II 

109TH CONGRESS 

1ST SESSION S. 2135 

To direct the Secretary of Transportation to report to Congress concerning 

proposed changes to long-standing policies that prohibit foreign interests 

from exercising actual control over the economic, competitive, safety, 

and security decisions of United States airlines, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 16, 2005 

Mr. INOUYE (for himself and Mr. LAUTENBERG) introduced the following bill; 

which was read twice and referred to the Committee on Commerce, 

Science, and Transportation 

A BILL 

To direct the Secretary of Transportation to report to Congress concerning proposed changes to long-standing policies that prohibit foreign interests from exercising actual 

control over the economic, competitive, safety, and security decisions of United States airlines, 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. FINDINGS. 

4 Congress finds the following: 

5 (1) Under current law (49 U.S.C. 

6 40102(a)(15)), only an airline that qualifies as ‘‘a 
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1 citizen of the United States’’ (commonly referred to 

2 as a United States airline) may provide service be3 tween cities in the United States or on international 

4 routes obtained by the United States through inter5 national agreements. The law further provides that 

6 an airline will qualify as a citizen of the United 

7 States only if the airline is ‘‘a corporation or asso8 ciation . . . which is under the actual control of citi9 zens of the United States’’. 

10 (2) Throughout its 47-year history (1938– 

11 1985), the Civil Aeronautics Board interpreted the 

12 governing law as requiring that United States inter13 ests be in ‘‘actual control’’ of all operations of the 

14 airline. The Department of Transportation contin15 ued these policies when it took over the responsibil16 ities of the Civil Aeronautics Board in 1985. 

17 (3) To ensure that these long-standing policies 

18 remained in effect, Congress in 2003 passed an 

19 amendment specifically adding to the definition of 

20 ‘‘citizen of the United States’’ a requirement that 

21 the airline be ‘‘under the actual control of citizens 

22 of the United States’’. When this ‘‘actual control’’ 

23 test was specifically added to the law, it clearly was 

24 intended to codify the policy developed by the Civil 

25 Aeronautics Board and the Department, which re-
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1 quired that United States interests control economic 

2 and competitive decisions of the airline, as well as 

3 safety and security decisions. 

4 (4) Congress has repeatedly refused the Depart5 ment’s requests to pass legislation to allow foreign 

6 interests to gain increased control of United States 

7 airlines by changing the statutory requirements that 

8 United States citizens must own 75 percent of the 

9 voting stock of United States airlines. The Depart10 ment now seeks to accomplish increased foreign con11 trol by other means. 

12 (5) On November 7, 2005, the Department 

13 issued a Notice of Proposed Rulemaking (70 Fed. 

14 Reg. 67389) that proposes to change the Depart15 ment’s long-standing interpretation of ‘‘actual con16 trol’’. Under the proposed rules, United States citi17 zens would be required to control decisions of a 

18 United States airline concerning commitments to the 

19 Civil Reserve Air Fleet, transportation security, safe20 ty, and organizational documents. However, United 

21 States citizens would not be required to control the 

22 airline’s basic economic and competitive decisions, 

23 such as the cities to be served, the fares to be 

24 charged, the aircraft to be purchased, and the na25 ture and size of the aircraft fleet. 
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1 (6) The proposal to review long-standing policy 

2 and law through a new interpretation of ‘‘actual con3 trol’’ is contrary to the clear intent of Congress. 

4 (7) The proposed new interpretation would 

5 change long-standing policies and legal interpreta6 tions that ‘‘actual control’’ means control over all 

7 operations of the airline, not only decisions con8 cerning security, safety, the Civil Reserve Air Fleet 

9 program, and organizational documents. 

10 (8) The Department’s rulemaking is a major 

11 impairment of the policies and legal interpretation 

12 that Congress specifically required by statute in 

13 2003, and that have been followed for over 60 years. 

14 Any major change in the definition of ‘‘actual con15 trol’’ should only be accomplished through the legis16 lative process and should not be unilaterally imposed 

17 by the executive branch. 

18 (9) The development of an equitable ‘‘open 

19 skies’’ agreement between the United states and Eu20 rope is central to opening up markets, including ac21 cess to Heathrow if commercially viable slots and fa22 cilities are available there and key rights beyond 

23 Heathrow, and both entities will benefit by moving 

24 the world’s 2 largest aviation markets closer to25 gether. 
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1 SEC. 2. LIMITATION ON CERTAIN ACTIONS. 

2 (a) IN GENERAL.—For a period of one year after the 

3 date of enactment of this Act, the Secretary of Transpor4 tation shall not issue a decision on the notice of proposed 

5 rulemaking referred to in section 1(a)(5), issue any final 

6 rule, or make any fitness determination under section 

7 41102 of title 49, United States Code, that would change 

8 the Department of Transportation’s long-standing inter9 pretation concerning what constitutes ‘‘actual control’’ of 

10 an airline for purposes of section 40102(a)(15) of such 

11 title. The Secretary may not submit a final rule to the 

12 Congress under chapter 8 of title 5, United States Code, 

13 before the date that is 180 days after the date on which 

14 the Secretary submits the report required by subsection 

15 (c). 

16 (b) CONGRESSIONAL REVIEW.—Any final rule de17 scribed in subsection (a) issued by the Secretary shall be 

18 treated as a major rule for purposes of chapter 8 of title 

19 5, United States Code. 

20 (c) REPORT.—Not later than 180 days after the date 

21 of enactment of this Act, the Secretary shall submit to 

22 Congress a report that assesses the impact of the proposed 

23 rules referred to in section 1(a)(5). At a minimum, the 

24 report shall include the following: 

25 (1) An assessment of the consequences of per26 mitting greater participation of foreign interests in 
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1 the direct operations of United States airlines, in2 cluding the impact on national defense, competition 

3 between foreign and United States airlines, the 

4 growth of international air services performed by 

5 United States airlines and of the United States avia6 tion industry manufacturers, and access of United 

7 States citizens, especially those living in rural com8 munities, to aviation service. 

9 (2) If the Department interprets the proposed 

10 rules as allowing foreign owners of 25 percent or 

11 less of a United States airline’s stock to gain control 

12 of the airline through supermajority voting require13 ments or other means, or as allowing agreements 

14 under which United States shareholders will vote 

15 their shares the same way as minority foreign share16 holders, an analysis of the potential effects of such 

17 supermajority voting requirements or agreements 

18 on— 

19 (A) national defense; 

20 (B) competition between foreign and 

21 United States airlines and aviation industry 

22 manufacturers; 

23 (C) access to domestic aviation services; 

24 and 
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1 (D) whether such agreements would be 

2 consistent with the statutory requirement that 

3 permits an airline to qualify as a citizen of the 

4 United States only if at least 75 percent of the 

5 voting interest in the airline is owned or con6 trolled by persons that are citizens of the 

7 United States. 

8 (3) An analysis of how the Department will en9 sure that United States citizens maintain control 

10 over matters having an impact on issues concerning 

11 Civil Reserve Air Fleet participation, safety, and se12 curity if foreign interests are allowed to exercise con13 trol over issues concerning a United States airline’s 

14 day-to-day operations, market strategy, and fleet 

15 management. 

16 (4) An analysis of the portion of the proposed 

17 rules that provides that the new interpretation of 

18 ‘‘actual control’’ would apply only in cases in which 

19 a foreign country grants United States interests ‘‘re20 ciprocal access to investments in their carriers’’, and 

21 an analysis of— 

22 (A) how the Department can adopt an in23 terpretation that will permit a definition of ‘‘ac24 tual control’’ to vary depending on policies fol25 lowed by a foreign country; 
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1 (B) how the Department would define ‘‘re2 ciprocal access’’; 

3 (C) how the Department would determine 

4 that the home country of a foreign airline does 

5 not deny United States citizens reciprocal ac6 cess to investments in its own airlines; and 

7 (D) whether, as part of ‘‘reciprocal ac8 cess’’, the Department would require control by 

9 United States interests over economic decisions 

10 by a foreign airline. 

11 (5) An analysis of whether under the proposed 

12 rule the Federal Government will have adequate 

13 ability to review the source of foreign capital. 

14 (6) An analysis of the effects the proposed rules 

15 would have on the wages, working conditions, and 

16 job opportunities of United States airline employees, 

17 including job opportunities in international air 

18 transportation. 

19 (7) An analysis of whether under the proposed 

20 rules interested parties would be notified of and have 

21 an opportunity to comment on an application sub22 mitted to the Department under which a foreign in23 terest could gain effective control of a United States 

24 airline. 

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