I

103D CONGRESS

1ST SESSION H. R. 472

To amend the Federal Aviation Act of 1958 for the purpose of enhancing

competition among air carriers and protection of passengers of air carriers, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 6, 1993

Mr. OBERSTAR introduced the following bill; which was referred to the

Committee on Public Works and Transportation

A BILL

To amend the Federal Aviation Act of 1958 for the purpose

of enhancing competition among air carriers and protection of passengers of air carriers, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Airline Competition

5 Enhancement and Passenger Protection Act of 1993’’.
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1 TITLE I—AIRLINE COMPETITION

2 ENHANCEMENT

3 SEC. 101. ENHANCEMENT OF COMPETITION RELATING TO

4 CERTIFICATES.

5 (a) IN GENERAL.—Section 401(h) of the Federal

6 Aviation Act of 1958 (49 U.S.C. 1371(h)) is amended to

7 read as follows:

8 ‘‘(h) TRANSFER OF CERTIFICATE.—

9 ‘‘(1) APPROVAL REQUIRED.—No air carrier

10 may transfer a certificate issued under this section

11 authorizing the carrier to engage in foreign air

12 transportation or any portion of such a certificate

13 unless the carrier has submitted to the Secretary an

14 application for approval of the transfer and the Sec15 retary has approved the transfer under this sub16 section.

17 ‘‘(2) OPPORTUNITY FOR COMPETING PROPOS18 ALS.—Not later than 180 days after the date of the

19 enactment of the Airline Competition Enhancement

20 and Passenger Protection Act of 1993, the Secretary

21 shall modify the rules promulgated under subsection

22 (p) to establish procedures for ensuring that, in any

23 case in which an air carrier has applied under this

24 subsection for approval of a transfer of a certificate

25 to another air carrier, all other air carriers inter-
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1 ested in obtaining the certificate or any portion

2 thereof are provided an opportunity to submit, to the

3 carrier seeking to transfer the certificate and the

4 Secretary, proposals for obtaining the certificate or

5 portion.

6 ‘‘(3) APPROVAL IF NO COMPETING PROPOS7 ALS.—If no proposal to obtain a certificate or por8 tion thereof is submitted to the Secretary pursuant

9 to paragraph (2), the Secretary, subject to para10 graph (5), shall approve the proposed transfer of the

11 certificate for which approval was sought under

12 paragraph (1) if the Secretary determines that the

13 proposed transfer is consistent with the public

14 interest.

15 ‘‘(4) APPROVAL STANDARD IF COMPETING PRO16 POSALS.—If 1 or more proposals to obtain a certifi17 cate or portion thereof are submitted to the Sec18 retary pursuant to paragraph (2), the Secretary,

19 subject to paragraph (5), shall approve the proposed

20 transfer of the certificate for which approval was

21 sought under paragraph (1) or the proposal or pro22 posals submitted under paragraph (2) which the

23 Secretary determines are consistent with the public

24 interest and provide the maximum enhancement of

25 the public interest, unless the Secretary determines
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1 that the proposed transfer or proposal or proposals,

2 as the case may be, do not include a purchase price

3 or other consideration that is fair. The Secretary

4 shall disapprove the proposed transfer and all such

5 proposals if the Secretary determines that none of

6 them would be consistent with the public interest.

7 ‘‘(5) SERVICE REQUIREMENT.—The Secretary

8 may not approve the transfer of a certificate to pro9 vide service on a route in foreign air transportation

10 issued to an air carrier under this section unless the

11 air carrier has provided the service for at least 1

12 year.

13 ‘‘(6) PUBLIC INTEREST FACTORS.—In making

14 a determination with respect to public interest under

15 paragraphs (3) and (4), the Secretary shall consider

16 as being in the public interest the following factors:

17 ‘‘(A) The factors listed in section 102 of

18 this Act.

19 ‘‘(B) The enhancement of the financial via20 bility of each of the air carriers involved in the

21 transfer.

22 ‘‘(C) The strengthening of smaller air car23 riers in order to enhance competition among air

24 carriers and inhibit concentration in the air car25 rier industry.
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1 ‘‘(D) The enhancement of the trade posi2 tion of the United States in the international

3 air transportation market.

4 ‘‘(E) A commitment by the carrier trans5 ferring the certificate or portion thereof to use

6 the funds received from the transfer to provide

7 air transportation services in other markets.

8 ‘‘(F) The quality of service likely to be pro9 vided to passengers by the carrier to whom the

10 certificate would be transferred as dem11 onstrated by information submitted under title

12 XVII of this Act and part 234 of title 14 of the

13 Code of Federal Regulations.

14 ‘‘(7) PURCHASE PRICE FACTORS.—In making a

15 determination as to fairness of a purchase price or

16 other consideration under paragraph (4), the Sec17 retary shall consider the following factors (among

18 others):

19 ‘‘(A) The price paid or other consideration

20 provided to obtain the certificate by the air car21 rier seeking to transfer the certificate.

22 ‘‘(B) The period of time the air carrier has

23 used the certificate and the funds expended by

24 the air carrier for marketing and for capital im-
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1 provements, facilities, and equipment in order

2 to use the certificate.

3 ‘‘(8) OPPORTUNITY TO MODIFY PROPOSALS.—If

4 the purchase price or other consideration included in

5 a proposal for transfer is determined not to be fair

6 under paragraph (4), the Secretary shall provide the

7 person submitting the proposal a reasonable oppor8 tunity to modify the proposal in order that a fair

9 price or other consideration may be offered. If, after

10 being provided the opportunity to modify the pro11 posal, the price or other consideration offered by the

12 person is still not determined by the Secretary to be

13 fair, the Secretary may approve in accordance with

14 paragraph (4) the proposed transfer for which ap15 proval was sought under paragraph (1) or any other

16 proposal or proposals for such transfer submitted

17 pursuant to paragraph (2).

18 ‘‘(9) EQUAL CONSIDERATION OF PROPOSALS TO

19 OBTAIN PORTIONS OF CERTIFICATES.—In consider20 ing proposals under this subsection, the Secretary

21 shall give the same consideration to proposals to ob22 tain only a portion of the routes covered by the cer23 tificate that the air carrier is seeking to transfer as

24 the Secretary gives to proposals to obtain all of such

25 routes.
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1 ‘‘(10) DEADLINE FOR DECISION.—

2 ‘‘(A) GENERAL RULE.—The Secretary

3 shall make a decision to approve or disapprove

4 transfer of a certificate under this subsection

5 not later than the 90th day following the last

6 day of the period for submitting proposals for

7 obtaining the certificate established pursuant to

8 paragraph (2).

9 ‘‘(B) EXTENSION.—The Secretary may ex10 tend the 90-day period referred to in subpara11 graph (A) for an additional period not to exceed

12 60 days if the Secretary determines that such

13 extension would not have a significant adverse

14 effect on the financial viability on the carrier

15 seeking to transfer the certificate under para16 graph (1).’’.

17 (b) SECRETARY DEFINED.—Section 101 of such Act

18 (49 U.S.C. App. 1301) is amended by redesignating para19 graphs (37), (38), (39), (40), and (41), and any references

20 thereto, as paragraphs (38), (39), (40), (41), and (42),

21 respectively, and by inserting after paragraph (36) the fol22 lowing new paragraph:

23 ‘‘(37) ‘Secretary’ means the Secretary of Transpor24 tation.’’.
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1 SEC. 102. ENHANCEMENT OF COMPETITION RELATING TO

2 SLOTS.

3 Title IV of the Federal Aviation Act of 1958 (49

4 U.S.C. App. 1371–1389) is amended by adding at the end

5 the following new section:

6 ‘‘SEC. 420. ENHANCEMENT OF COMPETITION WITH RE7 SPECT TO SLOTS.

8 ‘‘(a) APPROVAL OF TRANSFERS REQUIRED.—No air

9 carrier may transfer to any 1 person in any 1-year period

10 10 or more of the slots allocated at a high density airport,

11 unless the carrier has submitted to the Secretary an appli12 cation for approval of the transfer and the Secretary has

13 approved the transfer under this section.

14 ‘‘(b) OPPORTUNITY FOR COMPETING PROPOSALS.—

15 Not later than 180 days after the date of the enactment

16 of this section, the Secretary shall issue regulations estab17 lishing procedures for ensuring that all carriers and other

18 persons interested in obtaining slots the transfer of which

19 are subject to subsection (a) or any portion of such slots,

20 are provided an opportunity to submit, to the air carrier

21 seeking to transfer such slots and the Secretary, proposals

22 for obtaining such slots or portion of such slots.

23 ‘‘(c) APPROVAL IF NO COMPETING PROPOSALS.—If

24 no proposal to obtain slots or a portion of such slots is

25 submitted to the Secretary pursuant to subsection (b), the

26 Secretary, subject to subsection (h), shall immediately ap-
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1 prove the proposed transfer of the slots for which approval

2 was sought under subsection (a).

3 ‘‘(d) APPROVAL STANDARD IF COMPETING PROPOS4 ALS.—If 1 or more proposals to obtain slots or a portion

5 of such slots are submitted to the Secretary pursuant to

6 subsection (b), the Secretary, subject to subsection (h),

7 shall approve the proposed transfer of slots for which ap8 proval was sought under subsection (a) or the proposal

9 or proposals submitted under subsection (b) which the

10 Secretary determines provide the maximum enhancement

11 of competition among air carriers, unless the Secretary de12 termines that the proposed transfer or proposal or propos13 als, as the case may be, do not include a purchase price

14 or other consideration that is fair.

15 ‘‘(e) PURCHASE PRICE FACTORS.—In making a de16 termination as to fairness of a purchase price or other con17 sideration under subsection (d), the Secretary shall con18 sider the following factors (among others):

19 ‘‘(1) The price paid or other consideration pro20 vided to obtain the slots by the air carrier seeking

21 to transfer the slots.

22 ‘‘(2) The period of time the air carrier has used

23 the slots and the funds expended by the air carrier

24 for marketing and for capital improvements, facili25 ties, and equipment in order to use the slots.
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1 ‘‘(f) OPPORTUNITY TO MODIFY PROPOSALS.—If the

2 purchase price or other consideration included in a pro3 posal for transfer is determined not to be fair under sub4 section (d), the Secretary shall provide the person submit5 ting the proposal a reasonable opportunity to modify the

6 proposal in order that a fair price or other consideration

7 may be offered. If, after being provided the opportunity

8 to modify the proposal, the price or other consideration

9 offered by the person is still not determined by the Sec10 retary to be fair, the Secretary may approve in accordance

11 with subsection (d) the proposed transfer for which ap12 proval was sought under subsection (a) or any other pro13 posal or proposals for such transfer submitted pursuant

14 to subsection (b).

15 ‘‘(g) EQUAL CONSIDERATION OF PROPOSALS TO OB16 TAIN PORTIONS OF SLOTS.—In considering proposals

17 under this section, the Secretary shall give the same con18 sideration to proposals to obtain only a portion of the slots

19 that the air carrier is seeking to transfer as the Secretary

20 gives to proposals to obtain all such slots.

21 ‘‘(h) LIMITATION ON STATUTORY CONSTRUCTION.—

22 Nothing in this title shall be construed as limiting or oth23 erwise affecting any authority of the Secretary, the Ad24 ministrator, or the Attorney General to amend, modify,

25 revoke, or terminate the right of an air carrier to use or
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1 have a slot or hold a certificate issued under section 401

2 of this Act.

3 ‘‘(i) DEFINITIONS.—As used in this section, the fol4 lowing definitions apply:

5 ‘‘(1) HIGH DENSITY AIRPORT.—The term ‘high

6 density airport’ means an airport at which the Ad7 ministrator limits the number of instrument flight

8 rule takeoffs and landings of aircraft.

9 ‘‘(2) SLOT.—The term ‘slot’ means a reserva10 tion for an instrument flight rule takeoff or landing

11 by an air carrier of an aircraft in air transpor12 tation.’’.

13 SEC. 103. REDUCTION OF UNITED STATES CITIZENSHIP

14 VOTING INTEREST OWNERSHIP REQUIRE15 MENT.

16 (a) IN GENERAL.—Title IV of the Federal Aviation

17 Act of 1958 (49 U.S.C. App. 1371–1389) is further

18 amended by adding at the end the following new section:

19 ‘‘SEC. 421. REDUCTION OF UNITED STATES CITIZENSHIP

20 VOTING INTEREST OWNERSHIP REQUIRE21 MENT.

22 ‘‘(a) GENERAL RULE.—Notwithstanding the require23 ment of section 101(16) of this Act that at least 75 per24 cent of the stock of an air carrier be owned or controlled

25 by persons who are citizens of the United States or of one
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1 of its possessions, a person who is not a citizen of the

2 United States may purchase stock of a corporation or as3 sociation which is, or owns or controls, an air carrier with4 out regard to whether or not such purchase would result

5 in the corporation or association failing to meet the stock

6 ownership and control requirement of section 101(16) if

7 the Secretary of Transportation finds—

8 ‘‘(1) with respect to nonvoting shares of stock,

9 that after the purchase no person who is not a citi10 zen of the United States would have the power to

11 exercise control over the air carrier;

12 ‘‘(2) with respect to voting shares of stock—

13 ‘‘(A) that the air service agreement be14 tween the United States and the foreign coun15 try of which the purchaser is a citizen is a pro16 competitive agreement which, at a minimum, al17 lows those air carriers designated by the United

18 States to provide air service from any point in

19 the United States to any significant air service

20 point in the foreign country;

21 ‘‘(B) that after the purchase, the presi22 dent, chairman of the board of directors, chief

23 operating officer, and two-thirds or more of the

24 board of directors of the corporation or associa-
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1 tion which is, or owns or controls, the air car2 rier would be citizens of the United States;

3 ‘‘(C) that the laws and regulations of the

4 foreign country would permit a citizen of the

5 United States to acquire, under similar terms

6 and conditions, the same percentage of stock

7 (by vote or value) of a person who provides in

8 the foreign country transportation by aircraft of

9 person or property as a common carrier for

10 compensation as the percentage of ownership

11 which the person making the purchase would

12 have in the air carrier after the purchase;

13 ‘‘(D) that the purchaser is not a corpora14 tion or association of which 50 percent or more

15 of its stock (by vote or value) is owned or con16 trolled by a government of a foreign country;

17 ‘‘(E) that after the purchase, no person

18 who is not a citizen of the United States would

19 have the power to exercise control over the air

20 carrier;

21 ‘‘(F) that the purchase is consistent with

22 the national security interests of the United

23 States; and

24 ‘‘(G) that the purchase is otherwise in the

25 public interest.
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1 ‘‘(b) MAXIMUM REDUCED PERCENTAGE.—The 75

2 percent stock ownership and control requirement of sec3 tion 101(16) of this Act may not be reduced to less than

4 51 percent of stock by vote or value under this section.

5 ‘‘(c) APPLICATION.—A person interested in purchas6 ing stock with respect to which subsection (a) applies must

7 submit an application with respect to such stock purchase

8 to the Secretary. The application must be in such form

9 and contain such information as the Secretary may re10 quire by regulation.’’.

11 (b) DEFINITION OF CITIZEN OF THE UNITED

12 STATES.—Section 101(16)(c) of such Act (49 U.S.C. App.

13 1301(16)(c)) is amended—

14 (1) by striking ‘‘voting interest’’ and inserting

15 ‘‘stock (by vote or value)’’; and

16 (2) by striking the period at the end and insert17 ing ‘‘and over which no person who is not a citizen

18 of the United States has the power to exercise con19 trol.’’.

20 (c) CONFORMING AMENDMENT TO TABLE OF CON21 TENTS.—The table of contents contained in the first sec22 tion of the Federal Aviation Act of 1958 is amended by

23 adding at the end of the matter relating to title IV of such

24 Act the following:

‘‘Sec. 420. Enhancement of competition with respect to slots.

‘‘(a) Approval of transfers required.

‘‘(b) Opportunity for competing proposals.
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‘‘(c) Approval if no competing proposals.

‘‘(d) Approval standard if competing proposals.

‘‘(e) Purchase price factors.

‘‘(f) Opportunity to modify proposals.

‘‘(g) Equal consideration of proposals to obtain portions of slots.

‘‘(h) Limitation on statutory construction.

‘‘(i) Definitions.

‘‘Sec. 421. Reduction of U.S. citizenship voting interest ownership requirement.

‘‘(a) General rule.

‘‘(b) Maximum reduced percentage.

‘‘(c) Application.’’.

1 TITLE II—AIRLINE PASSENGER

2 PROTECTION

3 SEC. 201. REQUIREMENTS RELATING TO BANKRUPTCY AND

4 FREQUENT FLYER PROGRAMS.

5 (a) IN GENERAL.—The Federal Aviation Act of 1958

6 (49 U.S.C. App. 1301 et seq.) is amended by adding at

7 the end the following new title:

8 ‘‘TITLE XVII—AIRLINE

9 PASSENGER PROTECTION

10 ‘‘SEC. 1701. BANKRUPTCY PROTECTION.

11 ‘‘(a) INTERIM PROGRAM.—

12 ‘‘(1) IN GENERAL.—If an air carrier becomes a

13 debtor in a case under title 11, United States Code,

14 and is not providing air transportation of passengers

15 between 2 points, covered air carriers providing air

16 transportation of passengers between such points

17 must provide, on a space available basis, such air

18 transportation for persons holding airline tickets

19 sold by the debtor air carrier or an agent thereof for

20 such air transportation before the date on which
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1 such case is commenced. Any such transportation

2 shall be provided at no additional charge.

3 ‘‘(2) LIMITATION ON APPLICABILITY.—This

4 subsection only requires the provision of air trans5 portation for passengers of an air carrier which be6 comes a debtor described in paragraph (1) before

7 the date of issuance of an order under subsection (d)

8 or the date of issuance of regulations under sub9 section (e), as the case may be.

10 ‘‘(b) DEVELOPMENT OF BANKRUPTCY TRANSPOR11 TATION PLANS.—

12 ‘‘(1) ORDER.—Not later than 60 days after the

13 date of the enactment of this title, the Secretary

14 shall issue an order authorizing covered air carriers

15 to develop a plan for providing air transportation for

16 any person who holds an airline ticket for provision

17 of such transportation by a covered air carrier who,

18 after the date of purchase of such ticket, becomes a

19 debtor in a case under title 11, United States Code.

20 In issuing such an order, the Secretary shall have

21 authority to grant an exemption with respect to

22 interstate air transportation, overseas air transpor23 tation, and foreign air transportation in accordance

24 with section 414.
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1 ‘‘(2) DEADLINE FOR SUBMISSION.—A plan de2 veloped under paragraph (1) shall be submitted to

3 the Secretary for approval within 180 days after the

4 date of the enactment of this section.

5 ‘‘(c) TIME LIMIT AND BASIS FOR APPROVAL.—If a

6 plan is submitted to the Secretary in accordance with sub7 section (b), the Secretary shall approve or disapprove such

8 plan within 60 days after the date of such submission. If

9 the Secretary determines that such plan will provide (or

10 would provide if all covered air carriers participate in im11 plementation of such plan) satisfactory protection for all

12 persons who hold airline tickets described in subsection

13 (b), the Secretary shall approve such plan. Otherwise, the

14 Secretary shall disapprove such plan.

15 ‘‘(d) IMPLEMENTATION OF APPROVED PLANS.—If

16 the Secretary approves a plan under this section, the Sec17 retary shall issue an order requiring implementation of

18 such plan by the covered air carriers who submitted such

19 plan and any other covered air carriers. If there are any

20 covered air carriers who did not participate in development

21 of a plan approved under this section, such carriers shall

22 be treated under such order and plan in the same manner

23 as carriers who did participate in development of such

24 plan.
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1 ‘‘(e) REGULATIONS.—If a plan described in sub2 section (a) is not submitted within 180 days after the date

3 of the enactment of this title, or if the Secretary dis4 approves a plan submitted in accordance with subsection

5 (b), or if the Secretary determines that a plan approved

6 under this section is not being implemented in a manner

7 which provides satisfactory protection for all persons who

8 hold airline tickets described in subsection (b), the Sec9 retary shall issue regulations requiring all covered air car10 riers to provide air transportation for persons who hold

11 such tickets. Such regulations must be issued within 90

12 days after the expiration of such 180-day period, the date

13 of disapproval of such plan, or the date of such determina14 tion, as the case may be.

15 ‘‘SEC. 1702. FREQUENT FLYER PROGRAMS.

16 ‘‘Not later than 180 days after the date of the enact17 ment of this title, the Secretary shall initiate a rulemaking

18 proceeding—

19 ‘‘(1) to consider methods of ensuring that each

20 air carrier makes enough seats available for persons

21 redeeming frequent flyer awards to meet anticipated

22 demand;

23 ‘‘(2) to consider requirements to ensure that

24 such air carrier gives members of its frequent flyer
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1 program adequate notice of any material change in

2 such program; and

3 ‘‘(3) to consider whether or not frequent flyer

4 mileage obtained under a frequent flyer program of

5 a covered air carrier should be transferable to an6 other passenger who is a member of such program

7 as a means of reducing the anticompetitive effects of

8 such programs.

9 ‘‘SEC. 1703. DEFINITIONS.

10 ‘‘For the purposes of this title, the following defini11 tions apply:

12 ‘‘(1) AIRLINE TICKET.—The term ‘airline tick13 et’ means any written instrument that embodies a

14 contract of carriage between an air carrier and a

15 passenger thereof for air transportation.

16 ‘‘(2) COVERED AIR CARRIER.—The term ‘cov17 ered air carrier’ means an air carrier which, in the

18 most recent calendar year for which data is avail19 able, accounted for at least 1 percent of the sched20 uled passenger revenues derived from interstate and

21 overseas air transportation in such year.’’.

22 (b) CONFORMING AMENDMENT TO TABLE OF CON23 TENTS.—The table of contents contained in the first sec24 tion of the Federal Aviation Act of 1958 is amended by

25 adding at the end the following:

‘‘TITLE XVII—AIRLINE PASSENGER PROTECTION
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‘‘Sec. 1701. Bankruptcy protection.

‘‘Sec. 1702. Frequent flyer programs.

‘‘Sec. 1703. Definitions.’’.

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