Future of Aviation Advisory Committee

Subcommittee on Competitiveness and Viability

Record of Meeting

November 18, 2010

Covington & Burling, 1201 Pennsylvania Avenue

Washington, DC, 20004

1

Public Announcement

The U.S. Department of Transportation (DOT), Office of the Secretary of Transportation, told the 

public of this Future of Aviation Advisory Committee (FAAC) Subcommittee on Competitiveness and 

Viability meeting in a Federal Register notice published November 1, 2010 (75 FR 67163).

Subcommittee Members in Attendance

Name Affiliation(s)

Glenn Tilton, 

Subcommittee Chair

Chairman United Continental Holdings, Inc. (UCH)

Susan Baer Director, Aviation Department Port Authority of New York & New Jersey 

(PANY/NJ)

Russell Bailey, 

alternate for 

Ana McAhron-Schulz

Senior Attorney Air Line Pilots Association, International 

(ALPA)

Severin Borenstein1Professor Haas School of Business, University of 

California, Berkeley 

Patricia Friend International President Association of Flight Attendants (AFA) 

Communication Workers of America

(CWA), American Federation of Labor–

Congress of Industrial Organizations

(AFL-CIO)

William McGee Travel and Aviation Consultant Consumers Union 

Daniel McKenzie U.S. Airlines Research Analyst Hudson Securities, Inc.

Jack Pelton Chairman, President, and 

Chief Executive Officer

Cessna Aircraft Company (Cessna)

Frank Quinn,1

alternate for 

Chris Williams

Williams Capital Group

Committee Members Not in Attendance

Name Affiliation(s)

Bryan Bedford Chairman, President, and 

Chief Executive Officer 

Republic Airways Holding, Inc.

 

1

 By Phone
Future of Aviation Advisory Committee

Subcommittee on Competitiveness and Viability

Record of Meeting

November 18, 2010

Covington & Burling, 1201 Pennsylvania Avenue

Washington, DC, 20004

2

Other Officials Present

Name Affiliation(s)

Todd Homan,

Designated Federal 

Official (DFO)

Director, Office of 

Aviation Analysis

DOT

Susan Kurland,

FAAC Committee 

Chair

Assistant Secretary for 

Aviation and International 

Affairs

DOT

Other Persons Present

Name Affiliation(s)

Mark Anderson Vice President, 

Government Affairs

United Air Lines, Inc. (United)

Aleta Best Transportation Industry Analyst DOT

Bill Bottoms Executive Vice President Team SAI Inc.

Chris Brown Senior Advisor United

Mary Buckley Director, Government, and 

Community Affairs

Denver International Airport

Patty Clark Senior Advisor to the 

Aviation Director

PANY/NJ

Andrew Compart Commercial Aviation/MRO Editor Aviation Daily/Aviation Weekly

James Dann Deputy Director for the Office of 

Aviation Analysis

DOT

Dennis DeVany Chief, Essential Air Service and 

Domestic Analysis Division

DOT

Ed Faberman Executive Director Air Carrier Association of America

Paul Feldman Vice President for 

Government Affairs

General Aviation Manufacturers 

Association

David Goehler Director, Government Relations Jeppesen

Debbie McElroy Executive Vice President, Policy 

and External Affairs

Airports Council International-North 

America

Neil Modzelewski Director, Regulatory Affairs PAI Consulting

Rosemary Moon United

Robert Peterson Technical Fellow, Air 

Transportation Industry 

Infrastructure Research, Aviation 

Security

The Boeing Corporation (Boeing)

Lisa Piccione Senior Vice President, Government 

Affairs

National Business Aviation Association

Courtney Robinson Director, Civil Aviation 

Infrastructure

Aerospace Industries Association (AIA)
Future of Aviation Advisory Committee

Subcommittee on Competitiveness and Viability

Record of Meeting

November 18, 2010

Covington & Burling, 1201 Pennsylvania Avenue

Washington, DC, 20004

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Ashleigh de la 

Torre

Director, Government Affairs Bombardier

Kristi Warden Program Manager Federal Aviation Administration (FAA)

Stephen Welman Principal Economics and Business 

Analyst

The MITRE Corporation

Jeffrey Wharff Senior Economic Advisor FAA

BACKGROUND AND WELCOMING REMARKS

Mr. Glenn Tilton, Subcommittee Chair, UCH, welcomed the participants. He stated that the 

subcommittee's agenda for the meeting was comprised of reviewing and finalizing its draft proposals. 

Mr. Tilton thanked Ms. Susan Kurland, Committee Chair, DOT, and Mr. Todd Homan, DFO, DOT, for 

their work in developing a framework within which the differing opinions of the subcommittee 

members could be expressed. He then turned the meeting over to Ms. Kurland and Mr. Homan for 

remarks and opening formalities.

DOT REMARKS ON FAAC PROCEDURES

Ms. Kurland noted that this was the final subcommittee meeting, all of the other subcommittees having 

met earlier in the week. She thanked the subcommittee members for their efforts and cooperation.

Mr. Homan read the formal statement required under the Federal Advisory Committee Act. He noted

that, although the meeting was open to the public, participation in the meeting was limited to 

subcommittee members, their alternates, and Federal officials. Mr. Homan added that only 

subcommittee members and their alternates were entitled to vote on subcommittee business. He stated 

that interested people have the opportunity to submit comments before each meeting, either by 

email at faac@dot.gov or by submission to the regulatory docket at http://www.regulations.gov

(Docket No. DOT–OST–2010–0074). He noted that the meeting minutes will be made available both 

in the regulatory docket and on the FAAC Web site at http://www.dot.gov/faac.

Mr. Homan stated that corrections to the draft minutes of the August 24, 2010, meeting of the 

subcommittee had been received, and the corrected minutes had been circulated, ratified, and certified. 

He noted that draft minutes of the October 15, 2010, meeting had been circulated to the subcommittee 

members and requested that any comments or corrections be submitted by close of business 

Wednesday, November 24, 2010. Mr. Homan added that a revised draft of the minutes would be 

circulated by close of business December 1, 2010, and, barring any further comment, would be ratified 

and certified on December 6, 2010.

DISCUSSION

Mr. Tilton reminded the subcommittee that all proposed recommendations were due to Ms. Kurland no 

later than Monday, November 22, 2010. Ms. Kurland confirmed this requirement, and noted that the 

subcommittees' proposals would be packaged and distributed to the FAAC members for review prior to 

the final meeting of the FAAC on December 15, 2010. She stated that, at that meeting, each 
Future of Aviation Advisory Committee

Subcommittee on Competitiveness and Viability

Record of Meeting

November 18, 2010

Covington & Burling, 1201 Pennsylvania Avenue

Washington, DC, 20004

4

subcommittee would be afforded 30 minutes in the morning session to address the FAAC regarding its 

recommendations. She stated that the final recommendation package would be assembled during the 

lunch break, and the FAAC would present its recommendations to Secretary of 

Transportation Raymond LaHood during the afternoon session.

Mr. Tilton thanked Ms. Kurland and turned the meeting over to Mr. William McGee, 

Consumers Union, to discuss the draft recommendation proposals on air carrier competition and 

passenger protections, and on the Essential Air Service (EAS) Program.

Air Carrier Competition and Passenger Protections

Mr. McGee echoed Mr. Tilton's earlier thanks to the DOT representatives present for their efforts to 

bridge the differing opinions held by the subcommittee members. He stated that there had been 

significant disagreement among the subcommittee members early in the discussions of air carrier 

competition and passenger protections. He noted that, while the subcommittee had moved closer to 

consensus, further discussion of some issues remained necessary.

As a preliminary matter, Mr. McGee reiterated his earlier statements that there is currently a 

tremendous amount of discontent among air carrier passengers. He acknowledged that Secretary 

LaHood has been very proactive with respect to passenger concerns, and stated that the Secretary’s 

actions have demonstrated his earnest interest in the issue. He stated that, nevertheless, the provisions 

of a recent notice of proposed rulemaking (NPRM) do not go far enough in protecting passengers. 

Mr. McGee stated that, among advocates for passenger rights, Consumers Union has taken a relatively 

moderate position, and had respected Secretary LaHood's request for consensus within the FAAC 

subcommittees. He cautioned that if moderate proposals are not adopted, parties outside the DOT, 

including Congress, may put forth more extreme proposals. He noted that some proposals under 

discussion within the framework of the NPRM call for elimination, rather than transparency, of 

ancillary fees, or for reregulation of air carriers.

Mr. Tilton observed that the subcommittee's proposal reflects the result of its earnest efforts, and he 

suggested that it should not attempt to predict the impact of legislative activity or other political efforts 

in developing its recommendations.

Mr. McGee stated that the first issue addressed by the proposed recommendations is transparency. He 

stated that there was desire for transparency of fees—particularly baggage fees—and for transparency 

of flight operations undertaken by various air carriers, particularly code share operations and operations 

by regional air carriers on behalf of major air carriers. Mr. McGee stated the belief that there is 

significant consumer confusion regarding air carrier pricing because of the various ancillary fees 

charged by air carriers. He also stated that, despite the DOT's efforts in recent years, there is 

continuing confusion or lack of knowledge on the part of passengers regarding operations by regional 

partners and code sharing.

Mr. McGee reviewed the proposed recommendations, including a recommendation to continue efforts 

to ensure transparency in pricing and in disclosure of code share operations and similar air carrier 
Future of Aviation Advisory Committee

Subcommittee on Competitiveness and Viability

Record of Meeting

November 18, 2010

Covington & Burling, 1201 Pennsylvania Avenue

Washington, DC, 20004

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arrangements. He noted that the subcommittee had reached consensus on these recommendations 

generally, but that questions remained about how information would be communicated to passengers 

purchasing air transportation under different means of distribution. Mr. McGee asked Mr. Tilton to 

comment on the inclusion of a reference to global distribution systems (GDSs) in the subcommittee's 

proposal. He noted that GDSs had not been a subject of discussion in previous meetings of the 

subcommittee, and he stated that transparency should be consistent across all methods of purchase.

Mr. Tilton stated that relationships between the air carrier industry and GDSs are in a continual state of 

flux and are subject to negotiations between air carriers and GDSs. He noted that some air carriers use 

GDSs and others do not, and he added that this unequal participation introduces a complexity to the 

issue of disclosure of fees. He stated that, if air carriers, in their proprietary customer communications, 

follow the provisions the subcommittee proposes, passengers will have sufficient opportunity to 

determine the existence of fees. Mr. Tilton also noted that GDSs are not represented on the FAAC.

Mr. McGee stated that, regardless of the distribution channel, the concern is ensuring that appropriate 

information is communicated to the consumer. He noted that the DOT has a long and active history of 

monitoring and regulating GDSs and their dealings with consumers. He stated that any rationale which 

supported transparency in only some avenues is troubling.

Mr. McGee also stated that the subcommittee's recommendations do not address the view of air carriers 

that the products and services for which ancillary fees are charged are optional. He stated that whether 

services such as carriage of checked baggage are optional is subject to debate. He noted that this issue 

is of particular interest if taxes are to be imposed only on airfares and not on ancillary fees.

Mr. Tilton stated that the language of the proposal has been drafted to make clear that some concepts do 

not have the universal support of the subcommittee membership as well as to ensure that all viewpoints 

are acknowledged. He reiterated that the subcommittee should not attempt to take the political 

acceptability of its recommendations into account, but should recommend those actions it believes to 

be the best advised. He noted that the FAAC's recommendations would likely be a starting point, and 

political and market forces would influence the further evolution of any actions undertaken by 

the DOT.

Ms. Patricia Friend, AFA, noted that the proposed recommendation does not call for any change or new 

activity, only for the DOT and Secretary LaHood to continue in certain efforts. She asked Mr. McGee 

what he felt should be added to or changed in the proposal. Mr. McGee stated that, with respect to 

transparency, the Secretary of Transportation should take action to ensure that, in all distribution 

channels, consumers are aware of the total cost of their air travel, including all fees, and of the identity 

of the air carrier conducting the flights for which they purchase tickets.
Future of Aviation Advisory Committee

Subcommittee on Competitiveness and Viability

Record of Meeting

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Washington, DC, 20004

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Mr. Daniel McKenzie, Hudson Securities, noted that the subcommittee is not positioned to determine 

the technical ability of participants in all paths of distribution to comply with proposed requirements. 

He stated that one GDS does not possess the technological infrastructure necessary to comply, and it 

would likely be forced out of business by the proposed requirements. Mr. McGee stated that some 

would view this as a positive result of market forces. Mr. McKenzie stated that such an occurrence 

would not benefit consumers.

Ms. Baer cautioned against making overly prescriptive recommendations to Secretary LaHood. She 

noted that the subcommittee's recommendations should be broadly stated but should not prescribe 

specific methods. She added that following this rationale, the subcommittee could recommend that the 

Secretary require transparency of pricing to consumers, but not prescribe precisely how consumers 

should be apprised of pricing.

Mr. Tilton reiterated that because GDSs are not represented in the FAAC or the subcommittee, the 

subcommittee is not informed as to their abilities and limitations. He also reiterated that the 

subcommittee's proposal makes clear that there is a difference of opinion with respect to the application 

of its provisions to GDSs. Mr. McGee noted that the Rationale section of the proposal contains the 

following passage:

Some Subcommittee members maintain that a hyperlink to a page disclosing optional 

fees would provide a fully-accessible notice to passengers of optional fees, and airlines 

should not be forced to provide fee schedules for optional services to alternative 

distribution channels.

Mr. McGee requested that the words, ―other subcommittee members do not‖ be inserted before the 

final period of that passage. There was no objection to this request.

Ms. Friend again noted that the proposal does not recommend actions beyond maintaining the 

status quo, and suggested the subcommittee consider a more robust recommendation. Mr. Tilton noted 

that the subcommittee's mandate did not require it to make any recommendations in addition to the 

proposed rules contained in the NPRM and, in fact, industry representatives on the subcommittee had 

initially taken the position that the NPRM sufficiently addressed passenger protection concerns. He 

noted that Mr. McGee and others had persuaded the subcommittee to propose recommendations 

incremental to the NPRM's provisions.

Ms. Friend stated that even given the legitimate concerns of passenger rights advocates, she could not 

support a proposal that recommends that the Secretary of Transportation ―continue to‖ take measures 

already underway. Mr. Tilton stated he would be amenable to removing the words ―continue to‖ from 

the proposal, which would have the effect of recommending that the Secretary ensure transparency in 

pricing and operations. Mr. McGee, Ms. Susan Baer, PANY/NJ, and Ms. Friend expressed support for 

this amendment and stated that it would provide for a stronger proposal.

Mr. McGee observed that the subcommittee's discussions seem to assume that the provisions in the 

NPRM will be promulgated. He noted that this is not a foregone conclusion.
Future of Aviation Advisory Committee

Subcommittee on Competitiveness and Viability

Record of Meeting

November 18, 2010

Covington & Burling, 1201 Pennsylvania Avenue

Washington, DC, 20004

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Mr. McGee moved on to the portion of the proposal calling for transparency with respect to airline 

contracts of carriage. He stressed the importance of this issue, and recounted his statements at the 

previous meeting of the subcommittee regarding difficulties in obtaining and understanding typical 

contracts of carriage. Mr. McGee noted that the subcommittee had considered a more robust proposal, 

which would use the European Union model for contracts of carriage as a benchmark, but he expressed 

confidence that if presented with the current language, the Secretary of Transportation would take 

appropriate steps to examine the issue and ensure adequate disclosure to consumers. Mr. McGee 

sought comments in favor of or in opposition to the current language. There was no opposition to the 

language. Ms. Friend, Ms. Baer, and Mr. Tilton clarified that the removal of ―continue to‖ from the 

lead-in to the recommendations also affects the recommendation regarding contracts of carriage.

Next, Mr. McGee discussed the portion of the proposal calling for transparency in departmental 

reporting of consumer air travel statistics. He briefly summarized his statements from the previous 

meeting of the subcommittee. He noted that Consumers Union has regarded the statistics published by 

the DOT as a valuable tool for more than 20 years, but that their value is being eroded because the 

DOT and FAA differentiate between certificate holders, while the traveling public tends to view each 

major air carrier and its regional partners as a single brand. Mr. McGee noted that the the reduction in 

value of these reports is exacerbated because statistics on major air carriers and regional air carriers are 

not presented together. He added that the issue is further complicated because a single major air carrier 

may have multiple regional partners, and a single regional air carrier may partner with more than one 

major air carrier. He stated that regional air carriers now account for 50 percent of domestic 

departures.

As an illustration of potential for confusion, Mr. McGee presented the subcommittee with a passenger 

information card prominently bearing branding for Delta Air Lines, Inc. (Delta), noting that the card 

was actually from a flight operated by Atlantic Southeast Airlines, Inc. (ASA), Delta's regional partner. 

He noted that ASA's logo is much less conspicuous on the card, and he stated that a typical member of 

the traveling public might mistakenly believe that the flight was operated by Delta.

Mr. McGee stated that the proposal calls for the DOT to examine the reporting of consumer air travel 

statistics. He acknowledged that the details of addressing the issue would be problematic, and he stated 

that the DOT would be better able than the subcommittee to determine a methodology. He noted that 

any changes would likely not result in significant additional costs to air carriers already providing data 

to the DOT, but he noted that, currently, many regional air carriers do not provide data because their 

revenues do not exceed minimum levels for which reporting is required.

Mr. McGee reiterated that there is a fundamental difference between how the DOT and FAA 

differentiate between air carriers and how the public views carriers marketed under the same brand. He 

described numerous indicators—from credit card billing to terminal markings—which tend to create 

confusion in the traveler's mind as to the identity of the air carrier operating his or her flight.

Mr. McKenzie drew an analogy to telecommunications and noted that an international telephone call 

may be serviced by a carrier other than the customer's domestic provider without providing disclosure
Future of Aviation Advisory Committee

Subcommittee on Competitiveness and Viability

Record of Meeting

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Covington & Burling, 1201 Pennsylvania Avenue

Washington, DC, 20004

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to the customer. He stated that, in any network industry, some complexity resulting from connections 

between separate entities is inevitable.

Mr. Tilton also drew analogies to other industries, such as the hotel industry, and noted that common 

branding of disparate business entities is common in network and hospitality environments. He noted 

that common branding of major and regional air carriers also ties the major air carriers to the 

performance of their regional partners in consumers' minds. He stated that major air carriers have a 

vested interest in ensuring that their regional partners' statistics reflect positively on their brands, and 

that the major carriers are incentivized to self-police to protect their brand images. Mr. Tilton 

observed, however, that this did not represent a basis for opposing improved transparency, and he 

expressed support for efforts to ensure better passenger understanding of the relationships between 

major and regional air carriers.

Citing the passenger information card to which Mr. McGee had referred, Mr. Tilton stated that the use 

of a card produced by Delta, as opposed to one produced by ASA, represents a positive commitment to 

safety by the major air carrier partner. Mr. McGee reiterated that the branding on the card could cause 

confusion, and he noted that the issue of passenger confusion had been discussed at a recent National 

Transportation Safety Board forum on air carrier safety. He observed that the FAA and the DOT 

recognize a fatal accident in 2003 as involving Air Midwest, Inc., but he stated that the families of the 

victims perceive the flight to have been a US Airways flight.

Ms. Friend noted that, while similarities exist between the air carrier industry and the 

telecommunications and hospitality industries, the risk of fatal accidents is not as pervasive a concern 

for those industries and their consumers as it is for the air carrier industry. She noted that a passenger 

interested in the safety record of the air carrier operating his or her flight might examine data from the 

major air carrier carrying the brand, and not the regional partner actually operating the flight. 

Mr. McGee agreed and reiterated a previous statement that families of victims of fatal accidents 

involving regional air carriers partnered with major air carriers took offense at statements to the effect 

that there have been no fatal major air carrier accidents in recent years.

Mr. Tilton stated that there is a distinction between the uniform branding of major and regional 

air carriers—as a representation of the commercial relationships between them—and the responsibility 

of a certificate holder to conduct a safe operation. He stated that increasingly it will be the nature of 

the air carrier industry for a passenger purchasing a ticket from one air carrier to be transported by 

another, whether it is a regional partner or a code share partner.

Ms. Friend noted that major air carriers are quick to disavow responsibility when operations by 

partner air carriers result in harm to passengers. Mr. Tilton stated that that type of behavior warrants 

scrutiny, but he felt that it represented a different problem than the one addressed by the 

subcommittee's proposal. Ms. Friend stated that improved transparency would prevent such behavior. 

Mr. Tilton disagreed.

Mr. Tilton recognized Mr. Bob Peterson, Boeing, who observed that the proposal calls for transparency 

in reporting statistics, not in disclosing air carrier partner relationships. Mr. McGee stated that an 
Future of Aviation Advisory Committee

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Washington, DC, 20004

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analogy could be drawn to the proposal for transparency with respect to ancillary fees. He stated that 

the objective is to make clear at every step in the process the identity of the air carrier operating a given 

flight. Ms. Baer noted that the proposal regarding transparency of partnership arrangements more 

squarely addresses this concern.

Ms. Baer also asked whether the language of the proposal was acceptable to the subcommittee. There 

was consensus that it was. Mr. Tilton noted that the subcommittee seemed to be spending an inordinate 

amount of time discussing points that, in the interest of compromise between different viewpoints, were 

not included in its proposals. He asked that the subcommittee focus on determining whether the 

language of the proposals is acceptable. Mr. McGee stated that the ultimate objective is for the DOT to 

ensure that consumers have access to data sufficient to make a meaningful and informed comparison 

between carriers. Multiple subcommittee members agreed with this objective.

Essential Air Service

Mr. Tilton turned the meeting over to Dr. Severin Borenstein, University of California, Berkeley, to 

discuss EAS. Dr. Borenstein noted that the proposal was straightforward, and that he did not foresee 

lengthy discussion. He stated that Ms. Friend had previously expressed reservations with respect to the 

EAS proposal, and asked that she comment on it.

Ms. Friend stated that she did not agree with the approach of addressing EAS and intermodalism in 

separate documents. She stated she did not object to the proposed suspension or freezing of EAS 

eligibility, provided such action was dependent on moving forward with the subcommittee's 

recommendations regarding intermodalism. Ms. Baer suggested that such a provision could be inserted 

into the proposal.

Mr. McKenzie noted that the subcommittee's discussion of EAS had contemplated eliminating 

EAS subsidies for communities that are otherwise adequately served. He stated that as a result, no 

community should be left wanting for service because of the proposed actions. Dr. Borenstein stated 

that the proposal calls for a review of eligibility and, pending that review, a freeze on eligibility for new 

communities to prevent runaway program growth. 

Mr. Tilton recognized Mr. Peterson, who agreed with Mr. McKenzie's statement that the 

subcommittee's proposal would only affect communities served by a suitable alternative to EAS. 

Ms. Friend expressed concern that there is no assurance that such alternative service will remain in 

place, and she noted that the overarching concern is to ensure continuing reasonable access to the 

air transportation system.

Ms. Baer stated that intermodalism speaks to the proposed review of eligibility criteria, rather than the 

proposed freeze on eligibility. Ms. Friend asked why the proposals are not merged to incorporate the 

subcommittee's intermodalism recommendations into the review process. Ms. Baer noted that the 

intermodalism recommendations could be applicable under numerous circumstances outside of the 

context of EAS, and therefore warranted a separate proposal. Ms. Kurland stated that EAS was 

important enough to examine independent of intermodalism. She stated that EAS was one area in 
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Subcommittee on Competitiveness and Viability

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which intermodalism might come into play but that intermodalism represents a broader policy 

initiative. Mr. Homan noted that while a change to the EAS program would require congressional 

action, the DOT could take action on intermodalism under its existing authority. He stated that 

combining the two proposals could limit the DOT's ability to act on intermodalism.

Ms. Friend stated that even if the two recommendations remain separate, she thinks that the 

subcommittee's recommendations regarding EAS should be made dependent on adoption of the 

intermodalism recommendations. Dr. Borenstein stated he had no objection to making the EAS 

proposal contingent on review and adoption of the subcommittee's proposal regarding intermodalism. 

Mr. Homan, Mr. Jack Pelton, and Ms. Baer suggested language that would reference intermodalism as 

an alternative mode of service, without explicitly requiring implementation of the intermodalism 

proposal.

Mr. McGee suggested that the proposal make clear that any community made ineligible by the 

availability of alternative means of transportation could become eligible if those alternative means 

cease to exist. Dr. Borenstein agreed with this suggestion but noted that under existing criteria, a

community that is ineligible for EAS at the time eligibility is frozen could not become eligible because

of a sudden apparent need for transportation. Mr. Peterson pointed out that the freeze would only be 

needed pending the proposed review of eligibility criteria, and once the review is complete and new 

criteria are established, the freeze could be lifted. Dr. Borenstein suggested that the proposal should 

recommend that the freeze on eligibility include a sunset date in the event that the proposed review of 

eligibility does not occur.

The subcommittee members agreed that Mr. Homan would draft language reflecting the suggestions 

made and would circulate it for comment prior to the November 22, 2010, deadline for submission of 

proposals. Mr. Tilton suggested that, when presenting proposals to the FAAC, the subcommittee 

present its intermodalism proposal first, because intermodalism represents an important part of the EAS 

proposal.

Intermodalism

Mr. Tilton asked Ms. Baer to discuss the subcommittee's proposal regarding intermodalism. Ms. Baer 

noted that legislative and regulatory inertia and other political and bureaucratic factors have hindered

meaningful progress on implementation of intermodal efforts. She stated that there has been some 

limited implementation of intermodalism, and she added that increasing environmental pressures have 

made evident the need to examine opportunities to join with other modes of transportation.

Ms. Baer summarized the subcommittee's proposals. She noted that the subcommittee had already 

discussed the first proposal, which calls for implementation of intermodalism in coordination with a 

reexamination of the EAS program.

Ms. Baer stated that the second proposal would make intermodal efforts a priority in any infrastructure 

development projects, particularly those connected to the infrastructure bank. She noted that funding 

for these efforts should not be diverted from funding for the Next Generation Air Transportation 
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System (NextGen). Ms. Baer stated that the subcommittee’s recommendation for intermodal 

development in no way lessens the need to move forward with NextGen development and 

implementation.

Ms. Baer stated that the third proposal recognizes that the Secretary of Transportation is positioned to 

tap the expertise of top individuals in each transportation mode.

Mr. Peterson suggested that the proposal call for a system-level evaluation of any intermodal initiative 

to ensure that it serves goals of customer utility, cost effectiveness, and energy and environmental 

effectiveness. He noted that high-speed rail in particular can offer tremendous efficiencies where 

infrastructure is already in place, but justifying implementation where infrastructure does not exist may 

take decades because of economic and environmental factors and concerns.

Ms. Baer agreed and stressed that any such evaluation would examine the transportation system as a 

whole, and not be limited to a single mode. Mr. McGee urged that when performing evaluations, care 

be taken to ensure that comparisons between different modes are on an equal footing and to take total 

door-to-door efficiency into account.

Ms. Baer noted that, although intermodal transportation encompasses more than rail transportation, 

high-speed rail represents a focal point of intermodalism discussions. She noted it is important for 

aviation to be part of those discussions because of the potential benefits to the industry regarding 

optimal use of limited airport facilities. Ms. Baer stressed that surface modes other than rail should not 

be ignored. She stated that aviation can benefit by tapping the enormous investment the United States 

has made in roads.

Mr. Tilton stated that development of a comprehensive intermodal policy is a daunting prospect, 

especially when viewed in comparison to long overdue improvements to the air traffic control system, 

which is arguably a lesser challenge. He noted that ATC inefficiencies have resulted in economic 

losses of $33 billion, and he expressed surprise that there is not greater public interest in addressing 

them. Ms. Baer noted that efforts are underway to educate the business community about its interest in 

seeing the system updated. Mr. Tilton, Mr. McGee, Mr. Pelton, Ms. Baer, and Mr. Peterson discussed 

some of the factors that have prevented significant public interest in advancing development of 

NextGen.

Prior to the end of the meeting, Mr. Homan suggested the following language linking the 

Intermodalism proposal to the EAS proposal:

The committee recognizes the increasing importance of intermodal solutions to connect 

small and rural communities to the national air transportation system. The committee 

therefore recommends that the Secretary implement its recommendations on 

intermodalism expeditiously, to support the recommendations on EAS reform.
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Jet Fuel Price Volatility

Mr. Tilton turned the meeting over to Mr. McKenzie to discuss the subcommittee's proposal on jet fuel 

price volatility. Mr. McKenzie observed that the issue had been one of the more vigorously debated at 

prior meetings of the subcommittee. He stated he did not foresee lengthy discussion at this meeting 

because the proposal represents the compromises reached in those prior discussions. Mr. McKenzie 

asked Dr. Borenstein to comment on the language of the proposal.

Dr. Borenstein stated he was largely satisfied with the proposal, and requested only one change. He 

stated that the second to last sentence of the Rationale section of the proposal reads—

The Subcommittee is aware that the Department had earlier filed comments with CFTC, 

documenting the adverse impact of fuel price fluctuations on the transportation industry 

and stating it would support remedial measures if speculative investing were determined 

to be responsible in part for the volatility.

Dr. Borenstein requested that the last portion be amended to state the DOT ―would support remedial 

measures if speculative investing were determined to be responsible in significant part for the 

volatility.‖ There was no objection to this amendment.

Federal Aviation Taxes and Fees

Mr. Tilton turned the meeting over to Mr. McKenzie for a discussion of the subcommittee’s proposed 

recommendations with respect to taxation of air carriers and passengers. Mr. Tilton and Mr. McKenzie 

expressed hope that the proposal distributed to the subcommittee members represents a compromise 

position arrived at in the course of earlier discussions, and would require little or no amendment.

Dr. Borenstein stated that he had reservations about the tenor of the distributed proposal. He stated that 

the Problem/Challenge and Rationale portions of the proposal seem to assume that taxes are too high 

and should be lower. He questioned the basis for using taxation levels in 1990 as a baseline for the 

proposal, and stated that this date was arbitrary.

Dr. Borenstein suggested that the subcommittee consider a much shorter, more neutral proposal, 

posing the following questions: (1) how the Federal tax burden imposed on the U.S. aviation industry 

compares with burdens imposed on other modes of transportation, and (2) how the Federal tax burden 

imposed on the U.S. aviation industry compares with government expenditures in support of 

the industry.

Dr. Borenstein reiterated that taxation did not threaten the viability of the industry as a whole. He also 

expressed support for points made by Professor Kenneth Button, George Mason University, in a 

presentation at the subcommittee’s August 24, 2010 meeting. Dr. Borenstein stated that Dr. Button had 

framed the discussion in the form of two operative questions: (1) are the taxes and fees imposed on the 

industry proportional and fair, and (2) are they being collected efficiently. Dr. Borenstein suggested 
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that bullet Nos. 1, 3, and 4 in the distributed proposal be eliminated, and that the last sentence of bullet 

No. 6 be changed from—

The Subcommittee recommends that the Secretary review the results of the study and 

pursue appropriate legislative and regulatory actions that may be needed to ensure that 

the aviation tax burden on passengers, airlines and general aviation does not hinder the 

viability and competitiveness of the U.S. aviation industry and the nation’s economic 

recovery.

to—

The Subcommittee recommends that the Secretary review the results of the study and 

pursue appropriate legislative and regulatory actions that may be needed to ensure that 

the aviation tax burden on passengers, airlines and general aviation is fair and is collected 

efficiently.

Dr. Borenstein reiterated that comparison of the current level of Federal taxation to that present in 

1990, and the implication that taxes should return to 1990 levels, is unnecessary. Mr. Tilton agreed that 

the subcommittee’s proposal should be limited to facts and inquiries intended to foster factual 

determinations, and he proposed removing language that predetermines conclusions.

Ms. Baer agreed that the language of the proposal lacks neutrality, and she suggested that the phrase

―tax burden‖ could be amended to refer to ―tax.‖ She also expressed the opinion that the distributed 

draft of the proposal was overly prescriptive. Ms. Baer and Mr. Tilton also supported Dr. Borenstein’s 

argument that taxes should be tied to corresponding benefits enjoyed by the industry and air travel 

consumers, and should be apportioned accordingly. Mr. McGee agreed, and restated that travelers are 

particularly vulnerable to the imposition of taxes and fees that are not of benefit to them because they 

lack elected representation in the communities imposing the taxes and fees. He noted that taxation 

unrelated to the service or benefit enjoyed is common in other areas of the travel industry, such as 

automobile rental, and he expressed concern about the prospect of such taxes and fees being imposed 

on air carrier passengers.

Mr. Tilton recognized Mr. Peterson, who stated that while there are some egregious examples of 

inappropriate taxation, some fees are relevant to the enjoyment of a service or privilege. He suggested 

that analysis should pose three questions:

 What taxes and fees are being collected?

 Are those taxes and fees relevant to the services on which they are imposed?

 Are those taxes and fees efficient and appropriate for the level of service provided?

Mr. Tilton stated that a nexus could be drawn between taxation and competition. He added that the 

air carrier industry represents a positive economic force because it can generate wealth and create jobs. 
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He also suggested that any analysis of whether taxes are fair and appropriate should examine whether 

the loss in economic activity because of the tax would outweigh the tax revenue collected.

Mr. Homan submitted, for the subcommittee’s review, a modification of bullet No. 3 of the distributed 

proposal from—

Does the existing level of aviation taxes and fees hinder the performance of U.S. airlines 

and general aviation exports in larger global markets, thereby adversely impacting the 

U.S. trade balance?

to—

Does the existing level of aviation taxes and fees reflect the true cost and value of the 

aviation services provided and are taxes and fees levied efficiently and appropriately with 

respect to the services provided?

Mr. Homan noted that this language does not address Mr. Tilton’s position that the economic benefits 

of the aviation industry should be considered in determining the propriety of taxation. Mr. Tilton 

agreed and suggested that the proposal include language permitting the Secretary of Transportation 

latitude in determining whether specific taxation prevents more valuable economic activity.

Dr. Borenstein expressed concern with giving the Secretary of Transportation the responsibility of 

judging the aviation industry’s contributions to the U.S. economy. He noted that while many industries 

may claim to generate wealth, tax revenue sources are necessary for economic health. Mr. Tilton 

stated that he would not begrudge other industries the opportunity to pursue similar evaluation by 

their regulators.

Mr. McKenzie noted that the FAAC’s and the subcommittee’s charters task them with developing 

recommendations to enhance the competitiveness of aviation, not of other industries. Dr. Borenstein 

replied that the FAAC and the subcommittee are not simply advocates for the interests of the aviation 

industry. He stated that the subcommittee should present a balanced view, taking the overall impact on 

the economy into account.

Mr. Tilton stated that the distributed proposal is overly long and editorial in nature. He added that the 

document could be made clearer, more concise, and more objective. Ms. Baer stated that such a 

document would present a more compelling recommendation to Secretary LaHood.

Mr. Homan submitted an amendment to bullet No. 3 of the proposal, addressing Mr. Tilton’s position 

on the aviation industry’s contribution to the economy, as well as Dr. Borenstein’s position regarding 

the lack of a threat to viability. Mr. Homan suggested the bullet be revised to read—

The subcommittee recommends that the Secretary review the results of the study and pursue 

appropriate legislative and regulatory actions that may be needed to ensure that the aviation 

tax burdens on passengers, air carriers, and general aviation is fair and collected efficiently, 
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and appropriately recognizes the role aviation plays in fostering economic growth and 

development.

Mr. Homan asked whether the proposed language was acceptable to the subcommittee. No member of 

the subcommittee opposed the revision.

Dr. Borenstein stated that he still had significant reservations about the Problem/Challenge portion of 

the proposal. Mr. Tilton acknowledged that the language of the Problem/Challenge section is overly 

editorial. Ms. Baer suggested that the section could be reduced to a single paragraph on the growth of 

aviation taxes and fees.

Ms. Baer stated that the industry is concerned with both the amount and the number and diverse nature 

of taxes imposed by different authorities. Mr. Tilton stated that there are inherent inefficiencies in the 

taxation structure. He expressed dissatisfaction with the lack of accountability on the part of taxing 

authorities and with the lack of coordination or appreciation of the cumulative impact of different taxes 

and fees. He stated that simply asking that these issues be examined will benefit the industry, without 

prejudicing the outcome of such an examination.

Ms. Baer suggested that the Problem/Challenge section could be appended with a paragraph discussing 

the industry’s benefit to the economy. She added that what is currently the last paragraph of the 

Rationale section, which discusses the various taxes imposed on the industry, could be moved to the 

Problem/Challenge section. She reiterated that in its most basic form, the problem is the large number 

of taxes imposed without meaningful examination of whether they are fair, equitable, or efficient. She 

stated that much of the remainder of the language of the distributed proposal is unrelated to taxation, 

and that the economic health of the industry is only partly a taxation issue. Mr. Peterson observed that 

the existing language implies that taxes and fees are the primary cause of the industry’s economic 

woes. Mr. Tilton stated that the operative question is to what extent taxation prevents the aviation 

industry from generating a larger benefit to the national economy.

Dr. Borenstein stated he wanted to remove any reference to the viability of the industry, and he 

suggested that the proposal instead refer to the ―economic health‖ of the industry. Mr. Tilton noted that 

the term ―viability‖ is specifically used in the subcommittee’s charter, but he stated that he was 

nevertheless willing to use the term ―economic health‖ in its stead. Dr. Borenstein asserted that it 

would be useful to tell Secretary LaHood that, while the health and stability of the industry may well be 

at issue, its overall viability is not.

Mr. McGee noted that, unlike the other proposals discussed, the proposed changes to the taxation 

proposal were significant and would involve a wholesale rewrite of the document. He noted that the 

deadline for the submission of proposals was rapidly approaching, and he asked how the subcommittee 

would meet that deadline. Mr. Homan stated that he would begin redrafting the document immediately 

following the meeting and would circulate the revised draft no later than noon the following day. 

Ms. Kurland urged the subcommittee members to limit their comments to only necessary submissions. 

Mr. Homan asked that the subcommittee members submit proposed revisions only and limit extraneous 

commentary.
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Global Competitiveness

Following a break for lunch, Mr. Tilton initiated discussion of the subcommittee’s proposal on global 

competitiveness. He reiterated that, although the subcommittee’s charter speaks to the issue of viability 

of the aviation industry, Dr. Borenstein’s position that the viability of the industry is not seriously in 

question is well taken. Mr. Tilton stated that he remained content to limit the subcommittee’s 

discussion and recommendations to competitiveness.

Mr. Tilton stated that the subcommittee’s position on competitiveness had been the subject of extensive 

discussion and scrutiny. He expressed hope that the draft proposal addressed the subcommittee’s 

mandate. Mr. Tilton noted that, if accepted, the proposal would transfer a challenge from the 

subcommittee to the Secretary of Transportation and the DOT.

Mr. Tilton read briefly from the subcommittee’s charter, noting that it characterized a competitive 

air carrier industry as critical to the national economy. He stated that the charter calls for the 

subcommittee to examine changes in the operating and competitive structures of the U.S. air carrier 

industry, and to consider innovative strategies to access international markets and expand opportunities 

in existing markets. Mr. Tilton stated that those two points capture the essence of the subcommittee’s 

efforts. He noted that the subcommittee had not debated whether this tasking is appropriate. Mr. Tilton 

stated that, while significant editing had improved the proposal, there still might be room for further 

improvement.

Mr. Tilton introduced Mr. Russell Bailey, ALPA, who attended the meeting in place of 

Ms. Ana McAhron-Schulz. Mr. Tilton stated that Mr. Bailey had expressed interest in commenting on 

the Global Competitiveness proposal.

Mr. Bailey noted that, like the other proposals, the Global Competitiveness proposal is the product 

of compromise. He stated that the proposal does not address the controversial topic of ownership 

and control. Mr. Bailey distributed a revised proposal and reviewed the changes suggested in 

that document.

Mr. Bailey noted that the subcommittee proposes to recommend that Secretary LaHood reaffirm the 

general objectives of the DOT’s 1995 Statement of U.S. International Air Transportation Policy. He 

stated that ALPA is generally supportive of that proposal, but it harbors concerns regarding two 

elements of those objectives.

Mr. Bailey stated that one of the objectives set forth in the Policy Statement -- to encourage 

development of a cost effective and productive air transportation industry -- includes as a sub-objective 

a mandate to reduce barriers to the creation of a global aviation system. He stated this includes such 

efforts as limitations on cross-border investments wherever possible. Mr. Bailey stated that ALPA does 

not support that particular sub-objective. Mr. Bailey suggested that text could be added to the first 

footnote in the subcommittee’s proposal, stating that the subcommittee was unable to reach consensus 

supporting the policy statement’s endorsement of reducing existing limitations on cross-border 
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investment. Ms. Friend concurred with Mr. Bailey’s suggestion, and she stated that labor interests 

generally do not support a policy of reducing limitations on cross-border investment.

Mr. McKenzie cited a statement made in 2000 by then-Secretary of Transportation Rodney Slater, who 

served in the Clinton administration. He stated that Secretary Slater envisioned a globally consolidated 

air carrier industry by 2020. Mr. McKenzie stated that it was of note that such a position was adopted 

by a Democratic administration. Ms. Friend stated that, while such a vision may well have been the 

policy of Secretary Slater and the Clinton administration, it is not representative of the position of labor 

interests. She noted that labor interests have frequently disagreed with elements of transportation 

policy advanced by Democratic executive and legislative officeholders.

Mr. Bailey stated that, in addition to a policy of reducing limitations on cross-border investment, ALPA 

also disagrees with the language in the 1995 Policy Statement providing that the United States should 

seek changes in air carrier foreign investment law, if necessary to ensure trading partners’ security 

interests. He requested that the subcommittee’s proposal include the following language: 

―Accordingly, the subcommittee was unable to reach consensus on whether DOT should reaffirm these 

particular statements of the 1995 Statement.‖

Mr. Bailey noted that the subcommittee’s proposal currently states that the subcommittee supports the 

objectives of the 1995 policy statement. He requested that, because of the exceptions noted, the 

proposal be revised to state that the subcommittee ―generally‖ supports the objectives of the 

1995 Policy Statement.

Mr. Tilton noted that the existing draft of the proposal was the product of lengthy discussion and 

compromise. He stated that there were differing opinions among the subcommittee members: some 

stated the constituent parties should address protection of labor interests in cross-border investment or 

partnership arrangements through collective bargaining, while others preferred that the government 

address those issues through limitation or intervention.

Mr. McKenzie noted that the proposal contains language to the effect that some subcommittee 

members have adopted the position that the DOT should predicate the approval of global alliances on 

an assurance that U.S. air carriers perform a reasonable share of the physical flight operations under 

such alliances. Mr. McKenzie stated that from the perspective of a financial commentator, that position 

would likely be unpopular with investors. He suggested that to portray the differences of opinion 

within the subcommittee in a balanced manner, the proposal should also state that other subcommittee 

members maintain that the issue should be addressed in collective bargaining agreements. Mr. Tilton, 

Mr. Bailey, and Ms. Friend indicated that inclusion of both statements would comprehensively portray 

the different viewpoints of the subcommittee members.
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Mr. Tilton opened the floor to general questions on the draft proposal. Ms. Baer expressed an interest 

in addressing airport competitiveness and cited the appropriate Federal authority requiring such 

competitiveness. Mr. Tilton stated that he supported content addressing airport competitiveness. 

Ms. Baer indicated she would submit content for inclusion in the final proposal. Mr. Peterson and 

Mr. Pelton indicated that language addressing competitiveness and viability of the aircraft 

manufacturing industry should also be included.

Dr. Borenstein requested minor changes to the specific recommendations contained in the proposal. He 

asked that the second bulleted recommendation, which reads—

Ensure that, as DOT performs its public interest analysis, it gives greater weight to 

existing statutory criteria that would help ensure a viable and globally competitive U.S. 

airline industry and prosperous workforce, 

be changed to read—

Ensure that, as DOT performs its public interest analysis, it gives substantial weight to 

existing statutory criteria that would help ensure a healthy and globally competitive U.S. 

airline industry and prosperous workforce. 

There was no opposition to this requested change.

Dr. Borenstein also questioned whether the final bulleted proposal, which calls for an expansion of the 

DOT’s role in promoting aviation exports and facilitating international tourism, is more appropriately a 

function of the Department of Commerce. Mr. Tilton suggested that the subcommittee defer to 

Ms. Kurland’s discretion. He stated that Secretary LaHood and the DOT had been named to the 

Export Cabinet. He noted that this was an unprecedented step, and he expressed the opinion that it 

indicated an intention on the part of the Obama administration to expand the DOT’s role in 

international commerce.

Ms. Kurland indicated that the recommendation was appropriate. Mr. Peterson noted that the 

subcommittee could express a desire to see such an expanded role of the DOT continue beyond the 

present administration. Mr. Tilton suggested that the language could be changed to indicate that the 

subcommittee supports the DOT in its expanded role.

Dr. Borenstein suggested significant changes to the Problem/Challenge portion of the proposal as 

follows:

 Eliminate the first two paragraphs of the section and all but the first sentence of the 

third paragraph.

 Change the last sentence of the fourth paragraph from—

Such artificial service restrictions limit the ability of U.S. network airlines to 

optimize their competitiveness both domestically and globally,
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to read—

Such artificial service restrictions limit the ability of U.S. network airlines to 

optimize their networks, and to compete internationally.

 Eliminate the last two paragraphs.

Dr. Borenstein stated that these changes would make the points that the U.S. air carrier industry must 

be able to get access to foreign markets, and that existing restrictions artificially limit the ability of 

U.S. air carriers to optimize their networks.

Ms. Baer disagreed with the removal of a reference to domestic competitiveness in the fourth 

paragraph, because domestic operations are part of the air carriers’ overall networks, and are impacted 

by international restrictions. Dr. Borenstein stated that international restrictions do not significantly 

impact competitiveness in the domestic marketplace, which also includes low cost air carriers. 

Mr. McKenzie agreed with Ms. Baer and stated that parts of a network cannot be viewed in isolation, 

and that factors affecting one part will impact other parts. Mr. Tilton noted that much of the content of 

the subcommittee’s proposals deals with domestic competitiveness, and only this particular proposal 

addresses global competition. He suggested that reference to domestic competitiveness is necessary to 

tie the proposals together.

Dr. Borenstein also noted that the first sentence of the third paragraph of the Other Significant Issues 

portion of the proposal states that the subcommittee agreed that the development of global alliances is 

an important element in enhancing the viability and competitiveness of the U.S. airline industry. He 

stated that this belief was not unanimous and requested that the sentence be amended to state that many 

members of the subcommittee so agreed. The other members of the subcommittee agreed that this 

more accurately described the viewpoints of the subcommittee members. Dr. Borenstein noted that this 

change to the third paragraph makes unnecessary the first paragraph, which refers antitrust concerns of 

some subcommittee members, and he suggested that that paragraph be eliminated.

Mr. McGee made two suggestions regarding the subcommittee’s recommendations. He reiterated an 

earlier concern expressed by Dr. Borenstein that different methods were used to compare sizes of 

air carriers, and he requested that the subcommittee ensure that a consistent methodology is used when 

referring to such comparisons. He also expressed support for an earlier suggestion by Ms. Baer that the 

subcommittee provide sources for all factual or statistical statements contained in its proposals.
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Mr. McGee also raised a question regarding the last paragraph of the Other Significant Issues portion of 

the proposal. He noted that the proposal states that some subcommittee members would like the DOT 

to condition the approval of any grant of antitrust immunity to a cross-border partnership on an 

assurance that the U.S. air carrier involved conduct a proportionate share of the flight operations under 

the arrangement. Mr. McGee noted that the conduct of flights by a U.S. air carrier would not 

necessarily protect the interests of U.S. workers, because of the level of outsourcing in the air carrier 

industry. Mr. Tilton reiterated that there was disagreement within the subcommittee regarding whether 

the DOT should impose such conditions or whether protection of workers’ interests should be 

addressed through collective bargaining.

Mr. Bailey suggested that the paragraph in the Other Significant Issues portion of the proposal that 

addresses the lack of subcommittee consensus on reducing limitations on cross-border investment 

would more appropriately be located in the Rationale portion of the proposal.

CLOSING REMARKS

Mr. Tilton asked Ms. Kurland whether she had any final words for the subcommittee. Ms. Kurland 

once again thanked the subcommittee members for their efforts. She noted that the subcommittee was 

the largest of the five the FAAC chartered.

Mr. Tilton noted that the subcommittee’s final proposal would be distributed to the subcommittee 

members. He thanked the subcommittee members for their participation and expressed his confidence 

that Secretary LaHood and the DOT would be pleased with the subcommittee’s efforts. He stated that 

as a group of individuals with diverse interests, the subcommittee had performed admirably and had 

developed the basis for a good product that had the potential of serving the DOT and the industry well.

ADJOURNMENT

Mr. Homan solicited a motion for adjournment. On motion, duly seconded and approved by the 

majority of the FAAC members present, the meeting was adjourned.

The meeting adjourned at 1:18 p.m.

I hereby certify that, to the best of my knowledge, the foregoing minutes are accurate and complete.

Approved by: ____________________________________________

Todd M. Homan, Designated Federal Official

Dated: January 12, 2011

Ratified on: January 12, 2011