II

103D CONGRESS

1ST SESSION S. 1053

To amend the Federal Aviation Act of 1958 to provide emergency relief

to the United States airline industry by facilitating financing for investment in new aircraft and by encouraging the retirement of older, noisier,

and less efficient aircraft, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 27 (legislative day, APRIL 19), 1993

Mr. FORD (for himself, Mrs. MURRAY, Mr. MATHEWS, Mr. STEVENS, Mr.

KRUEGER, Mrs. FEINSTEIN, Mr. INOUYE, and Mr. BRYAN) introduced

the following bill; which was read twice and referred to the Committee

on Commerce, Science, and Transportation

A BILL

To amend the Federal Aviation Act of 1958 to provide emergency relief to the United States airline industry by

facilitating financing for investment in new aircraft and

by encouraging the retirement of older, noisier, and less

efficient aircraft, 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 ‘‘Aviation Revitalization

5 Act of 1993’’.
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1 SEC. 2. DECLARATION OF POLICY.

2 Congress finds and declares the following:

3 (1) The United States commercial airline indus4 try is currently suffering severe financial distress.

5 (2) Sustained record losses and excessive debt

6 burdens are causing air carriers to cancel new air7 craft options and orders which, in turn, is threaten8 ing the economic viability of the United States aero9 space manufacturing industry.

10 (3) Many air carriers are increasingly unable to

11 obtain financing at reasonable interest rates for pur12 chasing new equipment.

13 (4) The inability of many air carriers to acquire

14 new, quieter, more fuel efficient Stage 3 aircraft

15 may jeopardize the planned phaseout of noisier

16 Stage 2 aircraft.

17 (5) A Federal loan guarantee program should,

18 therefore, be established to support the financing of

19 new aircraft, or new aircraft components, in a way

20 that assures the phasing out of less fuel-efficient,

21 noisier, and older aircraft at the same time.

22 SEC. 3. AUTHORIZATION TO GUARANTEE FINANCING OF

23 NEW AIRCRAFT.

24 Title XI of the Federal Aviation Act of 1958 (49 App.

25 U.S.C. 1501 et seq.) is amended by adding at the end

26 the following new section:
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1 ‘‘SEC. 1119. FINANCING OF NEW AIRCRAFT.

2 ‘‘(a) AUTHORIZATION OF LOAN GUARANTEE PRO3 GRAM.—The Secretary is authorized to guarantee loans

4 for the financing of new aircraft, or new aircraft compo5 nents, for use by air carriers that meet the terms and con6 ditions set forth in subsection (b) and that agree to pay

7 (directly if the carrier is the loan guarantee recipient, or

8 indirectly if another person is the loan guarantee recipi9 ent) subsidy fees assessed under subsection (e). Subject

10 to subsection (b), such guarantees may be made with re11 spect to—

12 ‘‘(1) loans to an air carrier that will use such

13 new aircraft or such new aircraft components; or

14 ‘‘(2) loans to a person purchasing such new air15 craft, or such new aircraft components, for lease to

16 and use by an air carrier.

17 ‘‘(b) TERMS AND CONDITIONS.—A loan guarantee

18 under this section shall be subject to the following terms

19 and conditions:

20 ‘‘(1) The loan guarantee must lead to the deliv21 ery of new aircraft, or new aircraft components, to

22 an air carrier certificated under part 121 of title 14,

23 Code of Federal Regulations, and such delivery shall

24 occur no later than December 31, 1999.

25 ‘‘(2) The loan guarantee must be made for the

26 purpose of financing the acquisition of new aircraft,
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1 or new aircraft components, that comply with Stage

2 3 noise standards.

3 ‘‘(3) The loan guarantee shall only be available

4 for the purchase of new aircraft, or new aircraft

5 components, from companies that both—

6 ‘‘(A) publish independently audited finan7 cial disclosure information and financial results;

8 and

9 ‘‘(B) also are domiciled in countries that

10 comply with all major international agreements

11 governing aerospace trade, including but not

12 limited to the GATT Civil Aircraft Agreement,

13 the GATT Subsidies Code, the United States14 European Community bilateral aircraft agree15 ment, the OECD Large Aircraft Sector Under16 standing, and bilateral air services agreements

17 with the United States.

18 ‘‘(4) In the case of any air carrier taking deliv19 ery of a new aircraft financed under this section

20 which owns or operates either aging aircraft or

21 Stage 2 aircraft, such air carrier as borrower or les22 see must, except as provided in paragraph (5), agree

23 that, after April 1, 1993, it did remove from service,

24 or that no later than the 60th day after the aircraft

25 being financed is placed on the air carrier’s oper-
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1 ations specifications under part 121 of title 14, Code

2 of Federal Regulations, or December 31, 1999,

3 whichever occurs first, it will remove from service—

4 ‘‘(A) sufficient aging aircraft or Stage 2

5 aircraft which, at maximum certified capacity,

6 equal or exceed, in the aggregate and pursuant

7 to rules promulgated by the Secretary, 200 per8 cent of the number of seats (or in the case of

9 all-cargo aircraft 200 percent of cargo capacity)

10 of the new aircraft being financed; or

11 ‘‘(B) all of its remaining aging aircraft and

12 Stage 2 aircraft,

13 whichever number of aircraft is less; except that in

14 the event the maximum capacity of such aircraft re15 moved from service exceeds the number of seats or

16 cargo capacity required under this section, such ex17 cess seat or cargo capacity may be carried forward

18 as a credit available to be added to the capacity of

19 other aircraft removed from service for the purpose

20 of complying with this section for subsequent loan

21 guarantees.

22 ‘‘(5) When an air carrier described in para23 graph (4) is taking delivery of only all-cargo aircraft,

24 the carrier may, in lieu of removing Stage 2 all25 cargo aircraft from service, modify on or after April
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1 15, 1993, such Stage 2 aircraft in order to meet

2 Stage 3 noise standards on the same number of such

3 Stage 2 aircraft that otherwise would have had to be

4 removed from service within the contiguous States of

5 the United States under paragraph (4); except that

6 such modified aircraft must remain configured for

7 all-cargo service and shall not be converted to pas8 senger-cargo combination service.

9 ‘‘(6) Each aircraft removed from service by an

10 air carrier under paragraph (4) shall be taken off

11 the registry of certificated aircraft by the Secretary

12 and may not subsequently be registered in the

13 United States; except that—

14 ‘‘(A) the Secretary may continue to keep

15 an aircraft on the registry of certificated air16 craft if such aircraft—

17 ‘‘(i) is not based in any of the several

18 States of the United States and is engaged

19 in common carriage entirely outside the

20 several States; or

21 ‘‘(ii) is used solely outside the contig22 uous States of the United States; and

23 ‘‘(B) in a case where the aircraft removed

24 from service is owned by a person not affiliated

25 with such air carrier and was operated by such
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1 air carrier under lease on or before April 1,

2 1993, the Secretary may continue to keep such

3 aircraft on the registry of certificated aircraft if

4 such owner brings such aircraft into compliance

5 with Stage 3 noise standards prior to its lease

6 or sale to another air carrier or lessor.

7 ‘‘(7) An air carrier which is to take delivery of

8 a new aircraft, or new aircraft components, financed

9 under this section must warrant that it did not after

10 August 1, 1993, and will not on and after the date

11 of enactment of this section, place in service any

12 aging aircraft or Stage 2 aircraft to its fleet.

13 ‘‘(8) An air carrier’s violation of the warranty

14 under paragraph (7) shall constitute a revocation of

15 all outstanding loan guarantees under this section

16 that were made for the purpose of financing delivery

17 of new aircraft, or new aircraft components, to such

18 air carrier.

19 ‘‘(9) The Secretary may not grant a waiver, to

20 any air carrier that takes delivery of a new aircraft,

21 or new aircraft components, financed by a loan

22 guarantee under this section, that would allow such

23 air carrier to operate Stage 2 aircraft beyond De24 cember 31, 1999, in interstate air transportation.
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1 ‘‘(10) At least 75 percent of any new aircraft,

2 or new aircraft components, financed by a loan

3 guarantee under this section shall be manufactured

4 or produced in the United States.

5 ‘‘(c) REGULATIONS.—No later than 60 days after the

6 date of enactment of this section, the Secretary shall pro7 mulgate regulations implementing the loan guarantee pro8 gram authorized by this section.

9 ‘‘(d) FIDUCIARY DUTIES OF SECRETARY.—

10 ‘‘(1) IN GENERAL.—To implement this section,

11 the Secretary—

12 ‘‘(A) shall apply reasonable and prudent fi13 duciary standards in determining whether to

14 make any specific loan guarantee, and is au15 thorized to take such action as may be appro16 priate to enforce any right accruing to the

17 United States or any officer or agency thereof

18 as a result of making a loan guarantee under

19 this section;

20 ‘‘(B) shall make loan guarantees on rates,

21 terms, and conditions which, in the judgment of

22 the Secretary, offer reasonable assurance of re23 payment;

24 ‘‘(C) may require that loans guaranteed

25 under this section be secured by the new air-
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1 craft or new aircraft components being fi2 nanced, to provide sufficient collateral; and

3 ‘‘(D) may not guarantee a loan amount

4 that is more than 85 percent of the manufac5 turer’s price to the air carrier of the new air6 craft, or new aircraft components, being fi7 nanced.

8 ‘‘(2) SECURITY INTEREST.—If the Secretary re9 quires collateral under paragraph (1)(C)—

10 ‘‘(A) such collateral, to the extent of the

11 guaranteed loan and associated fees, shall be

12 deemed to be subject to a purchase-money

13 equipment security interest in the new aircraft

14 or new aircraft components for purposes of sec15 tion 1110 of title 11, United States Code; and

16 ‘‘(B) the Secretary may also authorize a

17 security interest in such collateral, on an equal

18 and pro rata basis or as may be otherwise

19 agreed by the Secretary, for persons providing

20 loans that are not guaranteed under this sec21 tion but that finance any portion of the price of

22 such new aircraft or new aircraft components.

23 ‘‘(e) ASSESSMENT OF FEES.—

24 ‘‘(1) IN GENERAL.—A loan guarantee under

25 this section shall remain in effect only so long as the
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1 loan guarantee recipient pays the subsidy fee as2 sessed under paragraph (2).

3 ‘‘(2) SUBSIDY FEE.—For each loan guarantee

4 under this section, the Secretary shall assess and

5 collect a subsidy fee from the loan guarantee recipi6 ent that is equal to the cost, as defined by section

7 502(5) of the Federal Credit Reform Act of 1990 (2

8 U.S.C. 661a(5)), of such guarantee.

9 ‘‘(f) ANNUAL REPORT.—The Secretary shall, not

10 later than March 1 of each year, submit to the Committee

11 on Commerce, Science, and Transportation of the Senate

12 and the Committee on Public Works and Transportation

13 of the House of Representatives a report that—

14 ‘‘(1) describes the progress of the loan guaran15 tee program authorized by this section;

16 ‘‘(2) identifies any problems with such pro17 grams; and

18 ‘‘(3) describes the loan guarantees made under

19 this section, including the identity of the air carriers

20 and other persons receiving loans to which such

21 guarantees apply.

22 ‘‘(g) DEFINITIONS.—As used in this section, the fol23 lowing definitions apply:

24 ‘‘(1) AGING AIRCRAFT.—The term ‘aging air25 craft’ means one or more airplanes that were placed
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1 into service more than 22 years prior to the date of

2 enactment of this section.

3 ‘‘(2) NEW AIRCRAFT.—The term ‘new aircraft’

4 means one or more newly manufactured airplanes,

5 including associated spare parts and engines in6 cluded in the original purchase, that have not been

7 previously registered or placed into service.

8 ‘‘(3) NEW AIRCRAFT COMPONENTS.—The term

9 ‘new aircraft components’ means components or

10 parts (or both), of an aircraft, that can be financed

11 separately from the body or frame of the aircraft, in12 cluding jet engines, Administrator-approved Stage 3

13 hush kits for jet engines, and avionics systems.

14 ‘‘(4) REMOVE FROM SERVICE.—The term ‘re15 move from service’ means to—

16 ‘‘(A) eliminate, permanently and irrev17 ocably, aircraft from the fleet of an air carrier

18 on or after April 15, 1993;

19 ‘‘(B) transfer aircraft to another air car20 rier, after April 1, 1993, but before the date of

21 enactment of this section, for use in common

22 carriage entirely outside the several States of

23 the United States; or
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1 ‘‘(C) remove aircraft permanently and en2 tirely from use in common carriage in the Unit3 ed States.

4 ‘‘(5) SECRETARY.—The term ‘Secretary’ means

5 the Secretary of Transportation.

6 ‘‘(6) STAGE 2 AIRCRAFT.—The term ‘Stage 2

7 aircraft’ means one or more airplanes as defined by

8 section 36.1(f)(4) of title 14, Code of Federal Regu9 lations, as in effect on the date of enactment of this

10 section.

11 ‘‘(7) STAGE 3 AIRCRAFT.—The term ‘Stage 3

12 aircraft’ means one or more airplanes as defined by

13 section 36.1(f)(6) of title 14, Code of Federal Regu14 lations, as in effect on the date of enactment of this

15 section.’’.

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