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[House Report 106-35]
[From the U.S. Government Publishing Office]

106th Congress                                                   Report
1st Session             HOUSE OF REPRESENTATIVES                 106-35
_______________________________________________________________________

 
     COMMERCIAL OPERATION OF SUPERSONIC TRANSPORT CATEGORY AIRCRAFT

                                _______
                                

 March  2, 1999.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________

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

                              R E P O R T

                        [To accompany H.R. 661]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 661) to direct the Secretary of 
Transportation to prohibit the commercial operation of 
supersonic transport category aircraft that do not comply with 
stage 3 noise levels if the European Union adopts certain 
aircraft noise regulations, having considered the same, report 
favorably thereon without amendment and recommend that the bill 
do pass.

                               BACKGROUND

    Aircraft noise has been a significant issue in the aviation 
industry for many years. Aircraft noise affects communities and 
people located near airports. To combat aviation noise, 
Congress passed Public Law No. 101-508, 104 Stat. 1388-378, 
codified at 49 U.S.C. 47524. This law imposes significant noise 
restrictions on the aviation industry. The most stringent of 
these restrictions, known as Stage 3 noise restrictions, have 
been phased in and require certain categories of aircraft to be 
fully Stage 3 compliant by December 31, 1999.
    The International Civil Aviation Organization (``ICAO''), 
created by the Chicago Convention, sets and administers 
international certification standards for aircraft. Once an 
aircraft is certified as having met ICAO standards, it may be 
used in any ICAO member country. ICAO certification gives 
operators and investors assurances of worldwide marketability 
for the normal life cycle of an aircraft. ICAO has promulgated 
international noise restrictions, similar to U.S. Stage 3 
restrictions, that are known as Chapter 3 noise restrictions; 
these restrictions become fully effective in 2002. Chapter 3 
and Stage 3 noise restrictions are the most stringent noise 
restrictions currently in effect and significantly reduce the 
amount of noise experienced by people near airports.
    An aircraft may meet these noise restrictions by various 
means. The most common means are: purchasing new aircraft that 
are manufactured to meet the restrictions; modifying an 
existing Stage 2 engine by essentially placing a device on it 
that makes the engine quieter and brings it up to Stage 3 
levels, a process known as ``hushkitting;'' or putting new, 
quieter Stage 3 engines on an existing Stage 2 aircraft, known 
as ``re-engining.'' In addition, aircraft weight and flap 
restrictions may be imposed to ensure that noise levels are at 
Stage 3 levels.
    The European Union (``EU'') is in the process of adopting a 
regulation that will severely restrict the use of hushkitted 
and re-engined aircraft in Europe despite the fact that these 
aircraft meet all Stage 3 and Chapter 3 requirements. The draft 
regulation targets ``recertificated'' aircraft, defined by the 
EU as aircraft modified through technical measures--hushkits, 
engine modifications, or other technical measures--or 
indirectly through operational restrictions, such as weight or 
flap restrictions.
    The proposed regulation targets several generally accepted 
methods for bringing older aircraft in compliance with current 
noise restrictions. Hushkits have been used for close to 15 
years as an appropriate measure to meet existing aircraft noise 
restrictions. Companies also often elect to re-engine their 
older aircraft to meet current noise restrictions.
    The draft regulation provides that an EU member state 
cannot place ``recertificated civil subsonic jet aeroplanes'' 
on its register after April 1, 1999. However, a recertificated 
aircraft that was on the register of an EU member state before 
April 1, 1999 can be freely transferred to the registry of 
another EU Member State.
    Recertificated aircraft registered in non-EU States can not 
be operated in the EU after April 1, 2002, unless the operator 
can prove that these aircraft were both operated in the EU 
between April 1, 1995 and April 1, 1999, and have remained on 
the same register. In addition, recertificated aircraft already 
on the register of an EU Member State cannot operate in the EU 
after April 1, 2002, unless they were already operating in the 
EU before April 1, 1999.
    The EU's proposal does allow the use of some re-engined 
aircraft. The proposed regulation uses the bypass ratio of an 
engine as an artificial cut off in determining whether an 
aircraft is a ``recertificated'' aircraft. The EU's proposal 
restricts the use of aircraft that are re-engined with a new 
engine having a bypass ratio of less than 3.0:1. This 
artificial cut off would, for example, allow the continued 
operation of aircraft having Rolls Royce engines, which have a 
bypass ratio of 3.1:1, but would disallow the use of aircraft 
re-engined with Pratt & Whitney JT8D engines, which have a 
bypass ratio of less than 3.0:1. Put another way, only aircraft 
equipped with U.S. manufactured engines are being disallowed 
under the proposed regulation.
    The proposal would affect U.S. cargo, express package 
service, and passenger airlines. Specifically, the regulation 
would affect over 1600 aircraft including DC-9s and 727s.
    The proposed ban violates universally recognized 
international obligations. Article 33 of the Chicago Convention 
mandates universal recognition of an airline's airworthiness 
certificate, where aircraft of the airlines' flag meet all 
current ICAO standards.
    The proposed regulation also treats domestic and foreign 
operators differently in violation of the Convention's 
nondiscrimination principle, and potentially violates EU Member 
States' bilateral air service agreements with the U.S. This 
proposal is a major departure from international standards in 
the aircraft certification arena. It unlawfully discriminates 
against U.S. operators by denying U.S. designated airlines the 
right to choose Chapter 3 compliant equipment best suited for 
its fleet.
    The Committee finds that the EU's proposed regulation will 
adversely affect the fleet value of aircraft that have been 
modified either by adding hushkits or re-engining to meet ICAO 
Chapter 3 noise rules. The rule would artificially and 
dramatically limit the pool of possible buyers of U.S.-owned 
hushkitted aircraft because EU operators can no longer buy 
these aircraft from non-Europeans-only from other Europeans. 
Since these aircraft will no longer be allowed to operate in 
Europe, the market value of the aircraft will substantially 
decline.
    The EU's proposal would also significantly increase the 
cost of U.S. operations to, from, and within Europe--any new 
operations would have to use aircraft originally manufactured 
to meet Chapter 3 standards.
    Ostensibly, the EU has proposed this regulation for 
environmental purposes. However, there has been no credible 
evidence that the proposal has any environmental basis. The 
aircraft targeted by the proposed regulation would be banned 
from some airports where noise has not been an issue. 
Furthermore, some non-hushkitted Chapter 3 aircraft, which 
would be allowed to fly under this proposal, are noisier than 
the hushkitted aircraft affected by the proposed regulation
    The proposed regulation promotes European commercial 
interests rather than environmental interests by favoring EU 
airlines over U.S. airlines, prohibiting airlines from 
developing countries, and favoring EU manufacturers over U.S. 
and other non-European manufacturers. The proposed regulation 
will cost U.S. operators between $1 and $2 billion by 
disrupting investor expectations and making certificated 
aircraft significantly less valuable in the EU market. The 
regulation is expected to cost U.S. manufacturers over $1 
billion in spare parts and engines sales. It will shrink the 
number of potential buyers for those aircraft and drastically 
reduce the value of affected aircraft. In addition, it may 
increase the cost of aircraft financing significantly, as 
financial institutions realize that the certification process 
can not be relied on to establish aircraft life expectancy.
    The Committee further believes that the EU proposal 
unfairly discriminates against hushkit and U.S. aircraft 
manufacturers. Development of hushkit technology is U.S.-based; 
essentially all hushkits are U.S. manufactured and the 
overwhelming majority of the business is conducted by U.S. 
companies. There are no European manufactured hushkitted 
aircraft. The proposed regulation does not affect any European 
aircraft or aircraft engine manufacturer.
    The Committee believes that the EU proposal seriously 
undermines ICAO's broad applicability and purpose to set 
international aviation standards to which all member countries 
abide, and will result in a patchwork of regional regulations 
that could dramatically disadvantage the U.S. aviation 
industry. Specifically, by imposing a regional noise standard, 
the EU severely undercuts ICAO's efforts to address 
environmental issues on a uniform international basis and 
current ICAO efforts to draft Chapter 4 noise restrictions 
could potentially falter. ICAO explicitly rejected this EU 
proposal at its September 1998 assembly meeting. Airbus 
Industries, a European based aircraft manufacturer that could 
potentially benefit from this regulation, also is on record 
opposing its implementation for the above reasons.

                             REPORTED BILL

    The Concorde is a civil supersonic transport category 
aircraft operated by both British Airways and Air France. It 
does not meet, and has been exempted from, Stage 3 
environmental noise requirements for its U.S. operations. In 
fact, the Concorde does not even meet less stringent Stage 2 
noise standards.
    The reported bill would ban U.S. commercial operations of 
the Concorde if the European Union adopts its proposed 
regulations by restricting the U.S. commercial operations of 
civil supersonic transport category aircraft that do not meet 
current U.S. noise restrictions. In contrast, the EU proposal 
would restrict U.S. aircraft that meet current international 
noise restrictions. Other EU-based aircraft that meet Chapter 3 
noise restrictions in the same way are not restricted by the 
EU's proposed regulation. The Committee believes that this bill 
is a fair and measured response to the EU's proposed action.

                    HEARINGS AND LEGISLATIVE HISTORY

    H.R. 661 was introduced on February 9, 1999. The Committee 
has not held hearings on the reported legislation.

                        COMMITTEE CONSIDERATION

    On February 11, 1999 the Committee on Transportation and 
Infrastructure met in open session and ordered the bill 
reported, without an amendment, by voice vote with a quorum 
present. There were no recorded votes taken during Committee 
consideration of H.R. 661.

                             ROLLCALL VOTES

    Clause 3(b) of rule XIII of the House of Representatives 
requires each committee report to include the total number of 
votes cast for and against on each roll call vote on a motion 
to report and on any amendment offered to the measure or 
matter, and the names of those members voting for and against. 
There were no recorded votes taken in connection with ordering 
H.R. 661 reported. A motion by Mr. Duncan to order H.R. 661 
favorably reported to the House, without amendment, was agreed 
to by voice vote, a quorum being present.

                      COMMITTEE OVERSIGHT FINDINGS

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

                        COST OF THE LEGISLATION

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

                    COMPLIANCE WITH HOUSE RULE XIII

    1. With respect to the requirement of clause 3(c)(2) of 
rule XIII of the Rules of the House of Representatives, and 
section 308(a) of the Congressional Budget Act of 1974, the 
Committee references the report of the Congressional Budget 
Office included below.
    2. With respect to the requirement of clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, the 
Committee has received no report of oversight findings and 
recommendations from the Committee on Government Reform and 
Oversight on the subject of H.R. 661.
    3. With respect to the requirement of clause 3(c)(3) of 
rule XIII of the Rules of the House of Representatives and 
section 402 of the Congressional Budget Act of 1974, the 
Committee has received the following cost estimate for H.R. 661 
from the Director of the Congressional Budget Office.

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, February 25, 1999.
Hon. Bud Shuster,
Chairman, Committee on Transportation and Infrastructure, House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 661, a bill to 
direct the Secretary of Transportation to prohibit the 
commercial operation of supersonic transport category aircraft 
that do not comply with stage 3 noise levels if the European 
Union adopts certain aircraft noise regulations.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Deborah 
Reis (for federal costs), and Lesley Frymier (for the private-
sector impact).
            Sincerely,
                                          Dan L. Crippen, Director.
    Enclosure.

               congressional budget office cost estimate

H.R. 661--A bill to direct the Secretary of Transportation to prohibit 
        the commercial operation of supersonic transport category 
        aircraft that do not comply with stage 3 noise levels if the 
        European Union adopts certain aircraft noise regulations

    H.R. 661 would require the Secretary of Transportation to 
prohibit the operation of civil supersonic aircraft to or from 
U.S. airports if the European Union adopts a final regulation 
affecting the use and sale of certain airline equipment 
retrofitted for noise control by American companies.
    CBO estimates that enacting H.R. 661 would have no 
immediate impact on the federal budget, but the government 
could incur costs as the result of arbitration, litigation, or 
other efforts at dispute resolution in an international forum. 
It is possible that the federal government could be liable for 
damages, but CBO has no basis for predicting the likelihood or 
outcome of such proceedings. Pay-as-you-go procedures would 
apply because the bill could affect direct spending--if the 
United States has to pay damages and if it uses the permanent 
judgment fund appropriation for that purpose.
    H.R. 661 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would not affect 
the budgets of state, local, or tribal governments. By 
effectively banning the operation of Concorde aircraft at U.S. 
airports, H.R. 661 would impose a new private-sector mandate on 
British Airways and Air France, the operators of the Concorde. 
Based on information provided by the Department of 
Transportation, the Congressional Research Service, and 
industry sources, CBO estimates that the direct cost of the new 
private-sector mandate would not exceed the statutory threshold 
established in UMRA ($100 million in 1996, adjusted annually 
for inflation).
    The CBO staff contacts are Deborah Reis (for federal 
costs), and Lesley Frymier (for the private-sector impact). 
This estimate was approved by Robert A. Sunshine, Deputy 
Assistant Director for Budget Analysis.

                APPLICABILITY TO THE LEGISLATIVE BRANCH

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

                       FEDERAL MANDATES STATEMENT

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

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, committee reports on a bill or joint 
resolution of a public character shall include a statement 
citing the specific powers granted to the Congress in the 
Constitution to enact the measure. The Committee on 
Transportation and Infrastructure finds that Congress has the 
authority to enact this measure pursuant to its powers granted 
under Article I, Section 8 of the Constitution.

                      ADVISORY COMMITTEE STATEMENT

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

                                
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