in section 102 of the 
                Robert T. Stafford Disaster Relief and 
                Emergency Assistance Act (42 U.S.C. 5122), 
                except as provided in section 40125(b).
          [(42)] (43) ``small hub airport'' means a commercial 
        service airport (as defined in section 47102) that has 
        at least 0.05 percent but less than 0.25 percent of the 
        passenger boardings.
          [(43)] (44) ``spare part'' means an accessory, 
        appurtenance, or part of an aircraft (except an 
        aircraft engine or propeller), aircraft engine (except 
        a propeller), propeller, or appliance, that is to be 
        installed at a later time in an aircraft, aircraft 
        engine, propeller, or appliance.
          [(44)] (45) ``State authority'' means an authority of 
        a State designated under State law--
                  (A) to receive notice required to be given a 
                State authority under subpart II of this part; 
                or
                  (B) as the representative of the State before 
                the Secretary of Transportation in any matter 
                about which the Secretary is required to 
                consult with or consider the views of a State 
                authority under subpart II of this part.
          [(45)] (46) ``ticket agent'' means a person (except 
        an air carrier, a foreign air carrier, or an employee 
        of an air carrier or foreign air carrier) that as a 
        principal or agent sells, offers for sale, negotiates 
        for, or holds itself out as selling, providing, or 
        arranging for, air transportation.
          [(46)] (47) ``United States'' means the States of the 
        United States, the District of Columbia, and the 
        territories and possessions of the United States, 
        including the territorial sea and the overlying 
        airspace.
          [(47)] (48) ``air traffic control system'' means the 
        combination of elements used to safely and efficiently 
        monitor, direct, control, and guide aircraft in the 
        United States and United States-assigned airspace, 
        including--
                  (A) allocated electromagnetic spectrum and 
                physical, real, personal, and intellectual 
                property assets making up facilities, 
                equipment, and systems employed to detect, 
                track, and guide aircraft movement;
                  (B) laws, regulations, orders, directives, 
                agreements, and licenses;
                  (C) published procedures that explain 
                required actions, activities, and techniques 
                used to ensure adequate aircraft separation; 
                and
                  (D) trained personnel with specific technical 
                capabilities to satisfy the operational, 
                engineering, management, and planning 
                requirements for air traffic control.
  (b) Limited Definition.--In subpart II of this part, 
``control'' means control by any means.

           *       *       *       *       *       *       *


SUBPART II--ECONOMIC REGULATION

           *       *       *       *       *       *       *


CHAPTER 413--FOREIGN AIR TRANSPORTATION

           *       *       *       *       *       *       *



Sec. 41302. Permits of foreign air carriers

  The Secretary of Transportation may issue a permit to a 
person (except a citizen of the United States) authorizing the 
person to provide foreign air transportation as a foreign air 
carrier if the Secretary finds that--
          (1) the person is fit, willing, and able to provide 
        the foreign air transportation to be authorized by the 
        permit and to comply with this part and regulations of 
        the Secretary; and
          (2)(A) the person is qualified, and has been 
        designated by the government of its country, to provide 
        the foreign air transportation [under an agreement with 
        the United States Government; or]; and
          (B) [the foreign air transportation] after 
        considering the totality of the circumstances, 
        including the factors set forth in section 40101(a), 
        the foreign air transportation to be provided under the 
        permit will be in the public interest.

           *       *       *       *       *       *       *


                            ADDITIONAL VIEWS

    While we there is support for the intent behind H.R. 3095, 
the Fair and Open Skies Act, we are concerned about the 
unintended consequences of the legislation as reported out of 
the Committee on July 28, 2021. During Committee mark-up, the 
Chair was asked for and gave his commitment to attempt to work 
though stakeholder concerns, including those from the United 
States Department of Transportation (DOT) under the Biden 
Administration, to achieve a balanced approach before going to 
the House floor with this bill. The importance of and need for 
achieving a more balanced approach is described in greater 
detail below.

                       I. BACKGROUND INFORMATION

Open Skies Agreements
    Open Skies agreements are bilateral agreements that the 
United States government negotiates with other countries to 
provide rights for airlines to offer international passenger 
and cargo services.\1\ Since 1992, the United States has 
entered into Open Skies agreements with over 120 countries.\2\ 
``These liberalized air service agreements have led to lower 
fares and increased travel choices for consumers, more robust 
and seamless U.S. trade, and more American jobs.''\3\
---------------------------------------------------------------------------
    \1\See United States Department of State, Open Skies Partnerships: 
Expanding the Benefits of Freer Commercial Aviation (2016), available 
at https://2009-2017.state.gov/documents/organization/262234.pdf 
[hereinafter United States Department of State Open Skies].
    \2\Id.
    \3\Doug Lavin, Don't Close Open Skies, Aviation Daily, September 
13, 2019, available at https://aviationweek.com/air-transport/op-ed-
don't-close-open-skies.
---------------------------------------------------------------------------
    According to the United States Department of State, the 
following are some of the impacts of Open Skies Agreements:\4\
---------------------------------------------------------------------------
    \4\See United States Department of State Open Skies, supra note 1.
---------------------------------------------------------------------------
           ``The business model for the international 
        package delivery sector, employing over half a million 
        people, depends on Open Skies to operate competitively 
        in foreign markets. U.S. air freight services to fast-
        growing regions like the Middle East, Indian 
        Subcontinent, and Africa exceeded $1 billion in 2013 
        and contributed over $3 billion to the U.S. trade 
        balance in the last five years.
           The Brookings Institution estimates that 
        Open Skies agreements add approximately $4 billion in 
        annual economic gains to consumers.
           U.S. Airlines for Open Skies estimates that 
        full liberalization through Open Skies agreements would 
        lead to a 16-percent increase in air traffic and 
        support 9 million jobs in aviation and related 
        industries.
           Open Skies has dramatically expanded direct 
        international connections to cities like Dallas-Fort 
        Worth, Denver, Detroit, Las Vegas, Memphis, 
        Minneapolis, Orlando, Portland, and Salt Lake City.
           A private study found that new direct 
        service between a U.S. city and a point in the European 
        Union generates up to $720 million annually in new 
        economic activity for the U.S. city and its local 
        region, depending on the size of the markets.
           Portland International Airport estimates 
        that its direct international flights to Tokyo, 
        Amsterdam, and Frankfurt generate over $240 million in 
        airport and visitor revenue.
           The Greater Orlando Aviation Authority 
        estimates that aviation liberalization with Brazil 
        helped increase the number of visitors from Brazil to 
        Orlando from 74,000 in 2004 to 768,000 in 2013, and 
        that Emirates' service from Dubai will add $100 million 
        in new economic activity in Central Florida and create 
        1,500 jobs.''\5\
---------------------------------------------------------------------------
    \5\Id.
---------------------------------------------------------------------------
Norwegian Air International
    In December 2013, Norwegian Air International (NAI), an 
Ireland-based subsidiary of Norwegian Air Shuttle, filed an 
initial application with the DOT for a foreign air carrier 
permit and exemption authority to begin service to the United 
States. NAI met fierce opposition from United States and 
European aviation labor groups because of its business model. 
American, Delta, and United also filed in opposition to NAI's 
application. In response, NAI stated that it was based in 
Ireland to benefit from the United States-European Union (U.S.-
E.U.) Open Skies Agreement, and that it was not trying to avoid 
Norwegian labor laws. Rather, NAI stated it would comply with 
U.S. labor laws and intended to hire U.S. crew and flight 
attendants for all flights operating to and from the United 
States.
    On April 15, 2016, the DOT, under the Obama Administration, 
issued a tentative decision to grant NAI a foreign air carrier 
permit. The two-and-a-half-year review process for this permit 
is believed to be the longest ever processing time. Prior to 
issuing its decision, DOT took the ``unprecedented step'' of 
consulting with both the Departments of Justice and State 
regarding the interpretation of international law. After the 
consultations, DOT concluded that Article 17 bis is simply a 
recognition of the value of ``high labor standards'' but an 
insufficient basis to deny a permit to NAI under the U.S.-E.U. 
Open Skies Agreement. On December 6, 2016, DOT, again under the 
Obama Administration, issued a final order approving NAI's 
foreign air carrier permit, days after the European Commission 
formally requested arbitration over the delay in approval. The 
controversy continued and in January 2017, the Air Line Pilots 
Association (ALPA) and three other airline employee unions 
filed suit against DOT to block approval of the permit. On May 
11, 2018, the United States Court of Appeals for the D.C. 
Circuit ruled that although the potential loss of union jobs 
was a sufficient injury to grant the unions standing in court, 
there was no Federal or international legal basis to challenge 
DOT's decision.\6\
---------------------------------------------------------------------------
    \6\Air Line Pilots Ass'n Int'l, et al. v. Elaine L. Chao, No. 17-
1012 (D.C. Cir. 2018).
---------------------------------------------------------------------------
    On August 14, 2019, NAI announced that it will stop flying 
routes between Ireland and North America. The decision, 
effective September 15, 2019, was made after the airline 
concluded the routes were not commercially viable.

                            II. BILL SUMMARY

    H.R. 3095 would prohibit the Secretary of Transportation 
(Secretary) from issuing a permit or an exemption authorizing a 
person to provide foreign air transportation as a foreign air 
carrier under the United States-European Union (U.S.-E.U.) Air 
Transport Agreement of April 2007 (as amended), unless the 
Secretary--(1) finds that issuing the permit or exemption would 
be consistent with Article 17 bis of the Agreement; and (2) 
imposes on the permit or exemption such conditions as may be 
necessary to ensure that the person complies with Article 17 
bis. Article 17 bis expresses that both the U.S. and E.U. 
``recognize the importance of the social dimension agreement 
and the benefits that arise when open markets are accompanied 
by high labor standards'' and that the agreement was not 
intended to undermine labor standards.\7\ Article 17 bis was 
added three years after the initial signing of the agreement.
---------------------------------------------------------------------------
    \7\Article 17 Bis of the Air Transp. Agreement with the European 
Union, 40 Op. O.L.C. 26, 29 (2016) available at https://
www.justice.gov/sites/default/files/olc/opinions/attachments/2016/04/
21/2016-04-14-ata-article-17.pdf.
---------------------------------------------------------------------------
    H.R. 3095 also would amend the statutory public interest 
test applied by the Secretary of Transportation when 
determining whether to issue a permit to a foreign air carrier. 
Additionally, the bill would add to the list of matters under 
section 40101 of title 49, United States Code, to be considered 
by the Secretary ``as being in the public interest and 
consistent with public convenience and necessity'' the 
following two additional matters--(1) preventing entry into 
United States markets by flag of convenience carriers; and (2) 
preventing the undermining of labor standards.
    Lastly, H.R. 3095 would define the term ``flag of 
convenience carrier'' to mean ``a foreign air carrier that is 
established in a country other than the home country of its 
majority owner or owners in order to avoid regulations of the 
home country.''

        III. CONCERNS ABOUT UNINTENDED CONSEQUENCES OF H.R. 3095

    The issues underlying this bill are complicated and 
controversial, dividing the aviation industry. H.R. 3095 is 
intended to prevent any foreign air carrier seeking a permit to 
operate in the United States from employing a business model 
that many feel is unfair. But, in addressing that issue, there 
is great concern that the bill will cause the United States to 
violate various international aviation agreements and risk 
harmful retaliation by other countries. Ultimately, H.R. 3095 
could harm U.S. industry more than help it. Given this, a more 
balanced approach is needed.
    While we are not advocating that aircraft registration and 
airline certification operate like the maritime sector; where 
ships are registered in a few, small countries with minimal 
regulation, allowing foreign air carriers using legal loopholes 
to arbitrarily relocate and directly compete against U.S. 
carriers while paying pennies on the dollar to their pilots, 
flight attendants, and maintenance personnel, puts the U.S. 
carriers at a competitive disadvantage. However, a significant 
portion of the diverse aviation industry has raised serious 
issues that Congress should explore more thoroughly before 
legislating a solution.
    Concerns have been raised about H.R. 3095 related to the 
United States' standing in the international community and the 
bill's impact on the United States industry. According to 
technical assistance received by the Committee from the DOT 
under both the Trump and Biden administrations, H.R. 3095 would 
put the United States in the position of taking actions that 
foreign countries would perceive as violating our international 
agreements with them.\8\ The bill would also require the DOT to 
determine the intent of commercial decisions made by foreign 
air carriers in deciding where to establish their operations. 
This is an impossible mandate.
---------------------------------------------------------------------------
    \8\E-mail to Republican Staff, H. Comm on Transp. and 
Infrastructure from DOT Congressional Affairs Staff (Sept. 11, 2019); 
E-mail to Republican Staff, H. Comm on Transp. and Infrastructure from 
DOT Congressional Affairs Staff (July 23, 2021) (on file with 
Committee).
---------------------------------------------------------------------------
    Additionally, concerns have been raised about whether 
foreign governments would feel likewise entitled to examine the 
intent behind commercial decisions made by U.S. companies. The 
risk of retaliation against U.S. air carriers is very real. In 
a letter to the leadership of this Committee (which is included 
with our additional views), the E.U. made it clear that it 
intended to take necessary measures to protect its right under 
the U.S.-E.U. Air Transport Agreement if this law is 
enacted.\9\ Finally, there are concerns about how this 
legislation might impact the United States' standing in future 
trade negotiations, particularly if trade agreements have the 
potential to be nullified at any future date by Congressional 
action. Rather than summarily dismiss these concerns, we 
believe it appropriate to thoroughly consider and review such 
concerns prior to taking legislative action, something that the 
Committee has not yet done.
---------------------------------------------------------------------------
    \9\Letter from Henrik Hololei, Director-General European 
Commission's Department for Mobility and Transport to Rep. Peter 
DeFazio, Chair, H. Comm on Transp. and Infrastructure, et. al., July 
22, 2021.
---------------------------------------------------------------------------
    Last Congress, the DOT summarized its position on H.R. 3632 
(the 116th Congress version of H.R. 3095--text is identical) as 
follows: ``In short, implementation of H.R. 3632 could result 
in retaliatory action by foreign governments that would harm 
U.S. carriers, their employees, and U.S. travelers and 
shippers. It would place DOT in the untenable position of 
having to execute inconsistent statutory mandates and 
potentially, act inconsistently with obligations undertaken by 
the U.S. in international agreements. H.R. 3632 should not be 
adopted.''\10\
---------------------------------------------------------------------------
    \10\E-mail to Republican Staff, H. Comm on Transp. and 
Infrastructure from DOT Congressional Affairs Staff (Sept. 11, 2019).
---------------------------------------------------------------------------

Concerns of those supporting H.R. 3095

           The NAI business model, which ultimately 
        failed, is allegedly intended to skirt the costs of 
        complying with ``home country'' laws and regulations, 
        including labor laws.
           Avoiding such costs both undermines labor 
        standards and provides an unfair competitive advantage.

Concerns of those opposed to H.R. 3095

           The bill would place the U.S. in violation 
        of its Open Skies agreements with the E.U. and other 
        countries by imposing additional criteria on the 
        approval of foreign air carrier permits that were not 
        agreed to in negotiations.
           One of the purposes of the E.U. is to allow 
        the free movement of companies and persons within a 
        common market. Just as there is no difference between a 
        carrier incorporated in one state but based in another 
        in the United States, there is no difference between a 
        carrier based in Norway, Ireland, Germany, or Greece 
        for purposes of the U.S.-EU Open Skies Agreement.
           There is a real danger of the E.U. or other 
        countries retaliating against the U.S. in ways that 
        further degrade existing Open Skies agreements.
           U.S. airports serving as international ports 
        of entry are concerned that any tit-for-tat escalation 
        could depress lucrative international air travel, 
        placing downward pressures on airport enplanements and 
        impacting local economies.

                             IV. CONCLUSION

    While we support for the intent behind H.R. 3095, it must 
be done in a way that Congress ensures a level playing field 
for the global aviation industry while avoiding violations of 
our country's existing international agreements. As noted 
above, during Committee mark-up, the Chair was asked for and 
gave his commitment to attempt to work though stakeholder 
concerns to achieve a balanced approach before going to the 
House floor with this bill. To date, this has not occurred.
    The concerns raised by those on both sides of the ``flag of 
convenience'' issue have merit. As the bill moves forward, we 
believe the Chair's willingness to address those concerns will 
result in a balanced and fair approach to the complicated and 
controversial issues behind H.R. 3095.
                                   Sam Graves,
                                           Ranking Member.
                                   Garret Graves,
                                           Ranking Member, Subcommittee 
                                               on Aviation.

                                  [all]