[Federal Register Volume 68, Number 9 (Tuesday, January 14, 2003)]
[Proposed Rules]
[Pages 1942-1947]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-685]



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Part IV





Department of Transportation





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Federal Aviation Administration



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14 CFR Part 121



Transponder Continuous Operation; Proposed Rule

  Federal Register / Vol. 68, No. 9 / Tuesday, January 14, 2003 / 
Proposed Rules  

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 121

[Docket No. FAA-2002-14081; NPRM No. 03-02]
RIN 2120-AH67


Transponder Continuous Operation

AGENCY: Federal Aviation Administration (FAA), Department of 
Transportation (DOT).

ACTION: Notice of proposed rulemaking.

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SUMMARY: This proposal would amend the instrument and equipment 
requirements for airplanes operated in domestic, flag, and supplemental 
operations. Specifically, the Federal Aviation Administration (FAA) 
proposes to require affected airplanes to have the capability to help 
assure immediate activation of the designated air traffic control (ATC) 
hijack alert code, and continuous transmission of that code to ATC 
during a hijack situation. The FAA is proposing this action in response 
to the heightened threat to U.S. civil aviation. The FAA believes that 
this capability would help provide ATC personnel with more time to 
initiate a national security response to a potential airplane hijack 
situation.

DATES: Send your comments on or before March 17, 2003.

ADDRESSES: Address your comments to the Docket Management System, U.S. 
Department of Transportation, Room Plaza 401, 400 Seventh Street, SW., 
Washington, DC 20590-0001. You must identify the docket number FAA-
2002-14081 at the beginning of your comments.
    You may also submit comments through the Internet to http://dms.dot.gov. You may review the public docket containing comments to 
these proposed regulations in person in the Dockets Office between 9 
a.m. and 5 p.m., Monday through Friday, except Federal holidays. The 
Dockets Office is on the plaza level of the NASSIF Building at the 
Department of Transportation at the above address. Also, you may review 
public dockets on the Internet at http://dms.dot.gov.

FOR FURTHER INFORMATION CONTACT: Richard E. Jennings, Aircraft 
Certification Service, Aircraft Engineering Division, AIR-130, Federal 
Aviation Administration, c/o Atlanta ACO, 1895 Phoenix Boulevard, Suite 
450, Atlanta, GA 30349; telephone (770) 703-6090; facsimile (770) 703-
6055, e-mail [email protected].

SUPPLEMENTARY INFORMATION:

Comments Invited

    The FAA invites interested persons to participate in this 
rulemaking by submitting written comments, data, or views. We also 
invite comments relating to the economic, environmental, energy, or 
federalism impacts that might result from adopting the proposals in 
this document. The most helpful comments reference a specific portion 
of the proposal, explain the reason for any recommended change, and 
include supporting data. We ask that you send us two copies of written 
comments.
    We will file comments we receive in the docket, as well as a report 
summarizing each substantive public contact with FAA personnel 
concerning this proposed rulemaking. The docket is available for public 
inspection before and after the comment closing date. If you wish to 
review the docket in person, go to the address in the ADDRESSES section 
of this preamble between 9 a.m. and 5 p.m., Monday through Friday, 
except Federal holidays. You may also review the docket using the 
Internet at the web address in the ADDRESSES section.
    Comments regarding national security information or sensitive 
security information should not be submitted directly to the public 
docket. These comments should be submitted according to procedures for 
safeguarding sensitive security information and sent to: Armen A. 
Sahagian, Office of Civil Aviation Security, Program Manager, Aircraft 
Security, ACP-400, Room 323, Transportation Security Administration, 
800 Independence Avenue, SW., Washington, DC 20591, Docket No. FAA-
2002-14081. Questions on these procedures may be directed to Armen 
Sahagian. These comments will be reviewed to determine appropriateness 
for inclusion in the public docket system.
    Before acting on this proposal, we will consider all comments we 
receive on or before the closing date for comments. We will consider 
comments filed late if it is possible to do so without incurring 
expense or delay. We may change this proposal in light of the comments 
we receive.
    If you want the FAA to acknowledge receipt of your comments on this 
proposal, include with your comments a pre-addressed, stamped postcard 
on which the docket number appears. We will stamp the date on the 
postcard and mail it to you.

Availability of Rulemaking Documents

    You can get an electronic copy using the Internet by taking the 
following steps:
    (1) Go to the search function of the Department of Transportation's 
electronic Docket Management System (DMS) web page (http://dms.dot.gov/search).
    (2) On the search page type in the last five digits of the Docket 
number shown at the beginning of this notice. Click on ``search.''
    (3) On the next page, which contains the Docket summary information 
for the Docket you selected, click on the document number of the item 
you wish to view.
    You can also get an electronic copy using the Internet through the 
Office of Rulemaking's web page at http://www.faa.gov/avr/armhome.htm 
or the Government Printing Office's web page at http://www.access.gpo.gov/su_docs/aces/aces140.html.
    You can also get a copy by submitting a request to the Federal 
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence 
Avenue SW., Washington, DC 20591, or by calling (202) 267-9680. Make 
sure to identify the docket number, notice number, or amendment number 
of this rulemaking.

Background

    On September 11, 2001, four U.S.-registered commercial airliners 
operating under the provisions of 14 CFR part 121 were hijacked and 
subsequently crashed, resulting in great loss of life and extensive 
damage to occupied buildings. In order to reduce the likelihood of such 
an event reoccurring, the FAA initiated a complete review of aircraft 
and airport security procedures. Based on this review, the FAA has 
determined that it is necessary to propose certain new regulations that 
would increase the desired level of safety and security.
    If adopted, these proposed amendments would require that a single 
action by the pilot or copilot (or flight engineer, where appropriate) 
immediately activate the air traffic control (ATC) transponder beacon 
code ``7500,'' which is the International Civil Aviation Organization 
(ICAO) code indicating to ATC that an aircraft is being subjected to 
unlawful interference, that is, being hijacked.
    Before the events of September 11, a flight crew would have 
responded appropriately to an airborne hijack situation by acceding to 
a hijacker's demands, flying the aircraft to the instructed 
destination, and allowing the appropriate authorities to resolve the 
situation. Before September 11, however, no one had envisioned a 
hijacking situation in which a hijacker would take control of a 
commercial

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aircraft and successfully use that aircraft as a weapon. Of the four 
aircraft involved in the events of September 11, none of the flight 
crews were able to switch to the designated hijack alert code, thus 
delaying ATC awareness of the unfolding situation. Further, the 
transponders on three of the four airplanes ceased replying to ATC 
radar interrogations within minutes of departing from their assigned 
routes. These events have changed profoundly the way in which a future 
hijack situation may be handled, and more generally, our concept of 
what is considered appropriate aviation safety and security.
    In response to the events of September 11, the Secretary of 
Transportation established the Rapid Response Teams (RRT) for Aircraft 
Security and Airport Security to identify measures to improve aviation 
security. The Aircraft Security Team was composed of individuals from 
the aviation industry, including airplane designers and manufacturers, 
airline operators, airline pilots, and flight attendants. Additionally, 
the teams consulted with and considered input from concerned private 
citizens and other sectors of industry. The RRT for Aircraft Security 
considered changes to aircraft design and operation that could (1) deny 
or at least delay any unauthorized access to the flight deck, (2) 
better train crewmembers to deal with security risks, and (3) ensure 
the flow of information from an aircraft to ATC. The RRT for Airport 
Security focused on such issues as improved screening of passengers, 
baggage, and aircraft and airport personnel prior to direct contact 
with an aircraft.
    On October 1, 2001, the RRT for Aircraft Security submitted its 
report to the Secretary of Transportation for consideration. [This 
report is available in Docket No. FAA-2002-14081.] The report included 
17 recommendations to help counter a situation in which an airplane 
might be hijacked and used as a weapon. Recommendation No. 16 called 
for the creation of an FAA-industry task force to determine the 
necessary modifications for airplane transponders to assure continuous 
transmission of a hijack signal, even if the fight deck-selected code 
or function is disabled. The task force was to examine the following: 
all alternatives that would allow pilots the ability to set and lock-in 
the hijack code so that a hijacker could not disable it; a ``panic 
button'' that would initiate the hijack code during an emergency 
situation; and an independent transponder that could not be disabled by 
the hijacker.
    Based on that RRT recommendation, the Air Transport Association of 
America (ATA) volunteered to facilitate formation of an FAA-Industry 
Transponder Task Force. The Task Force was composed of representatives 
from U.S. and foreign passenger and cargo airlines; FAA; Transport 
Canada; various industry associations; research and development centers 
funded by the U.S. Government; and manufacturers of airplanes, 
transponders, and transponder controls.
    At the time the Task Force was formed, several design concepts that 
could potentially satisfy RRT Recommendation No. 16 had been 
formulated. In evaluating these concepts and other suggestions, the 
Task Force assumed as its basis that any transponder system 
modifications should (1) allow for the rapid selection of the hijack 
alert code, and (2) assure continuous transmission of this code once it 
had been activated. The Task Force also assumed that the flight deck 
doors on airplanes operated under part 121 would be modified for 
increased strength, allowing additional time for the flight crew to 
initiate the hijack alert code.
    The Task Force evaluated the three most promising design concepts 
and submitted a final report to the FAA on November 5, 2001. The report 
also identified potential vulnerabilities in the various design 
concepts, and therefore, because of national security considerations, 
the details of this report are not being released to the general public 
for review or placed in the public docket. However, this proposed rule 
is based, in part, on the efforts of the Task Force. A redacted version 
of this report is available in Docket No. FAA-2002-14081.
    These actions taken by the FAA and the aviation industry following 
the events of September 11 are directly in line with the Aviation and 
Transportation Security Act of 2001 (Act), Public Law 107-71. Section 
104, Paragraph (b), Sub-Paragraph (2), of the Act states that ``the FAA 
Administrator may develop and implement methods to ensure continuous 
operation of an aircraft transponder in the event of an emergency.''

Related Activity

    In response to the September 11 attacks, the FAA has initiated 
several regulatory actions. On January 10, 2002, the FAA issued a final 
rule temporarily authorizing variances from existing flightcrew 
compartment door design standards for the doors and allowing for 
approval for return to service of modified airplanes without prior 
approved data if the modification constitutes a major alteration. This 
rule mandated these modifications on aircraft in certain passenger and 
cargo carrying operations. Also on January 10, 2002, the FAA issued a 
final rule requiring certain airplanes operated under part 121 to be 
equipped with a means to protect the flight deck from unauthorized 
intrusion and small arms fire or fragmentation devices. The FAA 
believes these related rulemaking activities will significantly reduce 
the danger to the flying public by preventing future terrorists from 
gaining access to an airplane's flight deck.
    Since this document was drafted, a number of other security 
measures have been adopted in response to the Aviation Security Act of 
2001. The FAA welcomes and encourages comments about how this proposal, 
when considering these other security measures that have been adopted, 
would contribute further to safety and security and how this additional 
proposal would affect the aviation industry.

Current Requirements

    All air carrier aircraft are required to be equipped with an ATC 
transponder (see 14 CFR 91.215 and 121.345), which in normal operation 
provides a radar beacon identity code and altitude (Modes 3A/C) for ATC 
use in controlling aircraft in en route and terminal areas of 
operations. During normal operations it is expected that a flight crew 
could manually dial-in a new ATC-directed Mode 3A transponder radar 
beacon code, through the transponder control panel, in roughly five to 
ten seconds. However, under the stress of a hijack situation it may 
take considerably longer than ten seconds to dial-in the designated 
hijack alert code, or it may not be possible at all if the flight crew 
is distracted by a flight deck intruder. In addition, during a hijack 
situation, the current requirements do not prevent an airplane's ATC 
transponder from being switched to the ``standby'' position, or having 
its circuit breaker ``pulled''--actions which would disable the 
transponder's response to an ATC ground radar beacon interrogation.
    The designated hijack alert code is ``7500,'' which is defined in 
section 2.1.4 of Volume IV of the International Civil Aviation 
Organization (ICAO) Annex 10 as the appropriate code to indicate to ATC 
that an aircraft is being subjected to unlawful interference.

General Discussion of the Proposal

    If an aircraft were to be used as a terrorist weapon, there are 
numerous

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targets of opportunity that could be destroyed by a large airplane. 
With this in mind, the FAA proposes to add a new Sec.  121.346 to 
require all airplanes operated under part 121 to be modified to provide 
the capability for the immediate notification to ATC of a hijack 
situation, and for the transponder to continuously transmit the 
emergency transponder code once activated. At this time, the FAA is 
proposing that the rule should apply only to passenger and cargo 
airplanes operated under part 121. The FAA invites interested persons 
to comment on the applicability of these requirements to aircraft 
operated under 14 CFR parts 91, 125, 129, or 135. If the FAA determines 
that additional aircraft should be included, a separate proposal will 
be issued.
    Paragraph (a) of the proposed rule would require that a single 
action would immediately set the airplane's ATC transponder Mode 3A 
beacon code to ``7500,'' which would be picked up by ATC ground 
surveillance radar. The proposal would require the ``single action'' 
method of activation, for example a switch or a button, to be 
accessible to both the pilot and copilot (and flight engineer, where 
appropriate). The FAA believes that activation through a single action 
would greatly enhance the flight crew's ability to quickly enable the 
transponder hijack alert code and thus ensure faster recognition of the 
hijack situation by ATC. However, the FAA also has determined that 
there should be a means to protect against unintentional activation of 
the hijack alert code. Therefore, as an example, a motion that lifts a 
guarded switch or breaks a frangible wire in the process of activation 
would still be considered a single action.
    Paragraph (b) of the proposed rule would require that three 
conditions be met upon activation of the hijack alert code. Paragraph 
(b)(1) would require that the transponder's Mode C, or altitude 
reporting function, be maintained with activation of the hijack alert 
code. Altitude reporting would help ATC positively identify the 
hijacked airplane, and keep other aircraft safely out of its projected 
path.
    Paragraph (b)(2) would require that a visual indication be provided 
to the flight crew as positive feedback of activation. A recent 
incident has shown the FAA the importance of this feedback to the 
flight crew. An airplane with a system similar to that proposed by this 
rule departed on a flight without realizing that the hijack alert code 
had been activated. Upon takeoff, ATC immediately detected the hijack 
alert code and challenged the flight crew. The airplane subsequently 
returned to its departure airport, escorted by two military fighter 
aircraft. On further investigation, it was determined that the 
airplane's hijack alert code had been activated unintentionally by 
ground personnel. Had the flight crew been provided a visual indication 
that the system had been activated, the crew could have corrected the 
situation before departure, averting a cost to the airline and 
disruption to the flow of the local air traffic.
    Paragraph (b)(3) would require installation considerations to help 
ensure continuous operation of the ATC transponder hijack alert code 
once it is activated. The FAA believes that continuous operation 
considerations should include inhibiting any further inputs from the 
ATC transponder control panel, for example any attempts to change 
beacon codes or to switch the transponder to standby, as well as for 
improving the security for electrical power to the transponder 
equipment. In addition, the FAA believes that resetting the ATC 
transponder to a normal mode of operation should be through a ground 
action by appropriate personnel. Where practical, this resetting action 
should not be accessible from within the airplane. Because inhibiting 
any further inputs to the transponder control panel would also prevent 
turning off altitude reporting at the request of ATC, the flight crew 
would be unable to comply with the requirements of Sec.  91.217(a). 
Therefore, paragraph (b)(3) also would provide relief from Sec.  
91.217(a) when the capability described in proposed Sec.  121.346 is 
activated.
    Common airplane transponder installations provide for separate 
electrical power breakers in the flight deck for each of the two 
installed ATC transponders. As proposed, this rule would require (upon 
activating the hijack alert code) the removal of power from the 
electrical breakers for the ATC transponders in the flight deck, and 
the transfer of power to remotely mounted breakers not accessible from 
the flight deck or cabin. This design change would prevent removing 
electrical power from the transponders as flight crews would perform 
when required to do so.
    Because the FAA does not want to cause a complete redesign of an 
airplane's electrical system, and because the FAA realizes that 
transponder operation could be silenced by the removal of all 
electrical power, the FAA has used the phrase ``* * * must not be able, 
by reasonable means, to disable the transponder * * * '' to mean that 
no person onboard the airplane should be able to remove power from the 
transponder simply by pulling the associated circuit breaker.
    Deactivation of the ATC transponder by means of removal of 
significant airplane electrical power to the detriment of airplane 
operations or obtaining access to a part of the airplane normally not 
accessible by the crew, are not considered reasonable.
    It is expected that most part 121 operators will add the capability 
required by Sec.  121.346 to function with the existing ATC transponder 
equipment installed on their airplanes. However, some operators may 
desire not to alter their existing equipment configuration, and instead 
choose to install an additional and dedicated ATC transponder to meet 
the requirements of this proposed rule. Because one cannot assure that 
a hijacker will, in fact, disable an airplane's normally operating ATC 
transponder, it is possible that more than one transponder could be 
operating and attempting to respond to the ATC secondary surveillance 
interrogation. This could result in an inaccurate reply, and subsequent 
rejection of both transponders' Mode 3A/C beacon codes by the ATC 
ground interrogator. To prevent this situation, operators who choose to 
install an additional and dedicated transponder to meet these proposed 
requirements should provide a means to inhibit replies from all other 
ATC transponders installed on the airplane at the time that this 
dedicated ATC transponder is activated.
    Given the importance of these proposed requirements, the FAA would 
prefer to put them into effect as quickly as possible. However, the FAA 
is aware that operators will need approved installation data in order 
to accomplish the airplane modifications required by this proposed 
rule. Therefore, the FAA proposes a compliance date of March 29, 2005. 
This date also was selected to coincide with the current compliance 
date for Terrain Awareness and Warning Systems (14 CFR 121.354(b)), to 
minimize the amount of downtime for any given airplane. Assuming that 
the final rule for this proposal is issued by December 31, 2002, 
operators would have approximately 27 months to accomplish the required 
modifications. This would allow approximately 6 months to support 
development of the approved installation data, including for example 
equipment modifications, manufacturer's service bulletins, and 
Supplemental Type Certificates, and 21 months for operators to schedule 
the necessary airplane downtime to complete the actual modification. 
Because the airplanes in question are maintained under a continuous

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airworthiness maintenance program, which includes a heavy maintenance 
visit scheduled approximately each 12 months, the FAA believes that 
operators could conclude any modifications required by this proposed 
rule within the time constraints of a single heavy maintenance cycle. 
The FAA believes the March 2005 compliance date would minimize the 
financial burden for affected operators as well as provide a long-term 
aviation safety benefit.

Initial Economic Evaluation, Regulatory Flexibility Determination, 
Trade Impact Assessment, and Unfunded Mandates Assessment

    Changes to Federal regulations must undergo several economic 
analyses. First, Executive Order 12866 directs each Federal agency 
proposing or adopting a regulation to make a reasoned determination 
that the benefits of the intended regulation justify its costs. Second, 
the Regulatory Flexibility Act of 1980 requires agencies to analyze the 
economic impact of regulatory changes on small entities. Third, the 
Trade Agreements Act prohibits agencies from setting standards that 
create unnecessary obstacles to the foreign commerce of the United 
States. In developing U.S. standards, this act requires agencies to 
consider international standards and, where appropriate, use them as 
the basis for U.S. standards. Fourth, the Unfunded Mandates Reform Act 
of 1995 requires agencies to prepare a written assessment of the costs, 
benefits, and other effects of proposed and final rules. An assessment 
must be prepared only for rules that impose a Federal mandate on State, 
local, or tribal governments, in the aggregate, or on the private 
sector, likely to result in a total expenditure of $100 million or more 
(adjusted for inflation) in any one year.
    In conducting these analyses, the FAA determined the following: the 
benefits of this proposed rule justify its costs; it would be a 
``significant regulatory action'' as defined in section 3(f) of 
Executive Order 12866; it would be ``significant'' as defined in DOT's 
Regulatory Policies and Procedures; it would not have a significant 
impact on a substantial number of small entities; it would have no 
effect on trade-sensitive activity; and it would not impose an unfunded 
mandate on State, local, or tribal governments, or on the private 
sector. These analyses, available in the docket, as summarized below.

Benefits and Costs

    This proposed rule is part of a series of rulemaking actions aimed 
at preventing or deterring a similar occurrence to the September 11 
attacks. It is designed to ensure immediate ATC notification of a 
hijack situation, and to assist in maintaining ATC tracking of the 
hijacked airplanes for purposes of national security. As such, the 
benefits of this proposed rule are to ensure the security of the 
American public.
    The cost of another catastrophic terrorist act cannot be reasonably 
measured in dollars. As it was witnessed on September 11, terrorist 
acts can result in the complete destruction of an aircraft with the 
loss of all on board, and with collateral damage far exceeding that of 
the aircraft and passengers. The main benefit related to this proposed 
rule is the averted loss of life by taking corrective action.
    The economic and social costs of the September 11 attacks have been 
measured in the billions of dollars, and another terrorist attack could 
be far more costly. Therefore, the FAA attributes the benefits of this 
proposed rule to the series of rules designed to ensure the safety and 
security of the American public. Such benefits cannot be reasonably 
quantified nor allocated between the multiple actions taken to avoid a 
repeat of the attack. In addition to preventing the extraordinary costs 
of another attack, this proposed rule responds to the interest of the 
U.S. Congress as specified in the Aviation and Transportation Security 
Act.
    The FAA estimates that 7,394 airplanes would be potentially 
affected by the proposed rule. Given that the deadline to comply with 
this proposed rule is tentatively set for March 2005 (27 months after 
the expected issuance of the final rule), the FAA assumes that all 
retrofitting expenses would be spread evenly, on a monthly basis, 
between January 2003 and March 2005.
    The estimated capital cost to upgrade airplanes with transponders 
capable of continuous operation in hijack mode is approximately $3,000 
for each airplane. This figure was provided by transponder and 
transponder control manufacturers, aircraft manufacturers, and airlines 
that received quotes from suppliers. Purchasing the compliant 
transponder controls or software upgrade for a fleet of 7,394 airplanes 
would cost $22.2 million, over the three-year period. The industry also 
estimated overall certification costs for the software and hardware to 
be $1,000,000, to be incurred in 2002.
    The software or hardware investment is only a portion of the cost 
to the industry. Locking a transponder into continuous operation is a 
relatively inexpensive and easy solution. Every transponder 
manufacturer claimed that a software upgrade would not require any 
downtime. The transponder could be removed from the airplane in a 
matter of minutes, replaced by a substitute transponder while the 
software upgrades were implemented (airlines indicated an abundance of 
transponders), and then reinstalled. The simplest, and quickest, 
solution for some operators is a transponder software upload, which is 
expected to be on the market for less than $3,000, and which could be 
accomplished on the airplane (that is, the transponder would not have 
to be removed). This update could be accomplished in about 5 minutes, 
and would allow the transponder to lock out all other inputs after the 
hijack alert code is entered.
    To comply with the proposed rule, operators also would need to 
install a method of rapid activation and isolate electrical power to 
the transponder control equipment. The labor cost, therefore, would 
likely be the same, regardless of the solution chosen, because there 
would be a need to wire a method of rapid activation and isolate the 
electrical power. Industry identified these tasks as being labor-
intensive. Airline technicians would require approximately 52 work 
hours per aircraft to wire a method of rapid activation and/or install 
a transponder control in the avionics bay. At an average hourly rate of 
$50, this translates into $19.2 million to retrofit the entire affected 
fleet. The upgrade would have to be performed during a ``C'' or ``D'' 
check, or place the aircraft out of service for a 2-day period. 
Alternatively, because the task would not need to be completed in one 
setting, the wiring could be performed in stages during several 
overnight maintenance sessions. In addition, the parts and supplies for 
this wiring would cost about $1,000 per aircraft. For the entire fleet, 
this would mean approximately $7.4 million over the 3 years.
    The FAA conservatively estimated that all passenger and cargo 
airplanes affected by the proposed rule would incur downtime costs, at 
a fleet-wide average opportunity cost of $5,178 per aircraft. This 
opportunity cost of capital represents the return foregone by having 
invested in the airplane rather than investing in securities. This 
figure reflects a fleet-wide average value of $15.0 million per 
airplane, multiplied by the industry's return on investment of 6.3 
percent for the year 2000, for 2 days of lost service. The total cost 
of airplane downtime is calculated to be approximately $38.3 million, 
spread over the 3 years. The FAA believes the estimate of downtime is a 
high-side estimate because most operators will

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perform the conversion during normal scheduled maintenance. A 
compliance date of 2005 will allow operators adequate time to schedule 
the upgrades within regular maintenance intervals.
    Cumulatively, the proposed rule is expected to cost the industry up 
to $88.1 million ($78.9 million discounted) between 2002 and 2005. 
However, the cost to the industry could be as low as $49.8 million 
($44.6 million discounted), if no downtime costs were incurred. 
Accordingly, the FAA believes that the proposed rule is cost-beneficial 
and is necessary to ensure the level of aviation security expected by 
the American public.
    The FAA solicits comments from affected entities with respect to 
these findings and determinations, and requests that all comments be 
accompanied by clear documentation.

Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, 
establishes ``as a principle of regulatory issuance that agencies shall 
endeavor, consistent with the objective of the proposed rule and of 
applicable statutes, to fit regulatory and informational requirements 
to the scale of the business, organizations, and governmental 
jurisdictions subject to regulation.'' To achieve that principle, the 
RFA requires agencies to solicit and consider flexible regulatory 
proposals and to explain the rationale for their actions. The RFA 
covers a wide range of small entities, including small businesses, not-
for-profit organizations, and small governmental jurisdictions.
    Agencies must perform a review to determine whether a proposed or 
final rule will have a significant economic impact on a substantial 
number of small entities. If the determination is that it will, the 
agency must prepare a regulatory flexibility analysis as described in 
the RFA.
    However, if an agency determines that a proposed or final rule is 
not expected to have a significant economic impact on a substantial 
number of small entities, section 605(b) of the RFA provides that the 
head of the agency may so certify and a regulatory flexibility analysis 
is not required. The certification must include a statement providing 
the factual basis for this determination, and the reasoning should be 
clear. This proposed rule will not have a significant impact on a 
substantial number of small entities, therefore a full Regulatory 
Flexibility Analysis is not necessary.
    To determine the potential economic impact on small entities 
conducting business as part 121 operators, the FAA first estimated the 
number of small entities affected by this proposed rule. The FAA then 
estimated the compliance cost and, subsequently, the economic impact. 
Using the criterion from the North American Industry Classification 
System of the Small Business Administration (SBA), the FAA identified 
approximately 100 operators that qualify as small businesses, and 
developed a random list of 50 air carriers to further analyze.
    Estimating the compliance cost and economic impact for each small 
entity involved several analytical steps. First, we obtained from the 
BACK Associates Fleet Database the fleet of aircraft operated by the 
small entities. Second, we estimated the purchase and installation cost 
of the transponder solution and method of rapid activation for the 
fleet of each small entity. The purchase cost of the transponder 
solution was estimated to be approximately $3,000 per airplane, with an 
additional $1,000 in parts and supplies, and $2,600 in labor. 
Additionally, downtime costs were estimated at approximately $5,178 per 
aircraft, resulting in a total per airplane cost of $11,778. This per 
airplane cost was then multiplied by the number of affected aircraft in 
the air carrier's fleet to obtain a total cost per operator.
    The degree to which small entities can ``afford'' the cost of 
compliance is determined by the availability of financial resources. 
The implementation costs of this proposed rule could be financed, paid 
for using existing company assets, or borrowed. As a proxy for the 
firm's ability to afford the cost of compliance, the FAA calculated the 
ratio of the total cost of the rule as a percentage of annual revenue. 
The FAA expects that the cost of the proposed rule would exceed 2 
percent of total revenue for no more than two entities. The FAA does 
not believe that two is a substantial number of small entities.
    In the interest of fully assessing the impact of this proposed rule 
on small entities, the FAA explored the potential competitive impact. 
The FAA examined the route structures and specific markets of the three 
firms who would be most affected (as a percentage of revenues) by the 
proposed rule, Chautauqua Airlines, Pan Am, and Grand Canyon Airlines. 
Chautauqua Airlines operates under a codeshare agreement at major hubs 
as an America West, American Airlines (since the purchase of TWA), and 
U.S. Airways affiliate, whereas Pan Am is an independent airline 
operating mostly at second-tier airports. These two air carriers 
sometimes compete with large airlines (which would incur the same fixed 
and marginal cost per airplane), but many routes served could be 
considered local monopolies in which the affected airline is the only 
provider of service. As a result of operating in these ``niche'' 
markets, an air carrier would be able to pass some of the cost to its 
customers. In the more competitive air tour business, keeping costs 
down is critical, because affected air carriers likely would not be 
able to pass costs down to customers. However, Grand Canyon Airlines is 
a dominant player in that market and its main competitors are not other 
airplane tour operators, but rather helicopter tour operators, with 
significantly higher operating costs. Thus, as a result of this 
proposed rule, there is expected to be little change in competition, 
and little change in market share within the industry.
    Accordingly, pursuant to the Regulatory Flexibility Act, 5 U.S.C. 
605(b), the Federal Aviation Administration certifies that this 
proposed rule would not have a significant impact on a substantial 
number of small entities.

Trade Impact Assessment

    The Trade Agreement Act of 1979, 19 U.S.C. 2531-2533, prohibits 
Federal agencies from engaging in any standards or related activities 
that create unnecessary obstacles to the foreign commerce of the United 
States. Legitimate domestic objectives, such as safety, are not 
considered unnecessary obstacles. The statute also requires 
consideration of international standards and, where appropriate, that 
they be the basis for U.S. standards.
    In accordance with the above statute, the FAA has assessed the 
potential effect of this proposed rule and has determined that the 
objective of this proposed rule is the safety and security of the 
United States, and therefore not considered an unnecessary obstacle to 
international trade.

Unfunded Mandates Assessment

    Title II of the Unfunded Mandates Reform Act of 1995 (the Act), 2 
U.S.C. 1531-1571, requires each Federal agency, to the extent permitted 
by law, to prepare a written assessment of the effects of any Federal 
mandate in a proposed or final agency proposed rule that may result in 
the expenditure by State, local, and tribal governments, in the 
aggregate, or by the private sector, of $100 million or more (adjusted 
annually for inflation) in any one year. Section 204(a) of the Act, 
requires the Federal agency to develop an effective process to permit 
timely input by elected officers (or their designees) of State, local, 
and tribal governments on a

[[Page 1947]]

proposed ``significant intergovernmental mandate.'' A ``significant 
intergovernmental mandate'' under the Act is any provision in a Federal 
agency regulation that will impose an enforceable duty upon State, 
local, and tribal governments, in the aggregate, of $100 million 
(adjusted annually for inflation) in any one year. Section 203 of the 
Act, 2 U.S.C. 1533, which supplements section 204(a), states that 
before establishing any regulatory requirements that might 
significantly or uniquely affect small governments, the agency shall 
have developed a plan that, among other things, provides for notice to 
potentially affected small governments, if any, and for a meaningful 
and timely opportunity to provide input in the development of 
regulatory proposals or proposed rules.
    This proposed rule does not contain any Federal intergovernmental 
or private sector mandate. Therefore, the requirements of Title II of 
the Unfunded Mandates Reform Act of 1995 do not apply.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires 
that the FAA consider the impact of paperwork and other information 
collection burdens imposed on the public. We have determined that there 
are no new information collection requirements associated with this 
proposed rule.

International Compatibility

    In keeping with U.S. obligations under the Convention on 
International Civil Aviation, it is FAA policy to comply with 
International Civil Aviation Organization (ICAO) Standards and 
Recommended Practices to the maximum extent practicable. The FAA has 
determined that this proposed rule will have no effect on ICAO 
Standards and Recommended Practices or ICAO Procedures for Air 
Navigation Services during normal airplane operations. However, it 
should be noted that, upon activation of the hijack code, the flight 
crew would not be able to perform the transponder actions outlined in 
ICAO Procedures for Air Navigation Services. These actions include 
modifying the Mode 3A transponder code, turning the transponder to 
standby or off, or inhibiting the transponder altitude reporting 
function. It is not expected that ATC personnel would request any of 
these actions during an actual hijack situation.

Regulations Affecting Interstate Aviation in Alaska

    Section 1205 of the FAA Reauthorization Act of 1996 (110 Stat. 
3213) requires the Administrator, when modifying regulations in title 
14 of the CFR in manner affecting interstate aviation in Alaska, to 
consider the extent to which Alaska is not served by transportation 
modes other than aviation, and to establish such regulatory 
distinctions as he or she considers appropriate. Because this proposed 
rule would apply to all aircraft operated under the provisions of part 
121, it could, if adopted, affect interstate aviation in Alaska. The 
FAA therefore specifically requests comments on whether there is 
justification for applying the proposed rule differently in interstate 
operations in Alaska.

Executive Order 13132, Federalism

    The FAA has analyzed this proposed rule under the principles and 
criteria of Executive Order 13132, Federalism. We determined that this 
action would not have a substantial direct effect on the States, on the 
relationship between the national Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. Therefore, we determined that this notice of proposed 
rulemaking would not have federalism implications.

Plain English

    Executive Order 12866 (58 FR 51735, Oct. 4, 1993) requires each 
agency to write regulations that are simple and easy to understand. We 
invite your comments on how to make these proposed regulations easier 
to understand, including answers to questions such as the following:
    [sbull] Are the requirements in the proposed regulations clearly 
stated?
    [sbull] Do the proposed regulations contain technical language or 
jargon that interferes with their clarity?
    [sbull] Would the regulations be easier to understand if they were 
divided into more (but shorter) sections?
    [sbull] Is the description in the preamble helpful in understanding 
the proposed regulations?

Please send your comments to the address specified in the ADDRESSES 
section.

Environmental Analysis

    FAA Order 1050.1D defines FAA actions that may be categorically 
excluded from preparation of a National Environmental Policy Act (NEPA) 
environmental impact statement. In accordance with FAA Order 1050.1D, 
appendix 4, paragraph 4(j), this proposed rulemaking action qualifies 
for a categorical exclusion.

Energy Impact

    The energy impact of the proposal has been assessed in accordance 
with the Energy Policy and Conservation Act (EPCA) Public Law 94-163, 
as amended (42 U.S.C. 6362) and FAA Order 1053.1. It has been 
determined that the proposal is not a major regulatory action under the 
provisions of the EPCA.

List of Subjects in 14 CFR Part 121

    Air carriers, Air transportation, Air traffic control, Aircraft, 
Aviation safety, Federal Aviation Administration, Radio equipment, 
Transponder.

The Proposed Amendment

    In consideration of the foregoing, the Federal Aviation 
Administration proposes to amend chapter I of Title 14, Code of Federal 
Regulations, as follows:

PART 121--OPERATING REQUIREMENTS: DOMESTIC, FLAG, AND SUPPLEMENTAL 
OPERATIONS

    1. The authority citation for part 121 is revised to read as 
follows:

    Authority: 49 U.S.C. 106(g), 40113, 40119, 41706, 44101, 44701-
44702, 44705, 44709-44711, 44713, 44716-44717, 44722, 44901, 44903-
44904, 44912, 45101-45105, 46105, Sec. 104, Pub. L. 107-71, 115 
Stat. 597-647.
    2. Add Sec.  121.346 to read as follows:


Sec.  121.346  ATC transponder operation.

    (a) After March 29, 2005, no person may operate an airplane unless 
that airplane has the capability to allow each flight crewmember to 
quickly activate the ATC transponder Mode 3A beacon code ``7500'' 
through a single action that includes protection from inadvertent 
activation.
    (b) Upon activation of the ATC transponder Mode 3A beacon code, as 
described in paragraph (a) of this section:
    (1) The ATC transponder must continue to report the airplane's 
altitude;
    (2) There must be a visual indication to the flight crew that the 
activation has occurred; and
    (3) A person onboard that airplane must not be able, by reasonable 
means, to disable the transponder or change its code during the 
remainder of the flight. In this case, the pilot-in-command need not 
comply with the requirements of Sec.  91.217(a) of this chapter.

    Issued in Washington, DC, on January 8, 2003.
John J. Hickey,
Director, Aircraft Certification Service.
[FR Doc. 03-685 Filed 1-13-03; 8:45 am]
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