REMARKS OF ANDREW B. STEINBERG

ASSISTANT SECRETARY OF TRANSPORTATION

FOR AVIATION AND INTERNATIONAL AFFAIRS

2006 International Aviation Issues Seminar

Thursday, November 30, 2006

Hotel Monaco - Washington, DC

GOOD MORNING AND THANK YOU GREG FOR THE INTRODUCTION AND TO AIRPORTS
COUNCILS INTERNATIONAL-NORTH AMERICA FOR THE OPPORTUNITY TO SHARE MY
PERSPECTIVE ON SOME OF THE DIFFICULT CHALLENGES WE FACE IN INTERNATIONAL
AVIATION. IT'S A PARTICULAR HONOR FOR ME TO FOLLOW MY FRIEND DANIEL
CALLEJA WHO HAS DONE SO MUCH TO ADVANCE EU -- US RELATIONS. INDEED,
SOMETIMES WE SEEM TO BE ***LITERALLY*** FOLLOWING EACH OTHER, AS I JUST
RETURNED FROM BRUSSELS WHERE I HAD A SERIES OF DISCUSSIONS ABOUT
EMISSIONS TRADING. EACH SIDE LIKES TO KEEP THE OTHER BUSY THROUGH
PROPOSED REGULATIONS! SO IF IT'S TUESDAY, IT MUST BE BELGIUM; AND IF
IT'S WEDNESDAY I GUESS IT MUST BE WASHINGTON.

I WAS ASKED THIS MORNING TO COMMENT ON A VARIETY OF TOPICS -- RANGING
FROM AIR SERVICES TO AIRSPACE CONGESTION -- BUT IF THERE IS A COMMON
THREAD TO THESE IT'S THIS: WE NEED TO RECOGNIZE THAT BECAUSE AVIATION IS
AT ITS CORE A **GLOBAL INDUSTRY**, LIBERALIZATION AND HARMONIZATION OF
OUR AVIATION REGULATORY SCHEMES IS NO LONGER A MATTER OF CHOICE. IT HAS
BECOME IMPOSSIBLE FOR ANY OF OUR COMMUNITIES TO PURSUE A PURELY DOMESTIC
OR EVEN A BILATERAL AVIATION AGENDA. WE CAN NO MORE HALT THE GROWTH OF
INTERNATIONAL AVIATION THAN WE CAN PREVENT THE OCEAN WAVES FROM WASHING
UP ON OUR SHORES.

AS PART OF DOT'S EFFORTS TO COMPLETE THE WORK OF DEREGULATION, STARTING
THIRTY YEARS AGO, THE U.S. REMAINS COMMITTED TO PURSUING COMPLETE AIR
SERVICES LIBERALIZATION WITH EUROPE AND THE REST OF THE WORLD. THE CASE
FOR OPEN SKIES IS MORE COMPELLING THAN IT WAS WHEN WE EMBARKED ON THIS
ROAD NEARLY 18 YEARS AGO: EACH TIME THE UNITED STATES AND EUROPE ARE
ABLE TO ELIMINATE A LAYER OF RESTRICTIONS AND ALLOW MARKET FORCES TO
OPERATE, STAKEHOLDERS ON BOTH SIDES OF THE ATLANTIC ENJOY THE DIVIDENDS.
BUT SEVERAL OF THE BIGGEST AND MOST IMPORTANT INTERNATIONAL MARKETS
STILL HAVE UNNECESSARY CONSTRAINTS ON COMPETITION -- INCLUDING OF COURSE
THE UNITED KINGDOM, CHINA, JAPAN, AND SEVERAL COUNTRIES IN LATIN
AMERICA.

TAKING THE NEXT STEPS, MOVING TO A US-EU WIDE AGREEMENT WILL
FUNDAMENTALLY IMPROVE THE TRANS-ATLANTIC MARKET BY CREATING MORE MARKET
OPPORTUNITIES FOR AIRLINES AND MORE CONVENIENT SERVICE CHOICES FOR
CONSUMERS, BY ENABLING NEW BUSINESS RELATIONSHIPS, AND ALSO BY
INCREASING THE DEPTH AND BREADTH OF US-EU COOPERATION IN THE AREAS OF
COMPETITION POLICY, SECURITY, AND CONSUMER PROTECTION. THE UNREALIZED
POTENTIAL IS VISIBLE IN BOTH THE UNITED STATES AND EUROPE AND WE WILL
CONTINUE TO MAKE OUR BEST EFFORTS TOWARD ACHIEVING THIS TRANSFORMATIVE
AGREEMENT.

AN OPEN SKIES DEAL WITH THE EU WILL JUST AS IMPORTANTLY INFLUENCE THE
GLOBAL LANDSCAPE AND CHANGE THE WAY AVIATION PARTNERS AROUND THE WORLD
VIEW THEIR RELATIONSHIPS. THAT'S WHY WE ARE NOT FOCUSED SOLELY ON THE
U.S.-E.U. DEAL. SO LET ME BRIEFLY TOUCH UPON OUR RELATIONSHIPS IN ASIA.
EARLIER THIS MONTH A U.S. DELEGATION WENT TO TOKYO FOR INFORMAL TALKS
WITH THE GOVERNMENT OF JAPAN. OUR GOAL FOR JAPAN, LIKE ALL OTHER
MARKETS, MUST BE FULL LIBERALIZATION. WE ALSO RECOGNIZE THE VALUE OF
SUBSTANTIAL INCREMENTAL IMPROVEMENT THAT CAN BE ACHIEVED ON THE
SOMETIMES LONG ROAD TO OPEN SKIES. IT IS IN THAT SPIRIT THAT WE CAME
TOGETHER WITH THE JAPANESE. THE TALKS WERE POSITIVE AND WE HOPE TO FIRM
UP PROPOSALS AND CONDUCT FORMAL NEGOTIATIONS DURING THE FIRST HALF OF
2007.

OUR EFFORTS ARE ALSO ONGOING WITH CHINA. EARLIER THIS YEAR THE U.S. AND
CHINA LAUNCHED A STRATEGIC ECONOMIC DIALOGUE, WHICH WILL COVER A WIDE
RANGE OF ISSUES DESIGNED TO ENHANCE AND DEEPEN THE TRADE RELATIONSHIP.
THE DIALOGUE WAS LAUNCHED BY PRESIDENTS BUSH AND HU IN SEPTEMBER AS AN
OVERARCHING FORUM FOR DISCUSSING WAYS THE U.S. AND CHINA CAN WORK
TOGETHER TO ENSURE THAT CITIZENS IN BOTH COUNTRIES BENEFIT FAIRLY FROM
THE GROWING BILATERAL ECONOMIC RELATIONSHIP. THE TWO COUNTRIES WILL
DISCUSS A RANGE OF ISSUES INCLUDING ASSURING CONTINUED GLOBAL GROWTH,
CHINA\'S ECONOMIC DEVELOPMENT AND FURTHER INTEGRATION INTO THE WORLD
TRADING SYSTEM, STABLE ENERGY MARKETS, AND COOPERATION ON THE
ENVIRONMENT. AS TRANSPORTATION IS A FUNDAMENTAL 'ENABLER' OF THE
ECONOMIC RELATIONSHIP BETWEEN OUR TWO COUNTRIES, WE WILL SEEK TO FURTHER
LIBERALIZE OUR AIR SERVICES AGREEMENT FOLLOWING UP ON THE 2004 PROTOCOL
BOTH COUNTRIES SIGNED.

EARLIER I SAID THAT NONE OF US CAN PURSUE A PURELY DOMESTIC OR BILATERAL
AGENDA. AS IN ANY OTHER MARKET, EVERY DAY THAT WE LEAVE MARKET
DISTORTING RESTRICTIONS IN PLACE REPRESENTS ANOTHER DAY OF FOREGONE
OPPORTUNITY AND LOST ECONOMIC VALUE. TRADING RESTRICTIONS IN AVIATION
MARKETS CANNOT WORK. WHILE IN BRUSSELS I WAS IMPRESSED WITH THE AMOUNT
OF INTEREST IN THE ASTOUNDING GROWTH OF EMIRATES AIRLINES IN DUBAI.
WHILE THERE ARE MANY REASONS FOR ITS SUCCESS, THE FACT IS THAT ONE OF
THEM IS THEIR ABILITY TO CREATE AND EXPAND A HUB RELATIVELY FREE OF THE
CUMBERSOME FREQUENCY AND DESTINATION RESTRICTIONS AFFECTING OTHER
COUNTRIES. THUS, AN INDIRECT EFFECT OF THE ANACHRONISTIC TRADING
RESTRICTIONS IN PLACE BETWEEN THE U.S. AND E.U. IS THE FACILITATION OF A
STRONG NETWORK COMPETITOR OUTSIDE THE BORDERS OF BOTH.

A LITTLE CLOSER TO HOME, RESTRICTIVE AVIATION AGREEMENTS DRIVE ROUTE
SELECTIONS PROCEEDINGS. AS YOU ALL KNOW, EVEN WITH THE IMPORTANT
LIBERALIZATIONS THAT WE ACHIEVED WITH CHINA IN 2004, DOT HAS HAD TO
CONDUCT CARRIER SELECTION OR FREQUENCY ALLOCATION CASES BETWEEN
COMPETING U.S. AIRLINES. THESE PROCEEDINGS ARE EXPENSIVE FOR THE
INDUSTRY AND REQUIRE THAT THE DEPARTMENT TRY TO SELECT AMONG CARRIER
PROPOSALS THAT ALL HAVE CONSIDERABLE MERIT. WE KNOW THAT THESE SELECTION
CASES MEAN A TREMENDOUS AMOUNT TO THE COMMUNITIES INVOLVED. BUT WE ALSO
KNOW THAT THE MARKETPLACE AND NOT THE FEDERAL GOVERNMENT SHOULD
ULTIMATELY DECIDE WHETHER OR NOT A CARRIERS BEGINS, ADDS OR MODIFIES
SERVICE TO CHINA. WE MUST ARRIVE AT A FULLY MARKET ORIENTED RELATIONSHIP
WITH CHINA AND OTHER IMPORTANT PARTNERS TO MINIMIZE THE GOVERNMENT ROLE
IN THIS PROCESS; IN THE MEANTIME WE WILL CONTINUE TO JUDGE THESE CASES
ON THE GREATEST PUBLIC BENEFIT PROPOSED.

ON THE SUBJECT OF AVIATION LIBERALIZATION, I AM FULLY AWARE THAT WE ARE
PREACHING TO THE CHOIR WHEN SPEAKING OF THE MERITS OF FREE AVIATION
MARKETS TO AN ACI AUDIENCE. INDEED, ACI WAS ONE OF THE FIRST
INSTITUTIONS TO RECOGNIZE THE TREMENDOUS ECONOMIC BENEFITS THAT FLOW
FROM OPEN SKIES AND MARKET ORIENTED AGREEMENTS WITH OUR TRADING
PARTNERS. WITHOUT THE STRONG SUPPORT OF THE U.S. AIRPORT OPERATOR
COMMUNITY, LIBERALIZATION MIGHT HAVE BEEN ON A SLOWER TRACK.

NOT ALL THAT LONG AGO AIRLINES VOCALLY OPPOSED AND IT TRULY WAS THE
COLLECTIVE EFFORTS OF AIRPORTS THAT HELP OVERCOME THE OPPOSITION. SOME
OF YOU MAY RECALL THE 'CITIES' PROGRAM THAT WAS PROPOSED BY SECRETARY
SKINNER. THE IDEA WAS SIMPLE: IF AN AIRLINE FROM A LIBERAL TRADING
PARTNER WANTED TO SERVE A CITY NOT LISTED IN THE GOVERNING BILATERAL AND
NO U.S. CARRIER WANTED TO SERVE THE ROUTE, THEN THE DEPARTMENT WOULD
PERMIT THE SERVICE WOULD PERMIT THE SERVICE WITHOUT NEED FOR FURTHER
NEGOTIATION. I THINK THE CITIES PROGRAM LED THE DEPARMENT TO RECOGNIZE
AIRPORT OPERATORS AS ECONOMIC BENEFICIARIES OF AND IMPORTANT ALLIES IN
OUR PURSUIT OF LIBERALIZED AVIATION MARKETS. THE DEPARTMENT APPRECIATES
THE POINT OF VIEW YOU BRING TO OUR DEBATES \-- AND ALL I CAN SAY IS KEEP
THOSE CARDS AND LETTERS COMING.

INTERNATIONAL COOPERATION IS ALSO THE ONLY PATH TO DEAL WITH THE
DIFFICULT ISSUE OF AVIATION EMISSIONS. NO ONE PART OF THE WORLD CAN DEAL
WITH THE ISSUE ON A PURELY DOMESTIC BASIS. AS I SAID, I JUST RETURNED
FROM A TWO-DAY TRIP TO BRUSSELS TO EXPRESS THE U.S. POINT OF VIEW ON THE
IDEA OF INCLUDING AVIATION IN THE EU EMISSIONS TRADING SCHEME. AS WE
UNDERSTAND, THE EC IS CONSIDERING A PROPOSAL THAT WOULD REQUIRE AIRLINES
TO PURCHASE OR TRADE EMISSIONS CREDITS BASED ON THE LENGTH OF THEIR
FLIGHTS IN AND OUT OF THE EU; THE LONGER THE FLIGHT, THE GREATER THE
CREDIT REQUIRED. YOU WILL HEAR ABOUT THIS IN MORE DETAIL FROM CARL
BURLESON OF THE FAA LATER TODAY. I WILL JUST MAKE ONE POINT ABOUT WHY
THE NATURE OF AVIATION MAKES IT PRACTICALLY IMPOSSIBLE FOR THE EC TO
INCLUDE INTERNATIONAL AVIATION IN ANY SCHEME THAT IS IMPLEMENTED.

TODAY SOME 20 PERCENT OF TRAFFIC MOVING THROUGH THE BIG EU HUBS IS BY
OUR ESTIMATE NON-EU TO NON-EU TRAFFIC -- THE PASSENGER GOING FROM, SAY
SYDNEY AUSTRALIA TO NEW YORK VIA LONDON AND BACK. BUT AN EMISSIONS
TRADING SCHEME DONE SOLELY IN THE EU WILL IN EFFECT RAISE THE COST OF
EACH OF THE FOUR SEGMENTS INVOLVED IN A ROUND TRIP WITH THAT ITINERARY
BY A NONTRIVIAL AMOUNT -- PERHAPS AS MUCH AS 140 EUROS \-- AND THEREFORE
CANT AND WONT WORK. AIR TRAVEL IS EXTREMELY PRICE SENSITIVE, SO THE
TRAFFIC WILL SIMPLY MOVE OUTSIDE THE EU CONNECTING HUB, FOR EXAMPLE,
OVER DUBAI, OR ON A NONSTOP BASIS. THUS THE EFFECT WOULD BE NOT TO
DECREASE FLYING, WHICH APPEARS TO BE THE OBJECTIVE, BUT TO PENALIZE
EUROPEAN CARRIERS AND DESTROY THE ECONOMICS OF THEIR HUBS.

AIRLINES ALREADY HAVE EVERY REASON IN THE WORLD TO REDUCE EMISSIONS,
BECAUSE OF THE COST OF FUEL. THE REAL SOLUTION TO EMISSIONS FROM
AVIATION IS TO REDUCE AIRSPACE CONGESTION IN THE LONG TERM BY ENDING THE
OUTMODED AND INEFFICIENT WAY IN WHICH WE MANAGE AIR TRAFFIC TODAY. AS
MANY OF YOU KNOW, THE DOT THROUGH THE FAA, IS ENGAGED IN A INTER-AGENCY
EFFORT TO RE-ENGINEER THE NATIONAL AIRSPACE SYSTEM TO PREPARE FOR THE
PREDICTED TREBLING OF AIR TRAFFIC BY 2025. THIS EFFORT IS KNOWN AS
NEXTGEN AND IS BEING SPEARHEADED BY THE JOINT PLANNING AND DEVELOPMENT
OFFICE OR JPDO. THE FUNDAMENTAL IDEA HERE IS TO USE THE RESOURCES WE
HAVE, INCLUDING AIRSPACE, MORE EFFICIENTLY BY USING NEW TECHNOLOGIES,
IMPROVED FLIGHT PROCEDURES, BETTER USE OF HUMAN RESOURCES AND
AUTOMATION, AND ALSO THROUGH USE OF NETWORKED INFORMATION.

UNDER NEXTGEN, AIR TRAFFIC SERVICE PROVIDERS AND FLIGHT CREWS WILL HAVE
ACCESS TO A COMMON OPERATIONAL PICTURE INCLUDING THE INTENT AND
TRAJECTORY OF OTHER AIRCRAFT. THIS INFORMATION SHARING COUPLED WITH
PRECISION NAVIGATION CAPABILITIES WILL ALLOW FOR AIR TRAFFIC FLOWS TO BE
OPTIMIZED IN AND OUT OF CROWDED AIRPORTS. TO GIVE YOU A CONCRETE
EXAMPLE, FLIGHT CREWS CAN NOW PROGRAM THE FLIGHT MANAGEMENT SYSTEMS IN
NEWER AIRCRAFT SO THAT THEY WILL ARRIVE AT A CERTAIN POINT AT A CERTAIN
ALTITUDE AT A PRECISE POINT OF TIME. CURRENTLY, CAPABILITIES SUCH AS
THESE ARE LIMITED TO AIRLINERS AND TOP-OF-THE-LINE BUSINESS AIRCRAFT BUT
WE EXPECT MORE AND MORE AIRCRAFT WILL BE CAPABLE OF SUCH OPERATIONS IN
THE FUTURE. IF AIRCRAFT CAN BE SEQUENCED IN AND OUT OF THE COUNTRY'S
MOST CONGESTED AIRPORTS WITH PRECISE TIMING, THAT WILL PROVIDE A
CAPACITY BENEFIT FOR THE SYSTEM.

THERE ARE OTHER BENEFITS IN ADDITION TO CAPACITY THAT WILL COME FROM
NEXTGEN. LET ME GIVE YOU ANOTHER REAL EXAMPLE. TODAY, UNITED PARCEL
SERVICE HAS BEGUN USING A NEW TECHNOLOGY CALLED ADS-B TO IMPROVE ITS
OPERATIONS AT ITS LOUISVILLE, KENTUCKY HUB. I WILL SPARE YOU THE DETAILS
BUT LET ME TELL YOU THAT ADS-B IS THE CORNERSTONE OF NEXTGEN. BY USING
ADS-B ALONG WITH SOME NEW AIR TRAFFIC TOOLS, THE COMPANY'S ADS-B
EQUIPPED AIRCRAFT ARRIVING FROM THE WESTERN U.S. ARE ABLE TO UTILIZE
WHAT ARE KNOWN AS CONTINUOUS DESCENT APPROACHES. THESE APPROACHES ALLOW
UPS FLIGHT CREWS TO DESCEND AT IDLE POWER REDUCING THE COMPANY'S FUEL
BILL, REDUCING AIRCRAFT EMISSIONS, AND ALSO VERY IMPORTANTLY, REDUCING
THEIR NOISE FOOTPRINT ON THE GROUND. IN ADDITION, BECAUSE UPS IS ABLE TO
PRECISELY TRACK AND TIME THE MOVEMENT OF AIRCRAFT, THEY CAN TRANSLATE
THAT INFORMATION INTO EFFICIENCY GAINS IN SORTING AND DISTRIBUTING
PACKAGES. AND THIS IS JUST ONE EXAMPLE OF THE POTENTIAL OF NEXTGEN.

I THINK ANY DISCUSSION OF NEXTGEN WOULD BE INCOMPLETE WITHOUT A MENTION
OF 'SESAR' WHICH IS THE EUROPEAN COUNTERPART TO NEXTGEN. OUR COLLEAGUES
IN EUROPE ARE WORKING TO SOLVE THE SAME ISSUES THAT NEXTGEN IS INTENDED
TO ADDRESS. AND SINCE AIR TRANSPORTATION IS GLOBAL BY ITS VERY NATURE,
GLOBAL INTEROPERABILITY IS ESSENTIAL. IN RECOGNITION OF THIS, THE UNITED
STATES AND THE EU HAVE AGREED TO FORMAL COOPERATION ON THE DEVELOPMENT
OF NEXTGEN AND SESAR. SO I THINK WE ALL HAVE SOME PROMISING DEVELOPMENT
TO LOOK FORWARD TO\...

LET ME FINISH THERE AND I WOULD BE HAPPY TO TAKE YOUR QUESTIONS. THANK
YOU.