Aviation Safety: Oversight of Foreign Code-Share Safety Program  
Should Be Strengthened (05-AUG-05, GAO-05-930). 		 
                                                                 
U.S. airlines are increasingly relying on code-share partnerships
with foreign carriers to provide additional sources of revenue.  
Code-sharing is a marketing arrangement in which an airline	 
places its designator code on a flight operated by another	 
airline and sells and issues tickets for that flight. To	 
determine whether the foreign code-share partners of U.S.	 
airlines meet an acceptable level of safety, in 2000, the	 
Department of Transportation (DOT) established the Code-Share	 
Safety Program, which requires U.S. airlines to conduct safety	 
audits of their foreign code-share partners as a condition of	 
code-share authorization. GAO's objective was to assess the	 
federal government's efforts to provide reasonable assurance of  
safety and security on foreign code-share flights. GAO reviewed  
(1) the extent to which DOT's code-share authorization process is
designed to consider safety and security, (2) the Federal	 
Aviation Administration's (FAA) management of the Code-Share	 
Safety Program, and (3) the implementation of the program by	 
airlines and the results.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-930 					        
    ACCNO:   A32157						        
  TITLE:     Aviation Safety: Oversight of Foreign Code-Share Safety  
Program Should Be Strengthened					 
     DATE:   08/05/2005 
  SUBJECT:   Air transportation 				 
	     Airline security					 
	     Airlines						 
	     Audit reports					 
	     Aviation						 
	     Aviation security					 
	     Internal controls					 
	     International cooperation				 
	     International relations				 
	     Program evaluation 				 
	     Program management 				 
	     Safety regulation					 
	     Safety standards					 
	     Transportation safety				 
	     Transportation security				 
	     Code-Share Safety Program				 
	     FAA International Aviation Safety			 
	     Assessment Program 				 
                                                                 

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GAO-05-930

     

     * Report to the Ranking Democratic Member, Committee on Transportation
       and Infrastructure, House of Representatives
          * August 2005
     * AVIATION SAFETY
          * Oversight of Foreign Code-Share Safety Program Should Be
            Strengthened
     * Contents
          * Results in Brief
          * Background
          * DOT's Office of International Aviation Relies on FAA for Safety
            Assessments and TSA for Security Assessments to Authorize
            Code-Share Arrangements
               * DOT Considers Information from Several Sources to Authorize
                 Code-Share Arrangements
               * FAA Response Reflects Assessments of Foreign Civil Aviation
                 Authorities and Safety Audit Reviews
               * FAA Reviews U.S. Airlines' Methodologies for Auditing Their
                 Foreign Code-Share Partners
               * TSA Clearances Reflect Security Assessments of Foreign
                 Airlines That Provide Direct Service to the United States,
                 Its Territories, and Certain Foreign Airports
               * DOD Provides Additional Safety Oversight of Foreign Airlines
          * Code-Share Safety Program Incorporates Auditing Standards, but
            FAA's Oversight of the Program Lacks Certain Management Controls
               * Code-Share Safety Program Incorporates Selected Government
                 Auditing Standards
               * FAA's Reviews of the Safety Audit Reports Lacked Certain
                 Management Controls
          * U.S. Airlines Are Auditing Foreign Partners' Safety, and Partners
            Are Taking Corrective Action, but Documentation of Corrective
            Actions Is Often Lacking
               * U.S. Airlines' Safety Audits Primarily Identified Findings
                 in Foreign Partners' Flight Operations and Maintenance and
                 Engineering
               * Airlines Submitted Compliance Statements to FAA but Did Not
                 Always Document the Closure of Findings
               * U.S. Airlines Also Monitor the Safety of Their Foreign
                 Partners between Audits
               * Use of International Safety Audit Program May Address Some
                 Weaknesses in the U.S. Safety Audit Program
               * Most U.S. Airline Officials Believe the Code-Share Safety
                 Program Provides a Reasonable Assurance of Safety
          * Conclusions
          * Recommendations
          * Agency Comments
     * Objectives, Scope, and Methodology
     * U.S. Carriers and Their Foreign Code-Share Partners
     * Comments from DHS
     * GAO Contacts and Staff Acknowledgments
          * GAO Contacts
          * Staff Acknowledgments

                 United States Government Accountability Office

Report to the Ranking Democratic

Member, Committee on Transportation and Infrastructure, House of Representatives

August 2005

AVIATION SAFETY

     Oversight of Foreign Code-Share Safety Program Should Be Strengthened

                                       a

AVIATION SAFETY

Oversight of Foreign Code-Share Safety Program Should Be Strengthened

  What GAO Found

In considering U.S. airlines' requests to establish code-share
arrangements with foreign carriers, DOT's Office of International Aviation
reviews, among other things, any safety and security objections from FAA
and TSA. FAA assesses the safety of foreign civil aviation authorities and
reviews reports of the safety audits that U.S. carriers have conducted of
their foreign airline partners. From fiscal years 2000 through 2004, DOT
(1) authorized U.S. airlines to establish or maintain code-share
arrangements with foreign carriers 270 times and (2) did not suspend any
arrangements because of known safety concerns. According to FAA, however,
U.S. airlines occasionally have decided not to pursue code-share
arrangements with foreign carriers because they expected FAA would object,
and FAA sometimes puts its reviews of proposed code-share arrangements on
hold if the agency has safety concerns. FAA and TSA did not object to any
of the authorizations during that period for safety or security reasons.
Although not involved in the code-share authorization process, the
Department of Defense (DOD) reviews the safety of foreign airlines that
transport DOD personnel. For their separate programs, FAA and DOD are
reviewing many of the same safety audit reports on foreign carriers.

The Code-Share Safety Program, which calls for U.S. airlines to conduct
periodic safety audits of their foreign code-share partners, incorporates
selected government auditing standards involving independence,
professional judgment, and competence. However, FAA's reviews of the
safety audit reports lacked management controls for reviewers'
qualifications, documenting the closure of safety audit findings,
verifying corrective actions taken in response to findings, and
documenting reviews.

Eight U.S. airlines with foreign code-share partners have implemented the
DOT program by conducting safety audits of their foreign partners.
According to our review of a random sample of audit reports that FAA
reviewed from fiscal years 2000 through 2004, the largest numbers of
safety findings identified were in the categories of (1) flight operations
and (2) maintenance and engineering. GAO estimates that for 68 percent of
the findings, the documentation was insufficient to demonstrate that the
findings were closed or were resolved. Airlines are beginning to adopt a
new safety audit program that requires the documentation of findings and
corrective actions.

Source: FAA.

United States Government Accountability Office

Contents

  Letter 1

Results in Brief 4 Background 7 DOT's Office of International Aviation
Relies on FAA for Safety Assessments and TSA for Security Assessments to
Authorize Code-Share Arrangements 12 Code-Share Safety Program
Incorporates Auditing Standards, but FAA's Oversight of the Program Lacks
Certain Management Controls 23

U.S. Airlines Are Auditing Foreign Partners' Safety, and Partners Are
Taking Corrective Action, but Documentation of Corrective Actions Is Often
Lacking 31 Conclusions 40 Recommendations 41 Agency Comments 42

Appendixes

                          Appendix I: Appendix II: Appendix III: Appendix IV:

                     Objectives, Scope, and Methodology 44

             U.S. Carriers and Their Foreign Code-Share Partners 50

Comments from DHS 53

GAO Contacts and Staff Acknowledgments 54 GAO Contacts 54 Staff
Acknowledgments 54

Table 1: Selected Government Auditing Standards Incorporated in

Table

the Code-Share Safety Program

Figure 1: Percentage of U.S. Carriers' Active Code-Share

Figures

Partnerships, by World Region, as of May 2005 8 Figure 2: Aviation
Accident Rates by World Region during 2004 11 Figure 3: Code-Share
Authorization Process 13 Figure 4: FAA's Process for Responding to DOT's
Office of

International Aviation 14 Figure 5: Percentage of Findings by Audit
Category 33

Contents

                                 Abbreviations

DHS        Department of Homeland Security             
DOD        Department of Defense                       
DOJ        Department of Justice                       
DOT        Department of Transportation                
FAA        Federal Aviation Administration             
GSA        General Services Administration             
IASA          International Aviation Safety Assessment 
IATA           International Air Transport Association 
ICAO         International Civil Aviation Organization 
IOSA       IATA Operational Safety Audit               
SARS       Severe Acute Respiratory Syndrome           
TSA             Transportation Security Administration 

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

A

United States Government Accountability Office Washington, D.C. 20548

August 5, 2005

The Honorable James L. Oberstar Ranking Democratic Member Committee on
Transportation and Infrastructure House of Representatives

Dear Mr. Oberstar:

As the U.S. airline industry strives to improve its financial condition,
many carriers are increasing their focus on international service to
provide needed sources of revenue. To help expand their global market
reach, U.S. airlines have established an increasing number of code-share
arrangements with foreign airlines, and, as of May 2005, eight U.S.
airlines had established foreign code-share partnerships. Code-sharing is
a marketing arrangement in which an airline places its designator code1 on
a flight operated by another airline and sells and issues tickets for that
flight. U.S. carriers must obtain authorization for foreign code-share
operations from the Department of Transportation (DOT).

In 2000, DOT's Office of the Secretary and Federal Aviation Administration
(FAA) established the Code-Share Safety Program to ensure that the foreign
code-share partners of U.S. airlines meet an acceptable level of safety.
The program was established in response to safety concerns that arose
after SwissAir Flight 111 crashed off the shores of Nova Scotia in 1998,
killing 229 passengers and crewmembers, including 53 Americans. At that
time, SwissAir was a foreign partner of U.S.-based Delta Air Lines. Before
the Code-Share Safety Program was established, DOT reviewed the potential
competitive and economic impact of U.S. airlines' code-share arrangements
with foreign airlines, but regarding safety considerations, relied on the
oversight by the home country. Now, under the Code-Share Safety Program,
U.S. airlines must conduct periodic safety audits of their foreign
code-share partners as a condition of code-share authorization. DOT
designed the Code-Share Safety Program to rely on U.S. airlines to audit
the safety of their foreign code-share partners because FAA does not have
the authority to inspect foreign aircraft that do not enter the United
States. The DOT program is similar to a safety audit program that the

1Designator codes are two-letter codes assigned by the International Air
Transport Association, the international airline association, to the
world's airlines.

Department of Defense (DOD) created in 1999 for foreign carriers that
transport DOD personnel.

You asked that we review the measures that the federal government is
taking to provide reasonable assurance of safety and security when
passengers travel on flights operated by foreign code-share partners of
U.S. airlines. To do so, we addressed the following questions:

     o To what extent is DOT's authorization of U.S. airlines' code-share
       arrangements with foreign airlines designed to consider safety and
       security?
     o How well has FAA managed the Code-Share Safety Program?
     o To what extent have U.S. airlines implemented the Code-Share Safety
       Program, and what have been the results of their efforts?

To determine how safety and security are considered in DOT's authorization
of U.S. airlines' code-share arrangements with foreign airlines,2 we
reviewed the process that DOT follows in authorizing code-share
arrangements, Code-Share Safety Program guidelines, applicable aviation
safety standards, and related legal authorities. Our review covered safety
audit reports on foreign carriers that FAA reviewed and U.S. airlines'
code-share partnerships with foreign carriers that DOT has authorized
since February 2000, when the Code-Share Safety Program was established,
through the end of fiscal year 2004. We also examined how FAA's
assessments of foreign civil aviation authorities are used in the
code-share approval process. During our review of the Code-Share Safety
Program, we found that DOD had a similar program designed to ensure the
safety of foreign airlines that transport DOD personnel. Because our
objective was to determine how the federal government is providing safety
oversight of foreign airlines, we included DOD in our review. However,
because DOD does not play a direct role in the authorization of foreign
code-share arrangements, this report focuses on the DOT Code-Share Safety
Program. Moreover, because security is a component of assessing airline
safety, we determined what the Transportation Security Administration
(TSA), the Department of Homeland Security agency

2This report pertains only to U.S. airlines' code-share arrangements with
foreign airlines for scheduled air service and not for charter or cargo
air service.

Page 2 GAO-05-930 Aviation Safety

responsible for aviation security, has done to provide security
information to FAA and DOD for their safety reviews of foreign airlines.

Because the Code-Share Safety Program establishes an audit program, to
assess how well FAA has managed the program, we reviewed whether the
program's design conformed with selected standards identified in
Government Auditing Standards.3 In addition, because we were evaluating
the management of a government program, we examined how FAA applied
certain management controls in its reviews of the safety audit reports for
the Code-Share Safety Program using Standards for Internal Control in the
Federal Government.4 We discussed with FAA officials how they conducted
the assessments of foreign civil aviation authorities and with TSA
officials how they assessed the security of certain foreign carriers and
airports.

Finally, to determine the extent to which U.S. airlines have implemented
the Code-Share Safety Program and the results, we interviewed safety
officials at the eight U.S. airlines that were participating in the
Code-Share Safety Program5 and reviewed a random sample of reports of
safety audits the airlines had conducted of their foreign code-share
partners. We did not determine whether the airlines complied with
international aviation safety standards but reviewed the safety audit
reports to determine what types of findings were identified and whether
corrective actions were documented. We also interviewed officials from the
International Air Transport Association (IATA), the trade association that
represents air carriers worldwide, to determine how IATA's recent
introduction of a new safety audit program for its members may affect the
Code-Share Safety Program. We conducted our review in Arlington, Virginia;
Atlanta; Denver; Eagan, Minnesota; Ft. Worth; Houston; Phoenix;
Pittsburgh; Seattle; Washington, D.C.; and Montreal, Canada; from August
2004 through August 2005 in accordance with generally accepted government
auditing standards. Appendix I provides additional information on our
methodology.

3GAO, Government Auditing Standards, GAO-03-673G (Washington, D.C.: June
2003).

4GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999) and GAO, Internal
Control Management and Evaluation Tool, GAO-01-1008G (Washington, D.C.:
August 2001).

5Those airlines are Alaska Airlines, America West Airlines, American
Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines,
United Airlines, and US Airways.

Page 3 GAO-05-930 Aviation Safety

Results in Brief

In considering U.S. airlines' requests to establish code-share
arrangements with foreign carriers, DOT's Office of International Aviation
reviews, among other things, any safety and security objections from FAA
and TSA. FAA assesses the safety of foreign civil aviation authorities and
reviews reports of the safety audits that U.S. carriers have conducted of
their foreign airline partners. According to DOT officials, on 270
occasions from February 2000-when the Code-Share Safety Program was
established- through the end of fiscal year 2004, DOT authorized or
reauthorized U.S. airlines to establish or maintain code-share
arrangements with foreign carriers and did not suspend any arrangements
because of known safety concerns. However, according to FAA, U.S. airlines
occasionally have decided not to pursue code-share arrangements with
foreign carriers because they expected FAA would object, and on four
occasions during that period, U.S. airlines suspended their code-share
arrangements with foreign carriers because FAA was questioning the
capabilities of the civil aviation authorities under which the foreign
carriers were operating. In addition, FAA sometimes puts its reviews of
proposed code-share arrangements on hold if the agency has safety
concerns. Code-share arrangements may be periodically reauthorized, based
on the terms of the initial authorization. To maintain code-share
authorization, U.S. airlines are to conduct safety audits of their foreign
code-share partners every 2 years. FAA provided DOT's Office of
International Aviation with memorandums indicating that it did not object
to any of the proposed arrangements from February 2000 through the end of
fiscal year 2004. DOT's Office of International Aviation also receives
security information from TSA, which assesses the security of foreign
airlines that provide direct service to the United States and its
territories and certain foreign airports. TSA provided security clearances
for all proposed code-share arrangements from fiscal years 2000 through
2004 for which it had information on the foreign carriers. TSA does not
assess the security of foreign carriers that do not provide direct service
to the United States and its territories because it lacks that authority.
Twenty-nine of U.S. airlines' foreign code-share partners, or about
one-third, do not provide direct service to the United States and its
territories and therefore have not been assessed for security by TSA. DOD
does not authorize code-share arrangements, but like FAA, it reviews the
U.S. airlines' safety audit reports of their foreign code-share partners.
We found that DOD and FAA are reviewing many of the same audit reports and
that TSA was not providing its foreign airport security assessments to
DOD.

The Code-Share Safety Program incorporates selected government auditing
standards involving auditors' independence, professional judgment, and
competence. However, FAA's management of the program did not incorporate
certain controls relating to establishing reviewers' qualifications,
documenting the closure of safety audit findings, verifying corrective
actions taken in response to the findings, and documenting its reviews.
For example, FAA has not established the qualifications needed for agency
staff who review the safety audit reports. In addition, FAA has not
provided its reviewers or the airlines with definitions of
"safety-critical" findings that the airlines must resolve immediately or
"nonsafety-critical findings" that can be resolved after the audit is
closed. Some airline officials told us they would like FAA to provide a
definition of "safetycritical" findings that must be resolved immediately.
Furthermore, in reviewing the safety audit reports, FAA frequently is not
documenting its reviews. As a result, it cannot be determined which
corrective actions that FAA verified were implemented by the foreign
carriers. FAA's lack of documentation about its reviews of the audit
reports could impede trend analyses and comparisons of findings and
prevents determining whether FAA reviewed those findings.

The eight U.S. airlines have implemented the Code-Share Safety Program by
conducting safety audits of their foreign code-share partners to determine
whether the partners comply with international aviation safety standards.
According to our review of a random sample of 149 audit reports, the
largest numbers of safety findings that the U.S. airlines identified in
auditing their foreign partners during fiscal years 2000 through 2004 were
in the categories of (1) flight operations, which govern the activities of
the pilots, including training, and (2) maintenance and engineering, which
involves the oversight of activities to maintain, repair, and overhaul
aircraft, aircraft engines, and parts. The U.S. airlines followed the
program's guidelines by submitting written statements from their safety
directors to FAA affirming that their foreign airline partners had
complied with international aviation safety standards. However, we
estimate that 68 percent of the audit findings lacked complete
documentation that corrective action had been taken. Without such
documentation, FAA lacks evidence that the identified safety issues have
been corrected. Furthermore, because FAA has not developed a definition of
"safetycritical" findings, which FAA requires the airlines to resolve
immediately, we could not identify those findings and, thus, were not able
to determine if corrective action was documented. Increasingly, the
airlines are adopting a new international audit program, which requires
the documentation of identified findings and associated corrective
actions. FAA accepted this new international audit program as a
methodology that would meet the Code-Share Safety Program guidelines. To
the extent that the airlines substitute the new international audit
program for their previous audit methodologies, they may improve their
documentation of resolved findings and associated corrective actions
because this audit program requires such documentation. Most U.S. airline
officials said they believe the Code-Share Safety Program provides
reasonable assurance of safety or is effective. One airline official, for
example, said that the program has been effective because some foreign
airlines, seeking to become code-share partners of

U.S. airlines, have restructured programs, rewritten manuals, and
instituted new management techniques.

We are making three recommendations to DOT and one to TSA. To improve the
effectiveness of the program, we are recommending that DOT revise the
Code-Share Safety Program guidelines to define "safety-critical" and
"nonsafety-critical" audit findings, so that FAA reviewers and the
airlines know which types of findings must be corrected immediately and
which ones can be resolved later. In addition, we are recommending that
FAA implement controls for reviewers' qualifications, corrective action
verification, and review documentation. Furthermore, because DOD and FAA
are reviewing many of the same audit reports, we recommend that FAA
explore with DOD potential opportunities to reduce duplication of efforts.
Finally, because security is an important component of assessing airline
safety, to improve DOD's oversight of foreign carriers that transport DOD
personnel, we are recommending that TSA develop a process for routinely
coordinating with DOD regarding information on the security of foreign
airports.

In commenting on a draft of this report, overall, DOT generally concurred
with our findings and agreed to consider our recommendations. DHS agreed
with our recommendation regarding TSA. DOD and DOT provided some technical
clarifications, which we incorporated into this report as appropriate. In
addition, FAA provided general comments on the Code-Share Safety Program.

Background

Each year, several million passengers travel on foreign airlines that have
established code-share arrangements with U.S. air carriers.6 Code-sharing
is a marketing arrangement in which an airline places its designator code
on a flight operated by another airline and sells and issues tickets for
that flight. On foreign code-share routes, U.S. airlines and their foreign
partners each place their respective designator code on flights operated
by the other airline. Passengers can purchase one ticket from a U.S.
airline that can include flight segments covered by one or more foreign
partner airlines.7 Air carriers throughout the world form code-share
alliances to strengthen or expand their market presence or ability to
compete. Through code-sharing, U.S. airlines can offer seamless service to
additional international destinations without incurring the expense of
establishing their own operations to those locations. Moreover, airline
officials said that code-share arrangements with foreign airlines have
become important sources of revenue.8 According to FAA, international
markets are viewed as more attractive growth markets by mainline carriers
because of more limited competition from low-cost carriers and greater
profitability.

In recent years, U.S. airlines have established an increasing number of
code-share arrangements with foreign carriers to expand their service
markets.9 As of May 2005, eight U.S. airlines had established 108
arrangements to place their designator codes on 85 different foreign
carriers, up from six U.S. airlines that had established 39 arrangements
to place their designator codes on 38 different foreign carriers in fiscal
year

6According to information provided by the eight U.S. airlines
participating in the Code-Share Safety Program, about 6.5 million tickets
were purchased from them in 2004 for travel on flights operated by their
foreign code-share partners. (See app. I for more information on how this
information was compiled.)

7U.S. and foreign airlines have established three main types of code-share
arrangements: (1) the U.S. airline places its designator code on the
foreign carrier's flight, (2) the foreign airline places its designator
code on the U.S. carrier's flight, and (3) the U.S. and the foreign
airline each place their designator code on the other's flights.

8U.S. airline officials said that their reimbursement agreements with
foreign carriers were based on route mileage, fare class, and selling
commissions.

9Some U.S. airlines code-share with foreign airlines on selected routes
only, while others code-share with foreign airlines on all of their
routes.

2000.10 As shown in figure 1, the majority of U.S. airlines' code-share
arrangements are with European airlines, representing over half, followed
by airlines from Asia and the Pacific, accounting for nearly a quarter of
the arrangements. Appendix II lists the U.S. carriers and their foreign
code-share partners.

Figure 1: Percentage of U.S. Carriers' Active Code-Share Partnerships, by
World Region, as of May 2005

2%

Africa

3%

Canada

5%

Middle East

Latin America and Carribean

Asia and Pacific

Europe

Source: FAA.

Note: Percentages do not total to 100 because of rounding.

In 1998, SwissAir Flight 111, which was a code-share flight with
U.S.-based Delta Air Lines, crashed off the shores of Nova Scotia, killing
229 passengers, including 53 Americans. Following that accident, the DOT
Inspector General reviewed aviation safety under international code-share

10DOT provided information on the number of U.S. airlines that had placed
their designator codes on foreign carriers' flights in fiscal year 2000
but indicated that the information was compiled informally and was not
official.

Page 8 GAO-05-930 Aviation Safety

agreements and issued a report in 1999 recommending, among other things,
that DOT develop and implement procedures requiring U.S. airlines to
conduct safety audits of foreign carriers as a condition of authorization
of code-share passenger services.11 Also in 1999, legislation was
introduced in the House of Representatives that would have statutorily
required U.S. airlines to audit the safety of their foreign code-share
partners.12 Although that legislation was not enacted, in 2000, DOT's
Office of the Secretary and FAA established the Code-Share Safety Program,
which included the development of guidelines for U.S. carriers to follow
in auditing the safety of their foreign code-share partners as a condition
of DOT's authorization of code-share passenger services.

DOD's safety audit program, called the Commercial Air Transportation
Quality and Safety Review Program, expanded another program that DOD
established in 1986 to check the safety of charter aircraft transporting
its personnel, after an Arrow Air charter airplane transporting U.S.
military personnel crashed in 1985, killing 256 passengers and crew. In
1986, Congress passed Public Law 99-661, which created a Commercial
Airlift Review Board and prohibits DOD from contracting with an air
carrier unless it meets certain safety standards and submits to a
technical safety evaluation. A 1999 memorandum of understanding between
DOD and the Air Transport Association, a U.S. airline industry
association, allows DOD to review the safety audits that U.S. airlines
have conducted of their foreign airline partners.

DOD is a major customer of airlines that have established code-share
arrangements through its participation in the General Services
Administration's (GSA) city-pairs program, under which the government
negotiates service contracts for all federal government employees,
including military personnel, to save the government money on air travel.
The program requires federal employees and military personnel to fly with
carriers under such contracts when they travel on government business. DOD
is required to review the safety of all airlines that provide scheduled
service to its personnel under the GSA city-pairs program, which include

U.S. airlines' foreign code-share partners. DOD's program also has the

11DOT Office of the Inspector General, Aviation Safety Under International
Code-Share Agreements, Report No. AV-1999-138 (Washington, D.C.: Sept. 30,
1999).

12Aviation Codeshare Safety Act, H.R. 2024, 106th Congress (1999),
introduced by Representative James Oberstar.

Page 9 GAO-05-930 Aviation Safety

effect of having the airlines comply with DOD requirements if they want to
maintain the GSA contracts.

The safety of foreign carriers is also a concern because aviation accident
rates vary considerably from one region of the world to another. According
to data compiled by IATA, an international airline association, during
2004, the North American region had the lowest aviation accident rate
(0.29 hull losses13 per million flight segments), while the Middle East
had the highest

(5.32 hull losses per million flight segments).14 Africa had the second
highest rate, followed by South America, the Asia-Pacific region, and
Europe. These accident rates are shown in figure 2.

13According to Aviation Safety Network, a database devoted to aviation
accident and safety information and used by FAA in monitoring accident
histories, a hull loss occurs when airplane damage is beyond economic
repair and may include events in which (1) the airplane is missing, (2)
the search for the wreckage has been terminated without success, or

(3) the airplane is substantially damaged and inaccessible. IATA's data on
hull losses are for western-built jet aircraft. The 2004 world aggregate
aviation accident rate compiled by IATA was 0.78 hull losses per million
flight segments.

14IATA's regional boundaries for this information are not necessarily
geographic. For example, Mexico is included in the South American region.

DOT Considers Information from Several Sources to Authorize Code-Share
Arrangements

program, DOD reviews many of the same safety audit reports on foreign
airlines that FAA reviews for the Code-Share Safety Program.

To authorize a code-share arrangement between a U.S. and a foreign
airline, DOT must find that the arrangement is in the public interest.15
Under the DOT guidelines, this public interest finding includes a
determination of the foreign carrier's level of safety and the economic
impact of the arrangement. Before authorizing a code-share arrangement,
DOT's Office of International Aviation obtains (1) a memorandum of "no
objection" from FAA, based on its review of the safety audits and other
safety information available to FAA; (2) a clearance from DOT's Office of
Policy on aspects of security involving the foreign carrier, including
information from TSA; and (3) a clearance from DOT's Office of Aviation
Analysis and Office of the General Counsel concerning the code-share
arrangement's competitive impact on the airline industry.16 The Office of
International Aviation also obtains advice from the Department of Justice
on potential antitrust issues.17 According to DOT officials, on 270
occasions, from February 2000 through the end of fiscal year 2004, DOT
authorized or reauthorized U.S. airlines to establish or maintain
code-share arrangements with foreign carriers and did not suspend any
arrangements

15DOT is required to consider the public interest in authorizing
code-share arrangements under 49 U.S.C. 41309. Although the law does not
provide a specific definition of public interest in this regard, leaving
the determination to the discretion of the Secretary of Transportation,
the determination is guided by the public interest standards of 49 U.S.C.
40101 as well as by the department's precedents in this area.

16According to DOT's Office of Aviation Analysis, since 2000, it has
cleared the competitive aspects of all U.S. airlines' code-share
arrangements with foreign airlines. Before providing a clearance, this
office reviews code-share applications for the degree of competition
involved, the terms of the financial agreements between the U.S. airlines
and their foreign partners, and the competitive impact on the carriers
involved and the region affected.

17According to the Justice Department's Antitrust Division, since 2000, it
has not advised DOT against approving any U.S. airlines' unimmunized
code-share arrangements with foreign carriers because of antitrust
concerns (unimmunized code-share arrangements are those for which the
Department of Justice has not provided immunity from antitrust actions).

FAA Response Reflects Assessments of Foreign Civil Aviation Authorities
and Safety Audit Reviews

during that time.18 However, FAA officials also said that U.S. airlines
have occasionally decided not to pursue code-share arrangements with
foreign airlines because they expected FAA would object. Code-share
arrangements may be periodically reauthorized based on the terms of the
initial authorization. Figure 3 shows the DOT code-share authorization
process.

Figure 3: Code-Share Authorization Process
                            FAA reviews safety audit
                            reports, civil aviation
                             authority assessments,
U.S. carrier                 and other information.
files                        
a code-share  DOT's Office   DOT's Office of   DOT's Office                
application   of             Policy reviews    of                          
with DOT's    International  security          International               
Office of     Aviation       information from  Aviation      DOT's Office  
International requires       TSA. DOT's Office receives      of            
Aviation.     information on of Aviation       clearances    International 
U.S. carrier  safety,        Analysis and      from FAA, DOT Aviation      
conducts      security,      Office of the     policy and    decides       
safety audit  competitive    General Counsel   economic      whether to    
on potential  impact, and    review            analysis      authorize the
foreign       potential      competitive       units, and    code-share
code-share    antitrust      impact            antitrust     arrangement.
partner.      implications   information.      advice from   
                 to help make   Justice           the Justice   
                 its decision.  Department        Department.   
                                reviews potential               
                          antitrust implications.               

            Source: DOT's Office of International Aviation and FAA.

DOT's Office of International Aviation solicits the views of FAA on the
safety aspect of its code-share authorization decision because of FAA's
technical expertise in that area. FAA reviews reports of the safety audits
that U.S. carriers have conducted on the foreign carriers and other safety
information available to FAA, including its assessments of the
capabilities of the relevant foreign civil aviation authorities. FAA
provided DOT's Office of International Aviation with memorandums of "no
objection" on all foreign airlines being considered for code-share
authorization during fiscal years 2000 through 2004. According to FAA
officials, if FAA has safety

18According to a DOT official, in some cases, the same code-share partners
requested and received multiple approvals during this period (adding
routings, for example), so the total number of authorizations granted by
the Office of International Aviation exceeds the total number of safety
audit reports that FAA reviewed.

Page 13 GAO-05-930 Aviation Safety

concerns, it puts a hold on its review of the proposed code-share
arrangement, allowing time for the safety issues to be resolved; and on
four occasions, from February 2000 through September 2004, U.S. airlines
suspended their code-share arrangements with foreign carriers because FAA
was questioning the capabilities of the civil aviation authorities under
which the foreign carriers were operating. Figure 4 shows FAA's process
for providing information to DOT's Office of International Aviation on
U.S. airlines' applications to establish code-share arrangements with
foreign carriers.

Figure 4: FAA's Process for Responding to DOT's Office of International Aviation

Under the Code-Share Safety Program guidelines, DOT authorizes a U.S.
airline's code-share arrangement with a foreign carrier only if the
foreign airline is from a country that is compliant with applicable
international aviation safety standards under FAA's International Aviation
Safety Assessment (IASA) program.19 Under IASA, FAA reviews the
capabilities of foreign civil aviation authorities by checking their
compliance with standards established by the International Civil Aviation
Organization

19FAA's authority to conduct the IASA program is facilitated through the
requirements of 14

C.F.R. part 129.11 (a), which require in part that operations within the
United States be in compliance with International Civil Aviation
Organization (ICAO) annex 6 part 1 (aircraft operations).

Page 14 GAO-05-930 Aviation Safety

(ICAO), a United Nations aviation organization.20 Under IASA, FAA assigns
countries' civil aviation authorities either a category 1 rating-meets
ICAO standards-or a category 2 rating-does not meet ICAO standards.21
During the IASA process, FAA personnel, typically from various
international field offices, conduct on-site assessments of civil aviation
authorities for compliance with ICAO standards in eight areas: (1) primary
aviation legislation, (2) aviation regulations, (3) organization of the
civil aviation authority, (4) adequacy of the technical personnel, (5)
technical guidance,

(6) licensing and certification, (7) records of continuing inspection and
surveillance, and (8) resolution of safety issues. Each country with
carriers serving, or wishing to serve, the United States in their own
right or as part of a code-share arrangement with a U.S. airline must
first have an assessment under the IASA program.

Although FAA's plan is to reassess the category for each foreign civil
aviation authority every 2 years, FAA officials said that this activity
occurred less frequently because of a larger-than-anticipated number of
reassessments and constraints on the agency's resources. FAA data indicate
that 67 of the 100 foreign civil aviation authorities in the IASA program,
or about two-thirds, have not been assessed within the last 4 years.
According to FAA, some countries were not assessed within the last 4 years
because available data indicated that their rating categorization remained
valid. FAA data also show that from January 1, 2000, through May 1, 2005,
FAA assessed or reassessed-because of safety oversight concerns-the
capabilities of 33 foreign civil aviation authorities, 6 of which were
assessed more than once.22 Of the 42 countries' civil aviation authorities
under which the foreign code-share partners of U.S. airlines are
operating, 16 have required an IASA assessment or reassessment since 2000
and 26 have not.

20The 1944 Chicago Convention on aviation safety led to the establishment
of ICAO, the United Nations organization that develops standards and
recommended practices for aviation safety and security, and outlined the
rights and responsibilities of civil aviation authorities. ICAO's 18
annexes delineate internationally agreed-upon standards that signatories
to the Convention (i.e., civil aviation authorities) must meet. Annex 1
(personnel licensing), annex 6 (aircraft operations), and annex 8
(aircraft airworthiness) serve as primary sources of international
aviation safety standards.

21The IASA program and the Code-Share Safety Program use the same ICAO
standards (annexes 1, 6, and 8) as evaluation criteria.

22Five of the six countries were ones that FAA had first given an IASA
category 2 rating and later upgraded to category 1.

IASA results, along with the safety audits that U.S. airlines conduct of
their foreign code-share partners, are FAA's principle measures of the
level of safety of the foreign carriers. According to the guidelines, the
level of oversight and regulation that an airline receives from its
regulatory authority is an important factor in assessing its safety. For
this reason, DOT authorizes U.S. airlines' code-share arrangements only
with foreign airlines that are from IASA category 1 countries. As of May
2005, FAA had assigned IASA category 1 ratings to 71 countries' civil
aviation authorities and IASA category 2 ratings to 28; 94 other countries
had not yet been categorized, generally because no carriers from those
countries had applied to provide direct service to the United States.

DOT's Office of International Aviation will not authorize a code-share
application, and FAA will not review the safety audit report if flights
that are intended to carry a U.S. carrier's designator code would be
operated by a foreign carrier from a country with an IASA category 2
rating. If a U.S. airline is seeking to establish a code-share arrangement
with a foreign carrier that is from a country that does not have an IASA
rating, FAA normally conducts the assessment before DOT's Office of
International Aviation considers the application. When FAA lowers a
country's IASA rating from category 1 to category 2, DOT's Office of
International Aviation contacts any U.S. airline that has a code-share
partnership with an airline from that country to advise the U.S. airline
of the lowered IASA rating so that the U.S. carrier can promptly remove
its code from any passenger flights operated by that airline, according to
agency officials. While DOT indicated that it could, at its option, order
the removal of U.S. airlines' designator codes under these circumstances,
in practice, DOT has not needed to pursue that option because, when the
airlines have learned about an IASA category change affecting their
service, they have removed their operating codes from the foreign carrier.
On four occasions since 2000, U.S. airlines have suspended their
code-share arrangements with foreign airlines because FAA was questioning
the capabilities of the civil aviation authorities under which the foreign
airlines were operating.23 The program guidelines allow DOT to consider,
on a case-by-case basis, continuing to authorize a U.S. airline's
code-share arrangement with a foreign carrier that

23In three cases, the U.S. airlines suspended their code-share
arrangements before FAA had lowered the respective IASA ratings from
category 1 to category 2. In another case, a U.S. airline temporarily
suspended its code-share arrangement with a foreign airline after FAA
questioned the capabilities of that airline's civil aviation authority,
but FAA did not lower that country's IASA rating. After FAA resolved its
questions, the U.S. airline resumed its code-share arrangement with that
foreign carrier.

Page 16 GAO-05-930 Aviation Safety

FAA Reviews U.S. Airlines' Methodologies for Auditing Their Foreign
Code-Share Partners

is from a country with an IASA rating that has been lowered from category
1 to category 2. According to FAA, this case-by-case language was included
to enable DOT's Office of International Aviation to accord U.S. airlines a
limited degree of flexibility needed to effectuate an orderly shutdown of
their code-share services. However, DOT officials told us that they will
not authorize the continuation of a code-share arrangement beyond the
needs of such an orderly shutdown.

FAA will not review a U.S. airline's safety audit report on a foreign
carrier until FAA has reviewed and accepted the airline's audit
methodology. According to the program guidelines, the U.S. airlines'
safety audit methodologies should incorporate ICAO standards on personnel
licensing, aircraft operations, aircraft airworthiness, and security.24
The guidelines also describe how the U.S. airlines should conduct their
safety audits, including what qualifications the auditors should possess,
how the system for reporting and correcting findings should be devised,
what audit results are satisfactory, how a safety monitoring system should
be established, and how frequently audits should be conducted. At the same
time, FAA officials said they provide the airlines with some flexibility
in designing their audit programs, as long as the programs address all of
the relevant ICAO standards. FAA reviewed and accepted an audit program
for each of the eight U.S. airlines to participate in the Code-Share
Safety Program. In designing their audit methodologies, some U.S. airlines
include other standards and best practices, such as ones developed by DOD,
in addition to the ICAO standards and recommended practices in the DOT
program guidelines. Moreover, to audit the safety of their foreign
code-share partners, six U.S. airlines have begun using standards from a
new international safety audit program developed by IATA called the IATA
Operational Safety Audit (IOSA), which incorporates the ICAO standards,
plus many additional industry best practices. IOSA was developed by IATA
to improve global airline safety and promote audit efficiency by reducing
redundant audits. In 2004, FAA accepted the IOSA program as a methodology
that would meet the Code-Share Safety Program guidelines.

24The Chicago Convention provides that signatories to the Convention
(countries), and thus the airlines under their oversight, must meet all
the ICAO annexes containing international aviation safety standards.
Including the United States, 188 countries are signatories to the
Convention.

Page 17 GAO-05-930 Aviation Safety

Under the Code-Share Safety Program guidelines, after the U.S. airlines
have completed the audits and the foreign airlines have taken all
corrective actions, the U.S. airlines' safety directors (or similar
officials) should provide written statements to FAA, known as compliance
statements, affirming that the audits were conducted in accordance with
the guidelines and that the foreign carriers meet the applicable ICAO
standards. According to an FAA official, U.S. airlines filed compliance
statements for all of the audit reports that FAA reviewed on foreign
carriers.25 The guidelines also indicate that to maintain their continued
code-share authorizations, U.S. airlines should audit the safety of their
foreign code-share partners and submit compliance statements to FAA every
2 years. We found that, for 12 out of 256 audit reports that FAA reviewed
from February 2000 through the end of fiscal year 2004, FAA granted the
U.S. airlines extensions of time to submit compliance statements because
delays had resulted from the outbreak of Severe Acute Respiratory Syndrome
(SARS), the U.S. airline planned to cancel the code-share arrangement, or
the foreign carrier needed more time to implement corrective actions. FAA
generally granted the extensions for between 1 and 3 months, during which
time the code-share arrangements continued.

25We reviewed FAA's files and did not find compliance statements that U.S.
airlines had filed for 25 of the 256 safety audit reports that FAA
reviewed from February 2000 through September 2004.

Page 18 GAO-05-930 Aviation Safety

TSA Clearances Reflect Security Assessments of Foreign Airlines That
Provide Direct Service to the United States, Its Territories, and Certain
Foreign Airports

Since 2000, DOT's Office of Intelligence and Security and Office of
Policy26 have provided security clearances to DOT's Office of
International Aviation for all U.S. airlines' proposed code-share
arrangements with foreign airlines. DOT's Office of Policy receives
security information on certain foreign carriers and foreign airports from
TSA,27 which assesses the security of foreign airlines that provide direct
service to the United States and its territories, as well as to certain
foreign airports. TSA provided security clearances for all proposed
code-share arrangements, from fiscal years 2000 through 2004, for which it
had information on the foreign carriers. Because it lacks the authority,28
TSA does not assess the security of other foreign carriers that do not
provide direct service to the United States and its territories.
Twenty-nine, or about one-third, of the 85 foreign code-share partners of
U.S. airlines do not provide service to the United States and its
territories and therefore have not been assessed for security by TSA.

DOT has also authorized U.S. airlines' code-share arrangements with
foreign airlines that serve many foreign airports that TSA has not
assessed for security. As a result, passengers traveling on foreign
code-share partners of U.S. airlines may be traveling to certain foreign
airports that could have security risks. TSA has the authority to assess
the security of a foreign airport (1) served by U.S. airlines, (2) from
which a foreign carrier serves the United States and its territories, or
(3) that "poses a high risk of introducing danger to international air
travel." Also, TSA can assess "other foreign airports the Secretary of
Homeland Security considers appropriate." TSA has assessed the security of
the foreign airports from which domestic and foreign airlines provide
direct service to the United States and its territories. However, in
addition to the foreign airports that provide direct service to the United
States and its territories, the foreign

26DOT's Office of Policy now includes security policy staff, formerly
housed within DOT's Office of Intelligence and Security, which provided
the security clearance information for foreign airlines.

27Before fiscal year 2002, when TSA was created and began conducting the
security assessments, FAA's Office of Civil Aviation Security was
responsible for conducting them.

28TSA has authority under 49 U.S.C. 44906 to regulate security aspects of
foreign air carriers that provide service to the United States. TSA
indicated that it does not have any special regulatory authority or
requirements for the code-share partners of U.S. airlines. TSA requires
foreign carriers in their operations to and from airports in the United
States to adhere to security measures that are similar to those TSA
requires of the U.S. carriers serving the same airports.

code-share partners of U.S. airlines serve other foreign airports. TSA
officials indicated they have begun to assess the security of other
foreign airports. DOT has not always had comprehensive data on which
foreign airports are being served by the foreign code-share partners, so
we were unable to determine how many foreign airports have not undergone
TSA security assessments.29 For one U.S. airline for which we had complete
foreign code-share route information,30 we determined that the foreign
partners served 128 foreign airports that did not provide direct service
to the United States and its territories, and some of these 128 had yet to
undergo TSA security assessments.

In assessing the security of foreign airports,31 TSA rates them in
categories and assesses airports in those categories as appropriate. DOT's
Office of International Aviation, which receives TSA's security ratings
through DOT's Office of Policy, authorizes code-share arrangements for
U.S. airlines with foreign carriers that serve foreign airports. According
to DOT security officials, it is not a problem to authorize code-share
arrangements with foreign airlines regardless of category because all
airports must meet ICAO security standards32 and are assessed
appropriately.33 Moreover, officials from TSA and DOT noted that both U.S.
and foreign airlines can be required to implement additional security
measures at those airports. For example, the TSA officials described an
instance in which a bombing in a Middle Eastern country resulted in the
implementation of additional security measures at an airport in that
country. TSA officials said that because that airport met ICAO security
standards, TSA had to rely on increased security measures voluntarily
implemented by the carriers to help mitigate the threat in that area.

29In some cases, DOT's documentation on foreign code-share routes refers
to "destinations" or "points" within a foreign country without specifying
which ones.

30We chose this U.S. airline because it has established code-share
arrangements with one of its foreign partners for nearly all its flights.

31Under 49 U.S.C. 44907, TSA is required to assess the effectiveness of
the security measures maintained at foreign airports from which a foreign
carrier serves the United States.

32ICAO's annex 17 covers security standards.

33 TSA also indicated that regardless of category, airlines from ICAO
signatory countries meet ICAO security standards and are assessed as
appropriate.

DOD Provides Additional Safety Oversight of Foreign Airlines

While not involved in DOT's code-share authorization process, DOD reviews
the safety of certain foreign airlines, thereby providing an additional
layer of federal oversight. The DOD Commercial Air Transportation Quality
and Safety Review Program is focused on ensuring that the airlines DOD
contracts with-to transport DOD personnel-meet applicable safety
standards. DOD requires U.S. airlines to audit the safety of their foreign
code-share partners every 2 years, on the basis of ICAO standards, and
monitor the safety of their foreign partners between safety audits. In
addition, DOD considers FAA's IASA ratings of foreign civil aviation
authorities in determining whether to allow foreign carriers to fly on GSA
city-pair routes.

DOD requires that foreign airlines be assessed on the basis of standards
that DOD developed called Quality and Safety Requirements, which are
focused on system safety processes.34 According to a DOD official, these
DOD standards include safety processes that are not ICAO requirements,
which form the basis of the DOT program. A DOD official said, for example,
that DOD requires airlines to have a safety audit program that analyzes
and assesses trends of safety information, including feedback from crew
members, for the purpose of enhancing safety, which is not an ICAO
standard. Although DOT can suspend code-share authorizations for safety
reasons, DOD can cancel, at any time, contracts with airlines that
transport DOD personnel if it determines that they are not sufficiently
safe. Between audits, DOD takes certain steps to monitor the safety of
foreign carriers that FAA does not take, such as conducting semi-annual
evaluations that include requiring foreign carriers that DOD contracts
with to complete questionnaires about their safety. DOD does not consider
TSA's security assessments of foreign airports in its review. DOD
officials said that they were unaware of TSA's foreign airport assessments
and would like TSA to provide the information for DOD to consider as part
of its reviews.

We found that DOD and FAA review many of the same safety audit reports on
foreign airlines. During fiscal years 2001 through 2004,35 DOD and FAA
reviewed 203 of the same reports of safety audits that U.S. airlines had
conducted of their foreign code-share partners. In reviewing these same

34DOD looks at system safety as a means of reducing risk through early
identification, analysis, elimination, and control of hazards.

35DOD had data on the reports that it reviewed from fiscal years 2001
through 2004, so we were unable to compare which reports FAA and DOD
reviewed during fiscal year 2000.

Page 21 GAO-05-930 Aviation Safety

reports, DOD and FAA reached the same conclusions about the safety of the
foreign carriers involved. Because DOD and FAA are reviewing many of the
same audit reports, the DOT and DOD safety programs are duplicating some
efforts. In its 1999 report, the DOT Inspector General recommended that,
in establishing a safety program on foreign code-share partners of U.S.
airlines, FAA and DOT's Office of the Secretary work closely with DOD to
maximize the use of limited resources, avoid duplication, and establish
protocols for exchanging information about the carriers' safety
assessments. A DOD official said that he communicates frequently with FAA
Code-Share Safety Program officials, and that DOD has a full-time liaison
in FAA's Flight Standards Service, who meets weekly with FAA officials.36
However, FAA officials said that although DOD requests IASA reports on
certain countries, FAA does not routinely communicate with DOD on its
safety audit reviews of foreign carriers, and no set criteria spell out
the circumstances under which FAA and DOD should communicate information
on the safety of U.S. airlines' foreign code-share partners.

When we discussed the possibility of reducing duplicative safety reviews
with FAA and DOD officials, an FAA official said he did not consider their
reviews to be duplicative because FAA and DOD have different objectives.
The FAA official said that FAA is reviewing the reports from the
perspective of a regulator, focusing on the carriers' compliance with ICAO
standards. Furthermore, the FAA official questioned whether FAA or DOD
could assume each others' responsibilities and report to different
departments. A DOD official also said the potential for duplication should
be considered from the perspective of DOD's and FAA's different objectives
in conducting their reviews. The DOD official said that DOD's objective is
to ensure that its requirements for transporting DOD personnel are being
met. Another DOD official said that FAA and DOD are not duplicating their
efforts because neither agency has the expertise to conduct its reviews
from the other agency's perspective.

36In a 2002 report on FAA and DOD responses to aviation safety concerns,
we found that FAA and DOD had gaps in their formal communication process,
which caused delays in bringing critical safety information to the
attention of key officials. GAO, Aviation Safety: FAA and DOD Response to
Similar Safety Concerns, GAO-02-77 (Washington, D.C.: Jan. 22, 2002). In
that report, we recommended that FAA and DOD develop a memorandum of
agreement for exchanging aviation safety-related information and research.
In January 2004, FAA and DOD signed a memorandum of agreement for
exchanging aviation safety-related information and research.

Code-Share Safety Program Incorporates Auditing Standards, but FAA's
Oversight of the Program Lacks Certain Management Controls

The Code-Share Safety Program incorporates selected government auditing
standards involving independence, professional judgment, and competence.
According to FAA officials, FAA and DOT's Office of the Secretary worked
with the airline industry to recommend that the Code-Share Safety Program
guidelines incorporate these standards. Government auditing standards
provide an overall framework for ensuring that auditors be independent and
exercise judgment, competence, and quality control and assurance in
planning, conducting, and reporting on their work.37 However, FAA's
management of the program did not incorporate certain internal controls,38
which the Office of Management and Budget requires federal managers to use
in assessing the effectiveness and efficiency of operations.39 These
controls are related to establishing reviewers' qualifications,
documenting the closure of safety audit findings, verifying corrective
actions taken in response to the findings, and documenting reviews.

Code-Share Safety Program Incorporates Selected Government Auditing
Standards

The Code-Share Safety Program guidelines recommend that the airlines
incorporate certain government auditing standards in their safety audit
reviews. FAA has reviewed the methodologies that the U.S. airlines follow
in auditing the safety of their foreign code-share partners, which
incorporate these auditing standards. Ensuring independence is critical,
for example, because the U.S. airlines generally audit the safety of their
foreign code-share partners themselves. Although we did not assess the
airlines' compliance with the independence standard, U.S. airline
officials told us that they ensure independence by separating their safety
and marketing departments organizationally to prevent any possible
influence from the marketing staff on the safety audit results. In
addition, safety officials at the

U.S. airlines participating in the Code-Share Safety Program indicated
that other airline departments do not have any input into their safety
audit results. Moreover, some airline safety officials said they were not
aware of the specific financial arrangements involved in their airlines'
code-share

37GAO, Government Auditing Standards, GAO-03-673G (Washington, D.C.: June
2003).

38GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999) and GAO, Internal
Control Management and Evaluation Tool, GAO-01-1008G (Washington, D.C.:
August 2001).

39Office of Management and Budget, OMB Circular A-123, Management's
Responsibility for Internal Control, (Washington, D.C.: 1995).

Page 23 GAO-05-930 Aviation Safety

partnerships. The program guidelines allow the U.S. airlines to employ
personnel or hire outside experts as consultants (contractors) to conduct
the safety audits. FAA officials said they are not concerned about
allowing the U.S. airlines to use their own employees to conduct the
safety audits because of the importance to the airlines of conducting
sound safety audits to limit the liability associated with establishing
code-share arrangements with foreign airlines. Table 1 lists the program
guidelines that incorporate the auditing standards.

 Table 1: Selected Government Auditing Standards Incorporated in the Code-Share
                                 Safety Program

                      Auditing standard Program guidelines

Independence: The audit organization and auditor should be free from
personal, external, and organizational impairments to independence.

The guidelines indicate that the U.S. airlines' safety auditors should
have organizational independence to perform the audits and be free to
objectively report to the airlines' senior management.

The guidelines indicate that U.S. airline safety directors (or similar
officials) should submit compliance statements to FAA affirming that their
foreign code-share partners meet international aviation safety standards.

The guidelines indicate that the safety auditors should have no financial
interest in or family affiliation with the foreign code-share partner
airlines.

Professional judgment: Professional judgment should be The guidelines
indicate that the safety audit report's content should be used in planning
and performing audits and in reporting the independent, objective, fair
and constructive, free of vagueness or results, including exercising
reasonable diligence to maintain ambiguity, and supported by competent and
relevant audit evidence. the highest degree of integrity, objectivity, and
independence.

Competence: Auditors should have the knowledge, skills, The guidelines
indicate that the safety auditors should have the and experience necessary
for their work, and these qualifications needed to conduct the safety
audits and analyze the elements should be addressed in the hiring process
and findings, including relevant training, experience in conducting safety
through continuous development. audits, and knowledge of international
aviation safety standards.

FAA's Reviews of the Safety Audit Reports Lacked Certain Management
Controls

Source: Government Auditing Standards and Code-Share Safety Program guidelines.

We found that FAA's reviews of the safety audit reports lacked certain
management controls-including establishing reviewers' qualifications,
verifying corrective actions, and documenting the reviews-but did employ
some management controls for monitoring and measuring performance.
Management controls are the continuous processes and sanctions that
federal agencies are required to use to provide reasonable assurance that
their goals, objectives, and missions are being met. These controls should
be an integral part of an agency's operations and include a continuous
commitment to identifying and analyzing risks associated with achieving
the agency's objectives, establishing program goals and evaluating
outcomes, and creating and maintaining related records.

Effective management controls require that personnel possess and maintain
a level of competence that allows them to accomplish their assigned
duties. In addition, management must identify the knowledge and skills
needed for various jobs, provide needed training, and obtain a workforce
that has the skills that match those necessary to achieve organizational
goals. However, we found that FAA has not established competence criteria
and qualifications for the personnel who review the airlines' safety audit
reports. As a result, the FAA staff who are reviewing the audit reports
have different backgrounds and training, which may lead to differing
interpretations of the standards. The FAA headquarters official who has
reviewed a large number of the safety audit reports has aviation
experience as a military pilot and is trained as an ISO 9000 auditor40 but
is not trained as an FAA inspector and was hired in an administrative
capacity. Two other FAA headquarters staff who review the audit reports
have been trained as aviation safety inspectors. Furthermore, five FAA
field inspectors who are conducting many of the reviews41 have not had
training in IOSA, which six U.S. airlines in the Code-Share Safety Program
are now using as standards to audit the safety of their foreign code-share
partners. As a result of inspectors not having this training, this could
impede FAA's review of the safety audits based on those standards.
Moreover, the Code-Share Safety Program manager was transferred to a new
position in February 2005, leaving the position vacant since that time. As
of June 2005,

40ISO 9000 is a certification process developed by the International
Organization for Standardization, which develops standards for business,
government, and technology based on quality management principles. An FAA
official said that the agency uses the ISO 9000 standards for the
Code-Share Safety Program for data collection and retention, continuous
improvement efforts, customer satisfaction, and performance measurement.
This official said that, for example, the ISO 9000 standards are used to
ensure consistency in how code-share applications are processed, that the
needed information is collected and provided to management to review the
applications, and that performance goals are achieved.

41Although FAA program staff based in Washington, D.C., review the
majority of the audit reports, FAA field safety inspectors review some of
them, because staffing is limited for this program. FAA provided
information indicating that one full-time-equivalent (FTE) position was
dedicated for the Code-Share Safety Program during fiscal years 2000,
2002, 2003, and 2004, and two FTEs were dedicated during fiscal year 2001.
In addition, FAA indicated that five inspectors helped conduct safety
audit reviews during those years on a part-time basis. FAA estimated that
the time these five inspectors spent reviewing audit reports represented
about 4 percent of an FTE's time per year. FAA also indicated that about
2.3 FTEs were used on the IASA program per year during fiscal years 2000
through 2004, including the time spent by field office staff.

FAA had not authorized this position to be filled and has denied a request
for another full-time staff position dedicated to the program. Since the
program manager's departure, other staff in FAA's International Programs
and Policy Office, which administers the Code-Share Safety Program, have
reviewed the safety audit reports in addition to performing their regular
duties. FAA program officials said that since the program manager was
transferred to another position, U.S. airlines must wait 3 to 4 weeks for
FAA to review their safety audits of foreign carriers, compared with
waiting 1 day to 2 weeks before his transfer, and that U.S. airlines now
must bring all of their safety audit reports to FAA in Washington, D.C.,
for review-a change that could hinder FAA's review of documentation, such
as safety monitoring systems, that may be located at the airlines'
facilities.42 An FAA management official said that because FAA's Flight
Standards Service,43 of which the Code-Share Safety Program is a part,
imposed a hiring freeze in January 2005 for budgetary reasons, only
critical positions are being replaced. The official said that because the
vacant position for the Code-Share Safety Program was not considered to be
critical, it was not filled.

Effective management controls also require the establishment of policies
and procedures to verify that corrective actions have been taken in
response to identified problems. According to FAA and airline officials,
FAA staff review each audit report for about 2 to 4 hours, identifying any
areas that need further clarification or resolution. Although FAA staff
review the reports of all audits that U.S. airlines have conducted of
their foreign code-share partners, normally they only spot check whether
findings that were identified during the audit were resolved. According to
an FAA safety official, FAA relies on the U.S. airlines' compliance
statements, signed by the airlines' safety directors, which affirm that
the audits were conducted in accordance with the guidelines and that the
foreign carriers met the applicable ICAO standards, as proof that all
findings have been resolved. However, FAA's reliance on the compliance
statements may not provide an effective management control to ensure that
corrective actions have been taken in response to audit findings. For
example, we found that FAA provided a memorandum of no objection to DOT's
Office of International Aviation about a foreign code-share partner that,
according to an official from its U.S. partner, had not implemented all

42FAA officials said that before the Code-Share Safety Program manager was
transferred to a new position, U.S. airlines brought the safety audit
reports of their foreign code-share partners to FAA in Washington, D.C.,
for review 90 percent of the time.

43FAA's Flight Standards Service is part of the Office of Aviation Safety.

Page 26 GAO-05-930 Aviation Safety

of the corrective actions needed to resolve the findings. The safety audit
identified dozens of findings, many of which were also found in a second
audit 2 years later and, according to the airline, subsequently corrected.
Furthermore, because FAA has not provided its reviewers or the airlines
with a standard definition of "safety-critical" findings that must be
corrected before the audit can be closed, it is unknown whether these open
findings were safety critical. Moreover, the reasonableness of leaving
open dozens of safety audit findings is questionable, as is FAA's reliance
on the airlines' compliance statements as proof that all corrective
actions have been made. Although the U.S. carrier temporarily suspended
the code-share arrangement with this foreign carrier, FAA officials said
the suspension occurred because of FAA's concern about the safety
oversight of that foreign airline's civil aviation authority, not because
of the number of audit findings or their lack of closure.

FAA uses compliance statements, which are based on the safety audit
results, as reasonable assurance that the foreign airlines meet ICAO
safety standards. However, FAA's reliance on compliance statements may not
provide such assurance because FAA has accepted compliance statements as
proof that the carriers met ICAO safety standards, even in situations when
it questioned the audit results. For example, FAA provided memorandums of
no objection to DOT's Office of International Aviation that were based on
safety audits conducted by one airline contractor over a 4-year period,
many of which did not identify any findings,44 even though an FAA official
told us that he had discussed with the airline FAA's concern about the
number of audits that did not identify any findings.45

44We found that over half of the contractor's audit reports had no
findings. By comparison, we estimate that 25 percent of all audits were
closed with no findings.

45The airline stopped using this contractor in 2003, after which the
airline conducted the safety audits itself. The airline indicated that its
decision to begin conducting the audits using its own resources was based
on the opportunity to lower costs while expanding its auditing checklists
to include elements from the IOSA program. In addition, the airline
indicated that using its resources provided an improved opportunity to
communicate with its counterparts at the code-share airline and exchange
recommended safety practices. An official from the airline said that the
airline shared FAA's concern about the relatively low number of findings
contained in the contractor's audit reports, but explained that the
airline had no basis for comparison since it was not conducting the audits
itself. The official said that now that the airline has conducted several
safety audits itself, there have been only a few instances when findings
impacting the safety of flight have been discovered. In addition, the
official said that many times findings are identified and resolved before
the audit team concludes the audit and that most of the recent findings
involve lack of documentation for established practices.

According to the Code-Share Safety Program guidelines, U.S. airlines
should not submit compliance statements to FAA until all corrective
actions have been completed; the statements should not be predicated on
future actions that are planned to be completed. However, FAA officials
said that they allow "nonsafety-critical" findings identified during the
audit, such as deficiencies in personnel training and omissions in
manuals, to be addressed later. Because FAA has not provided the airlines
with a standard definition of "safety-critical" findings that must be
corrected before the audit can be closed, airlines could interpret the
term inconsistently in documenting and resolving corrective actions. An
FAA official indicated that developing a definition of safety critical
would be difficult and time consuming. An aviation safety expert we
consulted said that a definition of safety critical would require
considerable study and criteria development because situations can be
critical to safety in many ways. He added that a well-trained and
experienced aviation safety inspector could identify a safety-critical
situation. However, this same expert suggested that, as a quality
assurance measure, FAA select several audits each year and check the
underlying documentation in depth. Similarly, the DOT Inspector General
recommended in 1999 that FAA conduct comprehensive audits of a sample of
safety audits to confirm that carriers have applied agreed-upon standards
and procedures in conducting the audits.46 However, even if FAA were to
conduct such comprehensive audits, without a definition of safety-critical
findings, the agency would still lack assurance that safety-critical
findings were identified and resolved.

FAA indicated that from August 2003 through July 2004,47 18 of the 50
audit reports on foreign airlines it reviewed were returned to U.S.
carriers for further action and 4 were placed on hold pending the outcome
of IASA reviews; the other 31 foreign carriers received memorandums of no
objection. Furthermore, FAA officials said that, according to anecdotal
information from some U.S. carriers, too many safety concerns were
identified during some safety audits for the carriers to proceed with
applications for code-share authorization. However, FAA officials said
they do not know how many times the safety audits have prevented airlines
that pose safety concerns from becoming code-share partners with U.S.
airlines.

46DOT Office of the Inspector General, Aviation Safety Under International
Code-Share Agreements, Report No. AV-1999-138 (Washington, D.C.: Sept. 30,
1999).

47FAA did not maintain data on the number of audit reports that it
reviewed and placed on hold for other years.

Page 28 GAO-05-930 Aviation Safety

In addition, effective management controls require that documentation be
created and maintained to provide evidence of executing approvals,
authorizations, verifications, and performance reviews. FAA devised a
checklist for agency staff to complete while reviewing safety audit
reports to check for compliance with the program guidelines, record
information about findings, or report irregularities. FAA officials said
that the checklist was developed to establish and maintain consistency in
reviewing the audit reports. However, we found that the checklist did not
consistently document what actions FAA took when reviewing the airlines'
audit reports, which findings it reviewed, and which corrective actions it
verified were implemented. For example, in some cases, the checklist
provided information about the closure of findings, but in other cases, no
information was recorded about closure. FAA officials said that portions
of the checklist may be left blank until the FAA reviewer has completed
discussions with the airline and answered all of the concerns to his or
her satisfaction, at which time the FAA reviewer will note that no
irregularities were found. Officials said that in such cases, the
checklist would not capture this process. However, not completing this
information could hinder future reviews of the same airline by impeding
comparisons between audits. Furthermore, because FAA often lacked
documentation that it had verified the closure of findings, we were unable
to determine how frequently FAA may have provided memorandums of no
objection on foreign carriers that had not implemented all corrective
actions in response to the findings, as occurred in the example discussed
earlier.

Effective management controls also include monitoring to assess the
quality of performance over time. Management controls generally should be
designed to ensure ongoing monitoring during normal operations and include
regular management and supervisory activities, comparisons,
reconciliations, and other actions people take in performing their duties.
FAA officials said that the manager of the International Programs and
Policy Division, which is responsible for administering the Code-Share
Safety Program and is part of FAA's Flight Standards Service, is briefed
by the Code-Share Safety Program staff on the results of their safety
audit reviews before a recommendation is made to the Director of Flight
Standards to sign the memorandums of no objection that are sent to DOT's
Office of International Aviation. This procedure allows the International
Programs and Policy Division manager to monitor the results and the
decision-making processes involved. In addition to reviewing the audit
reports, FAA monitors the safety of foreign carriers through other sources
of information. FAA officials said they also review any accident and
incident information from aviation safety databases, company financial
histories, ICAO reports on the countries' civil aviation authorities,48
media reports, ramp inspection results,49 and information from FAA
international field offices about their inspections of foreign aircraft
when these aircraft enter the United States.50

According to the Code-Share Safety Program guidelines, the U.S. airlines
participating in the program should have a process to monitor the safety
of their foreign code-share partners on an ongoing basis, and FAA should
review this monitoring process. FAA officials said they have reviewed the
monitoring systems at seven of the eight U.S. airlines participating in
the program.51 However, FAA had not documented its reviews of the
monitoring systems, so we were unable to verify that activity.
Furthermore, safety officials at three of the eight U.S. airlines said FAA
had not reviewed their monitoring systems.52 Without an FAA review,
deficiencies in these monitoring systems might not be identified.

FAA does not maintain information on the types and frequencies of audit
findings to provide a means of comparing the findings from initial and
recurrent audits of the same airline, or perform trend analysis that could
help identify problems across airlines or fleets. Trend analyses would be
useful for monitoring, on an ongoing basis, the effectiveness of FAA's
internal quality control system. FAA officials said the checklists are not
used for tracking or trend analysis and that FAA does not formally examine
either the safety problems occurring most often or the geographic areas

48ICAO's Universal Safety Oversight Audit Program regularly audits
countries that have signed the Chicago Convention of 1944, called ICAO
Contracting States, to determine the status of the states' implementation
of safety oversight and relevant ICAO standards and recommended practices,
associated procedures, guidance material, and safety-related practices.

49FAA conducts annual ramp inspections of foreign carriers entering the
United States or monthly inspections (called the special emphasis list)
when the results of inspections are repeatedly poor or the airline's
country of operation is placed in IASA category 2.

50Under 14 C.F.R. 129, FAA may inspect foreign airlines when they enter
the United States, but FAA does not inspect foreign aircraft outside the
United States. The Chicago Convention limits FAA and other civil aviation
authorities to regulating or auditing foreign airlines within their own
country's airspace.

51An FAA official said that FAA had not observed the eighth U.S. airline's
monitoring system because it was a new participant in the Code-Share
Safety Program.

52An official at another U.S. airline said that FAA had observed its
system to track open safety audit findings but not its entire monitoring
system.

U.S. Airlines Are Auditing Foreign Partners' Safety, and Partners Are
Taking Corrective Action, but Documentation of Corrective Actions Is Often
Lacking

where problems are occurring most frequently. However, the officials said
that the FAA program manager does want to have a general idea of the types
of problems being found, and the checklist provides this information
informally. According to one FAA official, the purpose of the checklist is
to ensure that the DOT guidelines are met, rather than to create a
database of findings. In our view, not maintaining such documentation
could impede analyses of trends and comparisons of findings, as well as
limit opportunities for assessing risks and prevents determining whether
FAA reviewed those findings.

Establishing performance measures is another component of effective
management controls. The Government Performance and Results Act of 1993
requires agencies to, among other things, set strategic and annual
performance goals, and measure and report on performance toward these
goals. Management controls play a significant role in helping managers
achieve those goals. FAA has established certain performance goals for the
Code-Share Safety Program, including reviewing at least 40 safety audit
reports during fiscal year 2004. FAA exceeded this goal by completing 57
reviews. In addition, FAA set a performance goal of meeting with major

        U.S.
                air carriers to request feedback on the Code-Share Safety
                Program. FAA met this goal in 2004. The eight U.S. airlines
                participating in the Code-Share Safety Program have conducted
                the safety audits of their foreign code-share partners and
                have monitored the safety of their code-share partners
                between audits, as specified under the guidelines. Through
                those audits, the U.S. airlines have identified numerous
                safety issues associated with their foreign partners'
                operations. After completing the audits, the U.S. airlines
                have submitted written statements to FAA affirming their
                foreign code-share partners' compliance with ICAO standards,
                as specified under the guidelines. However, the U.S. airlines
                have not always documented the implementation of actions
                taken in response to the findings. Many airlines are now
                moving to adopt the international safety audit program, IOSA,
                which contains procedures that would help to ensure that
                corrective actions implemented in response to audit findings
                are documented. Most

U.S.
           airline officials said they believe the Code-Share Safety Program
           provides reasonable assurance of safety or is effective, but some
           officials also suggested various changes in its administration.

U.S. Airlines' Safety Audits Primarily Identified Findings in Foreign
Partners' Flight Operations and Maintenance and Engineering

The U.S. airlines participating in the Code-Share Safety Program have been
assessing the safety of their foreign code-share partners at least every 2
years, as the guidelines specify.53 We estimate, based on the results of
our sample of 149 randomly selected safety audit reports, that there are
2,047 findings among the audits that the eight U.S. airlines conducted of
foreign carriers, which FAA reviewed from February 2000 through September
2004.54 The program guidelines define a finding as an instance in which
"the performance of the standard does not meet the established criteria"
under ICAO standards. We estimate that 75 percent of the audits of foreign
carriers that the eight U.S. airlines conducted of foreign carriers and
that FAA reviewed from February 2000 through September 2004 contained at
least one finding. Airline officials told us that most findings related to
a lack of documentation. Documentation is important to ensure the
implementation of management controls, which should appear, for example,
in management directives and operating manuals. However, we found that
many of the safety audit findings were broader in scope than a lack of
documentation and extended to a lack of underlying policies and
procedures. We further estimate that findings related to deficiencies in
policies and procedures accounted for 23 percent55 of all findings.

The audits reviewed the carriers' compliance in eight major categories
(organization, flight operations, flight dispatch, maintenance and
engineering, cabin operations, cargo and dangerous goods, ground handling,
and security).56 As shown in figure 5, the findings spanned all eight
categories, but the largest numbers were in two categories: (1) flight
operations, which govern the activities of the pilots, including training,
and

(2) maintenance and engineering, which involves the oversight of
activities

53As discussed earlier, for 12 of the 256 audit reports that FAA reviewed
from February 2000 through September 2004, FAA granted the U.S. airlines
extensions of time to submit compliance statements. In some cases, U.S.
airlines conducted safety audits of their foreign partners more frequently
than every 2 years.

54We are 95 percent confident that the actual number of findings lies
between 1,450 and 2,643. All percentage estimates from the sample of
audits have sampling margins of error of plus or minus 10 percentage
points or less unless otherwise noted. All numerical estimates other than
percentages have margins of error of plus or minus 10 percent of the value
of those estimates unless otherwise noted. See appendix I for additional
information on our sampling methodology.

55The 95 percent confidence interval surrounding this estimate ranges from
15 to 36 percent.

56Most of the audit reports that we reviewed were organized into these
eight categories.

Airlines Submitted Compliance Statements to FAA but Did Not Always
Document the Closure of Findings

to maintain, repair, and overhaul aircraft, aircraft engines, and parts.
In the flight operations category, the findings included a lack of drug
and alcohol testing policies and a lack of documentation on flight time
and rest requirements for flight personnel. In the maintenance and
engineering category, one common type of finding related to the
maintenance and calibration of tools and supplies, which could affect
safety.

Figure 5: Percentage of Findings by Audit Category

Flight operations

3%

Unknown

4%

Security

Cabin operations

Cargo and dangerous goods

Organization

Ground handling

Flight dispatch

Maintenance and engineering

Source: GAO analysis of the safety audit reports.

Note: Percentages do not total to 100 because of rounding.

After U.S. airlines completed their audits, their safety directors
submitted statements to FAA affirming their foreign code-share partners'
compliance with ICAO standards. FAA officials said they rely on these
compliance statements as the primary evidence that the foreign code-share
partners of

U.S. airlines have resolved all safety-critical findings. However, on the
basis of our review of a sample of the audit reports, we estimate that,
for 68 percent of the identified findings,57 the documentation was
insufficient to demonstrate that the findings had been closed or were
resolved. Specifically, the documentation either failed to indicate at
least one of the following three elements:58 (1) what corrective action
was taken, (2) who accepted the corrective action, and (3) when the
corrective action was accepted or the documentation was insufficient to
determine whether the findings were closed. An estimated 28 percent59 of
the audit reports that contained findings had at least one finding that
lacked all three elements documenting corrective actions.60 The Code-Share
Safety Program guidelines do not indicate that U.S. airlines should have
documentation available for FAA's review to provide evidence of what
corrective action was taken, who accepted the action, and when the action
occurred in response to the findings identified in audits of their foreign
code-share partners.61

We asked the eight U.S. airlines participating in the Code-Share Safety
Program what types of systems they were using to track any findings that
were not resolved when the safety audit was complete. We found that three
of the U.S. airlines were using computer systems to track the closure of
such open findings; three other airlines had computer systems that could
track the closure of findings, but their foreign partners had no open
findings; and two airlines indicated that they did not have systems to
track open findings because their foreign partners did not have any open
findings. At one U.S. airline that was using a computer system to track
open findings, officials said that a computer malfunction resulted in the
loss of 6

57These findings were not categorized as being either safety critical or
nonsafety critical. Furthermore, because FAA had not developed a
definition of safety-critical findings, which FAA requires airlines to
resolve immediately, we could not determine how many safety-critical
findings lacked complete documentation of corrective action.

58We identified these three elements as sufficient evidence that the
finding was resolved.

59The 95 percent confidence interval surrounding this estimate ranges from
16 percent to 44 percent.

60An estimated 64 percent of the audit reports that contained findings had
at least one finding that lacked at least one element documenting
corrective actions.

61The program guidelines indicate that the U.S. carriers should ensure
that their foreign partners have processes in place that identify "types
of problems that may occur from common or special circumstances" and that
corrective action takes into account, among other things, "the existence
of documentation of the changes made to analyze the effectiveness of the
corrective action."

months of data.62 An official from this airline said that before 2004, the
airline coordinated closure of any findings directly with the contractor.
When asked to produce this information, the airline did not have finding
closure documentation available for audits conducted before 2004. This
contractor said that although his firm was asked a few times by the U.S.
carrier to check on the closure of audit findings by its foreign partner,
the

U.S. airline was responsible for tracking the closure of findings.

Airlines also lacked documentation on the closure of findings in part
because an unknown number of findings were closed on-site during the
audits and not documented. The FAA program manager said he discouraged
closing out findings on-site without documentation during the audits
because it does not leave an audit trail about what findings were
identified. Documentation provides a record of the execution of management
controls which, in this situation, relate to the implementation of
corrective actions.

We estimate that 25 percent of the audits were closed with no findings
identified. According to an FAA official, audits that identify no findings
are questionable because the airlines must comply with so many
requirements under either ICAO or IOSA standards. One U.S. airline used a
contractor to conduct 31 of the audits of foreign airlines in our sample
from 1999 through 2003, over half of which identified no findings.63 As
described earlier, an FAA official told us that he had discussed with the
airline FAA's concern about the number of audits conducted by the
contractor that did not identify any findings. The FAA official also said
that he helped the airline revise its approach to conducting the audits as
a part of its internal evaluation program. The contractor told us that it
is common for the safety audits not to identify findings because the
airlines have prepared for the audit, and the audit findings are sometimes
resolved on the spot. The contractor also said that his firm often
recommended best practices that the foreign carriers could implement, but
these recommendations did not relate to violations of ICAO standards and,
thus, were not considered to be

62An official from this airline said that although the electronic data
were lost, the airline still had the paper documentation of the
information that was contained in the computer system. This official also
said that the airline had implemented a new tracking system, which he said
was an improvement over the previous system.

63From 2000 to 2004, six of the eight U.S. airlines used contractors to
audit the safety of their foreign code-share partners, although three used
them for only one audit. U.S. airline officials said they sometimes used
contractors because of convenience (e.g., when contractors were located
near the foreign airlines' operations).

U.S. Airlines Also Monitor the Safety of Their Foreign Partners between
Audits

findings. Furthermore, this contractor said that a representative from the

U.S. airline, who accompanied the contractor's auditors on the audits,
kept the U.S. airline informed.

The eight U.S. airlines participating in the Code-Share Safety Program
have processes to monitor the safety of their foreign code-share partners
on an ongoing basis, including their accident and incident rates,
financial condition, equipment age, labor issues, and other issues, as
called for in the program guidelines. Safety officials from the eight U.S.
airlines said that, to their knowledge, no fatal accidents had occurred on
their foreign code-share routes since the Code-Share Safety Program began
in 2000. We observed the systems and information sources that each U.S.
airline used for monitoring. Airline officials showed us, for example,
safety questionnaires that they sent to their code-share partners between
formal safety audits, news subscription services, and aviation safety Web
sites. Some airline officials also said they occasionally made on-site
visits to monitor their partners' safety. The airlines also indicated that
they monitor any accident and incident data for their code-share partners.
According to a safety official at one U.S. airline, a carrier's past
accident and incident record does not conclusively prove that a safety
problem exists, but it can be an indicator of other deficiencies, such as
gaps in training. Some officials from airlines that are part of global
alliances also said that they share safety information about their mutual
foreign code-share partners. Four U.S. airlines had created computer
databases to maintain this monitoring information while the other four
maintained paper files.

Use of International Safety Audit Program May Address Some Weaknesses in
the

U.S. Safety Audit Program

As U.S. airlines and their foreign code-share partners begin to use IOSA-a
new safety audit program developed by IATA-some of the weaknesses that we
observed in the Code-Share Safety Program may be addressed, and

U.S. airlines may receive other benefits. Increased use of IOSAs may help
to ensure that audit findings are resolved and corrective actions
implemented. IOSA requires that findings that are identified during the
audit be documented, excluding those that are corrected immediately
on-site during an audit.64 In addition, IOSA requires documentation of
closure

64According to IATA, when an airline being audited implements immediate
corrective action while the audit team is still on site, the audit team is
permitted to exclude the recording of a finding only if it is able to
verify full implementation of comprehensive and permanent corrective
action.

Page 36 GAO-05-930 Aviation Safety

for findings, including the three elements we identified-(1) a description
of the corrective actions taken, (2) who accepted the corrective actions,
and (3) when the corrective action was accepted-as well as the reasoning
used by the auditing organization to clear the findings. As noted,
documentation of one or more of these elements was missing, or it could
not be determined if elements were missing for an estimated 68 percent of
the audit findings.

Six of the eight U.S. airlines use IOSA standards to audit the safety of
their foreign code-share partners, one may do so in the future, and one
does not plan to use the standards to audit the safety of its foreign
code-share partner.65 Moreover, according to some airline officials, U.S.
airlines have a financial incentive to encourage their foreign code-share
partners to undergo IOSAs because the auditing costs66 are shifted from
the U.S. airline to its foreign partner. However, not all U.S. airlines
plan to require IOSAs of their foreign code-share partners.67 For example,
officials from one U.S. airline said that IOSAs may be too expensive for
some small foreign carriers. Similarly, officials at another U.S. airline
said that IOSAs are applicable to airlines with large fleets and major
processes but may not be practical for smaller airlines. Officials at a
third U.S. airline said they preferred to continue conducting the safety
audits themselves, rather than using an auditing organization selected by
IATA, because they wanted the assurance of examining their partners'
operations in person, rather than relying on an external organization.

Finally, increased use of IOSAs may help standardize aviation safety
auditing and streamline FAA's review of audit reports. Under the IOSA
program, the airlines can obtain the audit results of their mutual
code-share partners. Of the eight U.S. airlines with foreign code-share
partners, six share 18 of the same foreign code-share partners. FAA
recently allowed

U.S. airlines to submit for review audit reports that other U.S. airlines
had

65One U.S. airline was using an auditing organization accredited by IATA,
which is an independent business unit of that U.S. airline.

66An IATA official said the average cost of conducting a safety audit of a
foreign airline was between $50,000 and $70,000.

67IATA originally set a goal of having all 265 of its members undergo
IOSAs by January 2006, but it later revised that to having 140 airlines
undergo IOSAs by the end of 2005. As of June 2005, 88 IOSA audits had been
completed worldwide, including 66 IATA members. In May 2005, IATA's Board
of Governors decided in principle that all IATA members will have to
undergo IOSA.

Most U.S. Airline Officials Believe the Code-Share Safety Program Provides
a Reasonable Assurance of Safety

conducted on a shared foreign code-share partner.68 Some U.S. airlines, as
members of global airline alliances, plan to share their audit reports of
foreign partners and reduce duplicative audits.69 The IOSA program should
make it easier for airlines that are not in such alliances to share audit
reports.70 Increased sharing of the reports could reduce the number of
safety audits that the U.S. airlines would need to conduct of their
foreign partners and could thus reduce the number of reports that FAA
would need to review.

Officials at most U.S. airlines participating in the Code-Share Safety
Program told us they believe that the program provides reasonable
assurance of safety concerning their foreign code-share partners or is
effective. One airline official described the program as an "ingenious
technique" that has had the effect of raising aviation safety standards
worldwide by ensuring that safety issues will be resolved. This airline
official said that some foreign airlines, seeking to become code-share
partners of U.S. airlines, have restructured programs, rewritten manuals,
and instituted new management techniques-evidence, he said, of the
program's effectiveness. Another U.S. airline official said that, without
the Code-Share Safety Program, U.S. airlines might not conduct safety
audits of their foreign code-share partners. An official at another U.S.
airline said the Code-Share Safety Program is a means to ensure that a
carrier meets minimum ICAO-based international aviation safety standards
and that the IOSA program creates a baseline of auditing standards to be
followed worldwide. However, the official said that a safety audit,
whether conducted by an auditing organization selected by IOSA or a U.S.
airline, is only a snapshot of the carrier for the period in which the
audit is

68FAA requires that the audit be conducted using an FAA-accepted
methodology and that the airline that is relying on the audit report
submit a compliance statement to FAA.

69Five of the eight U.S. airlines participating in the Code-Share Safety
Program belong to global airline alliances with other U.S. airlines in the
program. Continental, Delta, and Northwest belong to the Sky Team
Alliance, and United Airlines and US Airways belong to the Star Alliance.

70According to IATA, any interested party, such as an airline or
regulator, may make a request through IATA to view the audit report of an
airline that is on the IOSA registry, which lists the airlines that have
undergone IOSA. After a requester "qualification and verification
process," which includes the signing of a nondisclosure agreement and
specific approval for release by the audited airline, the report is made
available to the requesting party. The use of IOSA audit data by
regulatory authorities was encouraged in November 2004, according to IATA.

conducted. The airline official said that the carrier's actions before the
audit or after the audit may differ and cannot be adequately evaluated
until additional safety information is collected from the carrier between
safety audits or until the next safety audit.

An official at another U.S. airline participating in the Code-Share Safety
Program said that although a safety audit provides a very good assessment
of an airline's compliance with aviation safety standards, it does not
guarantee the safety of the carrier's operations. This official added that
even if a safety audit were conducted on a carrier monthly, it would not
guarantee that the carrier would never have an accident. Furthermore, an
official at another U.S. airline said that the Code-Share Safety Program
is not necessarily required to provide reasonable assurance of safety
concerning the foreign code-share partners of U.S. airlines and that the
airline does not necessarily believe that formal, FAA-approved safety
audits are the only way to gain such assurance. This airline official said
that U.S. airlines should not be required to conduct safety audits of
foreign airlines that are operating out of countries that FAA rated as
IASA category 1 and that U.S. airlines should be able to choose whether to
conduct safety audits in countries that FAA has rated as IASA category 2
or has not rated. This airline official added that while the U.S. airline
may continue to audit its partners on its own, it does not believe that
FAA should oversee this process. However, an FAA IASA program official
told us that the IASA program focuses on the capabilities of the foreign
civil aviation authorities and does not ensure the safety of any carriers
operating in IASA category 1 countries. This FAA official also said that
inconsistencies in aviation safety oversight can exist throughout the
world, even in countries with "higher" standards, and that some countries
exceed ICAO standards, while others do not.

A safety official at one U.S. airline said he believed that the Code-Share
Safety Program guidelines should be made regulations. Although officials
from DOT's Office of International Aviation and FAA said that making the
program regulatory is not needed because it is working well, this airline
safety official said that making the program regulatory would allow
requirements to be applied more evenly to all airlines participating in
the program. This airline official added that DOT is requiring the
guidelines to be followed and therefore they are regulations in practice.
A safety official at another U.S. airline questioned why DOT requires
"guidelines" to be followed. He said that if DOT wants "rigid compliance"
with the guidelines, it should make the program regulatory. A safety
official at a third U.S. airline said the program's requirements should be
standardized, noting that, for example, FAA was inconsistent about its
requirements for reviewing auditors' qualifications. An aviation safety
expert we consulted also said that the program should be made regulatory,
observing that both the Code-Share Safety Program and IASA suffer from a
"lack of regulatory teeth" and that making them regulatory would provide
clarity to the DOT requirements, which he said are "mere policies." At the
same time, this expert said that although the program is not regulatory,
the Code-Share Safety Program guidelines clearly lay out what is expected
of the airlines and set the standards that must be met. He added that
under the guidelines,

U.S. airlines are held accountable for the safety of their foreign
code-share partners.

Finally, officials at two airlines said that they would like FAA to
provide a definition of safety critical or to define when an audit is
considered to be closed so that it would be clear which findings must be
resolved before closing an audit and submitting a compliance statement. As
noted, FAA officials said that they allow nonsafety-critical findings
identified during the audits to be addressed after the code-share
arrangement is authorized.

The safety of foreign code-share partners of U.S. airlines is important

Conclusions

because several million people fly on those foreign carriers using tickets
purchased from U.S. airlines each year. Under the Code-Share Safety
Program, the U.S. airlines are auditing the safety of their foreign
code-share partners and identifying safety concerns, which the foreign
carriers are addressing. However, FAA's reviews of the safety audit
reports lack management controls for establishing reviewers'
qualifications, verifying corrective actions, and documenting the reviews.
FAA, for example, has not established the qualifications needed to review
safety audit reports, and FAA field inspectors, who are reviewing many of
the safety audit reports, have not been trained in the IOSA
program-potentially impeding FAA's review of audits that were conducted
using those standards. In addition, the program guidelines do not provide
clear direction to the U.S. airlines and FAA reviewers on which concerns
are critical to safety and must be addressed before DOT's Office of
International Aviation will authorize or reauthorize a code-share
arrangement. Without a definition of safety-critical concerns and complete
documentation of the closure of findings, FAA lacks clear criteria for
responding to requests from DOT's Office of International Aviation about
the safety of foreign carriers and lacks assurance that safety-critical
concerns have been addressed. Furthermore, FAA is not using effective
management controls when it fails to document its reviews of the airlines'
safety audit reports. Without complete documentation, a determination
cannot be made of what actions FAA took when reviewing the reports, which
findings it reviewed, and which corrective actions it verified were
implemented. Because documentation on FAA's verification of the closure of
findings was often lacking, we were unable to determine how frequently FAA
may have failed to object to the authorization of code-share arrangements
with foreign carriers that had not implemented all corrective actions in
response to the findings. FAA also has not implemented a DOT Inspector
General's recommendation that it conduct a comprehensive examination of a
sample of audit reports to verify the underlying documentation.
Furthermore, FAA's not collecting and tracking safety audit findings is an
obstacle to conducting trend analysis or spotting anomalies.

The airlines' increasing adoption of the IOSA program as a worldwide
safety auditing standard is likely to change how FAA conducts its safety
reviews of foreign code-share partners of U.S. airlines. Moreover, IOSA
requires that actions to correct all findings, except those that are
corrected during an audit, be documented-a requirement that is lacking in
FAA's program. However, the adoption of the IOSA program is likely to be
gradual, given that, as of June 2005, 66 of IATA's 265 members had
completed the program.

Finally, although DOD and FAA officials said they have different program
objectives, the two federal agencies are nevertheless duplicating efforts
by reviewing many of the same audit reports. In addition, DOD is not
receiving the foreign airport security assessment information from TSA
that DOT is receiving. TSA's information would provide DOD with more
complete data for its safety reviews.

To improve the safety oversight of foreign code-share operations, we

Recommendations

recommend that the Secretary of Transportation direct the FAA
Administrator to implement the following three recommendations:

1. Revise the Code-Share Safety Program guidelines to improve the
effectiveness of the program and the clarity of the procedures that the
airlines should follow in documenting and closing out safety audit
findings. Because the audit guidelines indicate that the airlines should
not submit compliance statements until all corrective actions have been
completed, but FAA is allowing the airlines to resolve "nonsafetycritical"
findings later, FAA should consider either following that guideline or
defining "safety-critical" audit findings, so that the airlines and FAA
reviewers know which types of findings must be corrected

before submitting the compliance statements.

ines' safety audit reports;
       identifying ways to document its reviews of the airlines' safety audit
       reports; increasing the scrutiny of audit reports that have an
       unusually high or low number of findings, periodically selecting a
       sample of safety audits to conduct a comprehensive review of the
       underlying documentation collected; and collecting and analyzing
       information on the audit findings for the foreign code-share partners
       of U.S. airlines so that the data can be more easily quantified and
       analyzed to spot possible trends and anomalies, should FAA decide such
       analyses are needed.
.

We provided drafts of this report to the Department of Homeland Security,

Agency Comments

(DHS), DOD, and DOT. DHS provided written comments, agreeing with our
recommendation regarding TSA. DHS's comments are reprinted in appendix
III. DOD provided no comments on our findings or recommendations. DOD and
DOT provided some technical clarifications, which we incorporated into
this report as appropriate. We received comments from DOT officials,
including FAA's Deputy Associate Administrator for Aviation Safety. FAA
generally agreed with the report and agreed to consider our
recommendations. In addition, FAA provided comments on the Code-Share
Safety Program, emphasizing that it is a collaborative effort between
DOT's Office of the Secretary, FAA, and the air carriers. FAA officials
also said that the program established guidelines for approving
international code-share operations, with the intent of encouraging the
highest possible levels of safety for international code-share operations.
According to FAA, the program outlines the necessary steps that U.S. air
carriers must follow in seeking approval from DOT to conduct code-share
operations with foreign air carriers. The officials added that the
Code-Share Safety Program charges U.S. air carriers with the primary
responsibility for ensuring that their foreign code-share partners comply
with applicable international aviation standards.

As agreed with your office, unless you announce the contents of this
report earlier, we plan no further distribution until 30 days from the
date of this letter. At that time, we will send copies of this report to
interested congressional committees; the Secretary of Transportation; the
Administrator of FAA; the Secretary of Defense; the Secretary of Homeland
Security; and the Assistant Secretary of Homeland Security for the
Transportation Security Administration. Copies will also be available to
others upon request and at no cost on GAO's Web site at www.gao.gov.

If you or your staff have any questions about this report, please call me
at (202) 512-2834 or [email protected]. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this report
are listed in appendix IV.

Sincerely yours,

Gerald L. Dillingham, Ph.D. Director, Physical Infrastructure Issues

Appendix I

                       Objectives, Scope, and Methodology

Our objective was to review the measures that the federal government is
taking to provide reasonable assurance of safety and security when
passengers travel on flights operated by the foreign code-share partners
of

U.S. airlines. To accomplish this, we reviewed (1) the extent to which the
Department of Transportation's (DOT) authorization of U.S. airlines'
code-share arrangements with foreign airlines is designed to consider
safety and security, (2) how well FAA has managed the Code-Share Safety
Program, and (3) the extent to which U.S. airlines have implemented the
Code-Share Safety Program, and the results of their efforts.

To determine how safety and security are considered in DOT's authorization
of U.S. airlines' code-share arrangements with foreign airlines, we
interviewed officials at DOT's Office of International Aviation, Federal
Aviation Administration (FAA), Transportation Security Administration
(TSA), and the Department of Justice (DOJ) and reviewed the Code-Share
Safety Program guidelines and related program documentation, applicable
international aviation safety standards, and relevant legal authorities.
Our review covered the U.S. airlines' code-share partnerships with foreign
carriers that DOT authorized from February 2000, when the Code-Share
Safety Program began, through fiscal year 2004.1 At DOT, we interviewed
the officials who decide whether to authorize such partnerships about the
authorization process, their sources of information, and how often they
authorize the partnerships. To gain a better understanding of the
authorization process and the information considered, we also reviewed a
sample of code-share applications that U.S. airlines had filed to
establish code-share partnerships with foreign carriers. Our sample
consisted of one randomly selected application filed by each of the eight
U.S. airlines participating in the Code-Share Safety Program.

We also interviewed DOT security officials about how they provide security
clearances for foreign carriers and how often they have provided those
clearances for code-share authorization. Because TSA was the source of
aviation security information for DOT, we interviewed TSA officials about
how they assess the security of foreign airlines and airports. We also
reviewed data from TSA about the results and frequency of its security
assessments of foreign airports and related legal authorities. Based on
our understanding of the data through interviews with TSA officials, we
determined that the data were sufficiently reliable for our purposes. In

1Our review pertained only to U.S. airlines' code-share arrangements with
foreign carriers for scheduled air service, and not for charter or cargo
air service.

Page 44 GAO-05-930 Aviation Safety Appendix I Objectives, Scope, and
Methodology

addition, we interviewed DOT officials who review the competitive aspects
of the code-share arrangements about how they conduct their reviews and
how often they have provided those clearances for code-share
authorization. Because these DOT officials received advice from DOJ on
potential antitrust issues involving the code-share partnerships, we also
interviewed DOJ officials who provided that advice about their process and
sources of information.

At FAA, we interviewed officials about how they assess the capabilities of
foreign civil aviation authorities through the International Aviation
Safety Assessment (IASA) program and how those assessments relate to the
Code-Share Safety Program. We also analyzed data on the results and
frequency of IASA reviews since the Code-Share Safety Program was
initiated. Based on our understanding of the data through interviews with
FAA officials, we determined that the data were sufficiently reliable for
our purposes. We reviewed documentation that FAA staff had prepared when
they reviewed the airlines' safety audit reports to determine how they
documented their reviews. We also discussed with FAA officials how often
FAA provided memorandums of no objection to DOT's Office of International
Aviation to support U.S. airlines' applications for code-share
arrangements with foreign carriers.

Because the Code-Share Safety Program was designed to assess foreign
airlines' compliance with aviation safety standards established by
International Civil Aviation Organization (ICAO), we interviewed ICAO
officials about the standards, related international aviation safety
issues, and the ICAO Universal Safety Oversight Audit Program, which
assesses the capabilities of countries' civil aviation authorities. In
addition, because many airlines are planning to use a new international
safety audit program-the International Air Transport Association's (IATA)
Operational Safety Assessment (IOSA) program-to assess the safety of their
foreign partners, we interviewed IATA officials about how the program was
developed, how airlines plan to implement it, and how it could affect the
Code-Share Safety Program. For background information on how aviation
safety varies internationally, we obtained data from IATA on aviation
accident rates for different world regions. We did not review the
reliability of IATA's aviation accident data because we used this
information only for background purposes. We also interviewed officials
from the Air Transport Association-a U.S. airline association-about its
involvement in establishing the DOD safety audit program and its views on
the Code-Share Safety Program and FAA's IASA program. Finally, because we
found during our review that DOD had also established a program for
reviewing the

Appendix I Objectives, Scope, and Methodology

safety of foreign carriers, we interviewed DOD officials about the design
and implementation of its program. In addition, we obtained information
about the safety audit reports that DOD had reviewed from fiscal year 2001
through fiscal year 2004 and the results, which we compared with the
results of those that FAA reviewed. We also discussed with FAA and DOD
officials the extent to which they have coordinated their efforts.

To determine how well FAA has managed the Code-Share Safety Program, we
evaluated whether DOT's Office of the Secretary and FAA incorporated
selected government auditing standards in the program's design and whether
FAA effectively used management controls in reviewing the safety audit
reports. Because the Code-Share Safety Program establishes an audit
program, we reviewed whether the program's design, as reflected in the
program guidelines, conforms to certain standards identified in Government
Auditing Standards.2 We reviewed selected general standards3 that are
contained in Government Auditing Standards (independence, professional
judgment, and competence) to assess the program's design. Although we
examined the audit methodologies that the

U.S. airlines had developed and submitted to FAA for review, we did not
review them for conformance with government auditing standards because FAA
had already conducted this review as a condition of accepting the U.S.
airlines' participation in the program. In addition, because we were
evaluating the management of a government program, we examined FAA's
application of management controls, which is synonymous with the term
"internal controls," in its reviews of the safety audit reports using
Standards for Internal Control in the Federal Government.4 We selected the
management controls that were applicable to FAA's review of the audit
reports for establishing reviewers' qualifications, verifying corrective
actions, documenting the reviews, and monitoring and measuring
performance. We also reviewed the recommendations contained in a 1999 DOT
Office of the Inspector General report on aviation safety under
international code-share agreements to determine whether and to what

2GAO, Government Auditing Standards, GAO-03-673G (Washington, D.C.: June
2003).

3We did not include the quality control and assurance general standard
because it mainly relates to the process of peer review.

4GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999) and GAO, Internal
Control Management and Evaluation Tool, GAO-01-1008G (Washington, D.C.:
August 2001).

Page 46 GAO-05-930 Aviation Safety Appendix I Objectives, Scope, and
Methodology

extent the report's recommendations-about how a code-share safety audit
program should be designed-were implemented.

To determine the extent to which U.S. airlines have implemented the
Code-Share Safety Program and the results, we interviewed officials at the
eight

U.S.
           airlines that were participating in the program about how they
           were assessing the safety of their foreign partners and reviewed a
           sample of the reports. We drew a stratified random probability
           sample of 153 reports of audits conducted by U.S. airlines of
           their foreign code-share partners. This sample was drawn from a
           population of documentation maintained by FAA for the 242 audit
           reports that the agency had reviewed from February 2000 through
           September 2004. Of these 153 sampled audits, 2 were out of scope
           because the airlines withdrew them from consideration and 2 were
           in scope, but we did not complete our reviews of these reports. We
           ultimately collected information for 149 in-scope audits. With
           this probability sample, each audit report in the study population
           had a positive probability of being selected, and that probability
           could be computed for any audit. We stratified the population into
           nine groups on the basis of the U.S. airline conducting the audit,
           and further, for some of those airlines, whether the foreign
           airlines being audited were code-share partners with more than one

U.S.
           airline or whether FAA's records of its reviews of the audit
           reports contained comments about the findings. Each sampled audit
           was subsequently weighted in the analysis to statistically account
           for all of the audits in the study population, including those
           that were not selected. During our audit work, three airlines
           provided information about a total of 14 additional audit reports
           that, according to the airlines, FAA had reviewed. These 14 audits
           were not included in the population from which we drew our sample
           because FAA's files did not contain information about them.
           Estimates generated in this report pertain only to the 242 audit
           reports that, according to FAA's files, the agency reviewed.

Because we followed a probability procedure based on random selections,
our sample is only one of a large number of samples that we might have
drawn. Since each sample could have provided different estimates, we
express our confidence in the precision of our particular sample's results
in 95-percent confidence intervals. These are intervals that would contain
the actual population values for 95 percent of the samples we could have
drawn. As a result, we are 95-percent confident that each of the
confidence intervals in this report will contain the true values in the
study population. All percentage estimates from the sample of audits have
sampling margins of error of plus or minus 10 percentage points or less
unless otherwise noted. All numerical estimates other than percentages
have margins of

Appendix I Objectives, Scope, and Methodology

error of plus or minus 10 percent of the value of those estimates or less
unless otherwise noted.

We did not determine whether the airlines complied with international
aviation safety standards. However, we performed a content analysis of the
audit reports in our sample to determine what types of safety findings
were identified regarding the foreign carriers. We recorded the findings
and grouped them into eight categories: (1) organization, (2) flight
operations,

(3)
           flight dispatch, (4) maintenance and engineering, (5) cabin
           operations,

                (6)
                        cargo and dangerous goods, (7) ground handling, and
                        (8) security- because the reports were generally
                        organized into those categories. We then further
                        divided those eight categories into at least six
                        issue subcategories. Two coders independently
                        categorized each finding, and any coding
                        disagreements were resolved between the coders or by
                        a third reviewer. During our review of the audit
                        reports, we also attempted to determine whether
                        corrective actions taken in response to the findings
                        were documented. To accomplish this, we looked for
                        evidence of (1) what corrective action was taken, (2)
                        who accepted the corrective action, and

(3)
           when the corrective action was accepted. We considered these three
           elements to be sufficient evidence of documentation after
           observing how some airlines had documented the closure of findings
           and by reviewing Government Auditing Standards, which indicate
           that auditors should examine whether recommendations from previous
           audits have been implemented, and from Standards for Internal
           Control in the Federal Government, which require management to
           determine whether proper actions have been taken in response to
           findings and audit recommendations.

In addition to reviewing the audit reports at the airlines, we interviewed
safety officials (typically the safety directors) at all eight U.S.
airlines participating in the Code-Share Safety Program about how they
assess the safety of their foreign code-share partners, including how they
plan, carry out, and close the audits, as well as monitor the safety of
their foreign partners between audits.5 We also observed the monitoring
systems that

5An independent business unit of one of the eight U.S. airlines
participating in the Code-Share Safety Program is an auditing organization
selected by IATA to conduct IOSAs. We had also interviewed staff from that
organization about how the audits were conducted and their qualifications.

Page 48 GAO-05-930 Aviation Safety Appendix I Objectives, Scope, and
Methodology

they had implemented, as the program guidelines require, and sources of
information that they used to monitor the safety of their foreign
code-share partners. In addition, we asked the U.S. airline safety
officials about their program-related interactions with FAA and DOT's
Office of International Aviation, whether and how they believe the program
could be improved, and what they thought about the implications of the
airlines' increased adoption of IOSA by as an international aviation
safety audit program. We also obtained the views of an aviation safety
expert about the Code-Share Safety Program. We selected this expert
because of his experience in aviation safety, which included helping to
design FAA's IASA program. Because some airlines had used contractors to
conduct safety audits of their foreign code-share partners, we interviewed
one contractor who said that he had conducted or helped to conduct safety
audits for five of the eight U.S. airlines in the Code-Share Safety
Program about how his firm conducted the audits and the qualifications of
his staff.

Finally, for background information on the extent to which passengers are
traveling on foreign code-share partners of U.S. airlines, we asked the
eight

U.S. airlines to provide such data from 2000 through 20046 using the same
methodology, which was based on the number of tickets that the U.S.
airlines sold for travel on their foreign code-share partners. For
example, if a U.S. airline sold a single ticket for travel that included
one or more foreign code-share partner flight segments, this ticket was
counted once. If a U.S. airline sold separate tickets for travel that
included more than one foreign code-share partner flight segment, each
flight segment was counted as a separate ticket. Some airlines could not
provide data for all 4 years, but all eight U.S. airlines were able to
provide data for 2004, which we reported. We did not independently verify
this information provided by the airlines because it was used only for
background purposes.

6Annual data are in calendar years unless noted otherwise.

Appendix II

U.S. Carriers and Their Foreign Code-Share Partners

                    U.S. carrier Foreign code-share partner

                           Alaska (1 partner) Helijet

               America West (1 partner) Royal Jordanian Airlines

American (24 partners) Aer Lingus Aero Caribe Air Pacific BA CitiExpress
British Airways Cathay Pacific China Eastern EVA Airways Finnair Gulf Air
Iberia JAL JALways JetConnect Limited LACSA LAN Chile Lan Express Mexicana
Airlines Qantas SN Brussels Swiss International Air Lines TACA TAM -
Linhas Aereas Turkish Airlines

Contintental (18 partners) AeroLitoral Aeromexico Air Europa Air France
Alitalia Brit Air COPA CSA Czech Emirates EVA Airways flybe.British
European KLM Cityhopper KLM Exel Airlines KLM Royal Dutch Airlines Korean
Airlines Maersk Air TAP Air Portugal Virgin Atlantic

Appendix II

U.S. Carriers and Their Foreign Code-Share Partners

                         (Continued From Previous Page)

                    U.S. carrier Foreign code-share partner

Delta (21 partners) AeroLitoral Aeromexico Air France Air Jamaica Alitalia
Express Alitalia Team Avianca Brit Air China Airlines China Southern
CityJet CSA Czech El Al Emirates flybe.British European KLM Royal Dutch
Airlines Korean Airlines Malev Hungarian Airlines Regional Royal Air Maroc
South African Airways

Northwest (11 partners) Aeromexico Air Alps Air France Alitalia CSA Czech
KLM Cityhopper KLM Exel KLM Royal Dutch Airlines Korean Airlines Malev
Express Malev Hungarian Airlines

Appendix II

U.S. Carriers and Their Foreign Code-Share Partners

                         (Continued From Previous Page)

                    U.S. carrier Foreign code-share partner

                              United (23 partners)

AC Jazz Air Canada Air China Air Dolomiti Air Japan Air New Zealand Air
Nippon All Nippon Airways (ANA) Asiana Austrian British Midland (BMI) LOT
Polish Lufthansa Lufthansa Cityline Nakanihon Airlines PrivatAir
(Switzerland) PrivatAir (Germany) SAS Thai Airways The Fair, Inc. Tyrolean
Varig Virgin Blue

US Airways (9 partners) AeBal (Aerolineas de Baleares) Air Dolomiti
BahamasAir British Midland (BMI) Eurowings Lufthansa Lufthansa CityLine
Spanair Winward Island Airways

Source: FAA.

Note: Data as of May 2005.

                                  Appendix III

                               Comments from DHS

Appendix IV

                     GAO Contacts and Staff Acknowledgments

Gerald Dillingham (202) 512-2834

GAO Contacts

Teresa Spisak (202) 512-2834

In addition to the above individuals, Elizabeth Eisenstadt, Jessica A.
Evans,

Staff

Brandon Haller, Bob Homan, David Hooper, Casey Keplinger, Elizabeth A.
Marchak, Sara Ann Moessbauer, Mark Ramage, and Sidney Schwartz made key
contributions to this report.

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