Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules 67389 

may change this proposal in light of the 

comments we receive. 

If you want the FAA to acknowledge 

receipt of your comments on this 

proposal, include with your comments 

a pre-addressed, stamped postcard on 

which the docket number appears. We 

will stamp the date on the postcard and 

mail it to you. 

Sensitive Security Information 

Do not file in the docket information 

that you consider to be sensitive 

security information. Send or deliver 

this information (identified as docket 

number FAA–2003–17005) directly to 

Edith V. Parish, Acting Manager, 

Airspace and Rules, Office of System 

Operations and Safety, Federal Aviation 

Administration, 800 Independence 

Avenue, SW., Washington, DC 20591, 

telephone (202) 267–8783. You must 

mark information that you consider 

security-sensitive. 

Under 14 CFR 11.35 (a), we will 

review comments as we receive them, 

before they are placed in the docket. If 

a comment contains sensitive security 

information, we remove it before 

placing the comment in the general 

docket. 

Background 

On August 4, 2005 (70 FR 45250), the 

FAA proposed to amend 14 CFR part 93 

to permanently codify the temporary 

flight restrictions over the Washington, 

DC Metropolitan Area. The comment 

period closed November 2, 2005. The 

FAA has received requests from the U.S. 

House of Representatives Committee on 

Transportation and Infrastructure, the 

National Business Aviation Association, 

Inc. (NBAA), the Aircraft Owners and 

Pilots Association (AOPA), the General 

Aviation Manufacturers Association 

(GAMA), and the Secretary of 

Transportation of the Commonwealth of 

Virginia to extend the comment period 

and hold public meetings. 

Today’s Action 

The FAA has determined that it is in 

the public interest to reopen the 

comment period for the proposed rule 

published on August 4, 2005 (70 FR 

45250) until February 6, 2006 and hold 

a public meeting. The date, time, and 

location of this public meeting will be 

announced in a future Federal Register 

document. 

Issued in Washington, DC, on November 3, 

2005. 

Edith V. Parish, 

Acting Director, System Operations and 

Safety. 

[FR Doc. 05–22261 Filed 11–3–05; 2:46 pm] 

BILLING CODE 4910–13–P 

DEPARTMENT OF TRANSPORTATION 

Office of the Secretary 

14 CFR Parts 204 and 399 

[Docket No. OST–03–15759] 

RIN 2105–AD25 

Actual Control of U.S. Air Carriers 

AGENCY: Office of the Secretary, DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM); request for comments. 

SUMMARY: The Department is seeking 

comments on a proposal to clarify 

policies that may be used during initial 

and continuing fitness reviews of U.S. 

carriers when citizenship is at issue. We 

propose to add a new section to 14 CFR 

part 399 that clarifies how the 

Department will interpret ‘‘actual 

control’’ of a U.S. air carrier during 

fitness reviews. This proposal will affect 

how we interpret the circumstances 

influencing a determination of ‘‘actual 

control,’’ allowing easier access to 

foreign capital for U.S. airlines. We are 

also proposing minor amendments to 14 

CFR part 204 to reference the new 

section and update existing language in 

part 204. 

DATES: Comments are due on or before 

January 6, 2006. 

ADDRESSES: You may send comments 

identified by DMS Docket No. OST–03–

15759 using any of the following 

methods: 

• Web site: http://dms.dot.gov Follow 

the instructions for submitting 

comments on the DOT electronic docket 

site. 

• Fax: 1–202–493–2251. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov Follow the 

instructions for submitting comments. 

• Mail: Docket Operations, U.S. 

Department of Transportation, 400 

Seventh Street, SW., Nassif Building, 

Room PL–401, Washington, DC 20590–

0001. 

• Hand Delivery: Room PL–401 on 

the plaza level of the Nassif Building, 

400 Seventh Street, SW., Washington, 

DC, between 9 a.m. and 5 p.m., Monday 

through Friday, except Federal holidays. 

Instructions: All submissions must 

include the agency name and docket 

number or Regulatory Identification 

Number for this rulemaking. For 

detailed instructions on submitting 

comments and additional information 

on the rulemaking process, see the 

Public Participation heading in the 

Supplementary Information section of 

this document. Note that all comments 

received will be posted without change 

to http://dms.dot.gov, including any 

personal information provided. Please 

see the Privacy Act heading under 

Supplementary Information for further 

information. 

Docket: For access to the docket to 

read background documents or 

comments received, go to http:// 

dms.dot.gov at any time or to Room PL–

401 on the plaza level of the Nassif 

Building, 400 Seventh Street, SW., 

Washington, DC, between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

FOR FURTHER INFORMATION CONTACT: 

William M. Bertram, Chief, Air Carrier 

Fitness Division, Department of 

Transportation, 400 Seventh Street, 

SW., Washington, DC 20590. Telephone: 

(202) 366–9721. 

SUPPLEMENTARY INFORMATION: Comments 

Invited: The Department invites 

interested persons to participate in this 

rulemaking by submitting written 

comments, data, or views. We also 

invite comments relating to any 

economic, environmental, energy, or 

federalism impacts that might result 

from adopting the proposals in this 

document. The most helpful comments 

will reference a specific portion of the 

proposal, explain the reason for any 

recommended change, and include 

supporting data. 

Public Participation 

The DMS is available 24 hours each 

day, 365 days each year. You can get 

electronic submission and retrieval help 

and guidelines under the ‘‘help’’ section 

of the DMS Web site. If you want us to 

notify you that we received your 

comments, please include a selfaddressed, stamped envelope or 

postcard or print the acknowledge page 

that appears after submitting comments 

on-line. 

Comments received after the comment 

closing date will be included in the 

docket, and we will consider late 

comments to the extent practicable. 

Privacy Act: Using the search function 

of our docket Web site, anyone can find 

and read the comments received in any 

of our dockets, including the name of 

the individual sending the comment (or 

signing the comment on behalf of an 

association, business, labor union, etc.). 

You may review the Department’s 

complete Privacy Act Statement in the 

Federal Register published on April 11, 

2000 (65 FR 19477–78), or you may visit 

http://dms.dot.gov. 

Background 

Air carriers must have authority 

granted to them by the Department to 

operate in the United States as U.S. air 

carriers. Under 14 CFR 204.5, 

67390 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules 

1 14 CFR 204.2(l) defines substantial change in 

operations, ownership, or management as 

including, but not limited to, the following events: 

‘‘(1) Changes in operations from charter to 

scheduled service, cargo to passenger service, shorthaul to long-haul service, or (for a certificated air 

carrier) small-aircraft to large-aircraft operations; (2) 

the filing of a petition for reorganization or a plan 

of reorganization under Chapter 11 of the federal 

bankruptcy laws; (3) the acquisition by a new 

shareholder or the accumulation by an existing 

shareholder of beneficial control of 10 percent or 

more of the outstanding voting stock in the 

corporation; and (4) a change in the president, chief 

executive officer or chief operating officer, and/or 

a change in at least half of the other key personnel 

within any 12-month period or since its latest 

fitness review, whichever is the more recent 

period.’’

2Past cases include In the matter of the 

citizenship of DHL Airways, Inc. n/k/a ASTAR Air 

Cargo, Inc., Order 2004–5–10, issued May 13, 2004 

at 8; Acquisition of Northwest Airlines by Wings 

Holdings, Inc., Order 89–9–51, issued September 

29, 1989, at 5; Application of Discovery Airways, 

Inc., Order 89–12–41, issued December 22, 1989, at 

10; In the matter of USAir and British Airways, 

Order 93–3–17, issued March 15, 1993, at 19; and 

Application of North American Airlines, Inc., Order 

89–11–8, issued November 6, 1989, at 6. 

3See 49 U.S.C. 40102(a)(15), as amended by 

Vision 100—Century of Aviation Reauthorization 

Act, Public Law 108–176, 807, 117 Stat. 2490 

(2004). 

certificated and commuter air carriers 

that undergo or propose to undergo a 

substantial change in operations, 

ownership, or management must submit 

certain updated fitness information to 

the Department.1 Section 204.5(c) of our 

regulations specifies that, if such 

information is being filed in support of 

an application for new or amended 

certificate authority, it will be filed in 

the docket as part of a public 

proceeding. For example, a certificated 

or commuter air carrier must apply for 

new or amended authority if its existing 

authority is not adequate for the 

performance of its planned service (e.g., 

if a carrier wishes to serve a new citypair route in foreign scheduled air 

transportation, if a carrier holding allcargo authority wishes to conduct 

passenger service, or if a carrier 

currently operating only small aircraft 

wishes to operate large aircraft). If the 

substantial change being proposed does 

not affect the carrier’s authority to 

perform its service under its existing 

authority, then the information is 

reported directly to the Chief of the Air 

Carrier Fitness Division, and is 

reviewed without a public proceeding 

as part of an informal continuing fitness 

investigation. Substantial changes that 

may not require a carrier to apply for 

new or amended authority include 

changes in the carrier’s ownership or 

management. The purpose of these 

informal reviews is to decide whether a 

more formal, public proceeding is 

warranted, and whether the carrier’s 

authority should be modified, 

suspended, revoked, or subjected to an 

enforcement action. During a continuing 

fitness review, the Department’s staff 

may examine the carrier’s ownership 

structure, and determine whether the air 

carrier continues to satisfy all statutory 

citizenship tests and continues to be 

under the actual control of U.S. citizens. 

A citizen of the United States is 

defined in 49 U.S.C. 40102(a)(15) as: 

(A) An individual who is a citizen of 

the United States; 

(B) A partnership each of whose 

partners is an individual who is a 

citizen of the United States; or 

(C) A corporation or association 

organized under the laws of the United 

States or a state, the District of 

Columbia, or a territory or possession of 

the United States, of which the 

president and at least two-thirds of the 

board of directors and other managing 

officers are citizens of the United States, 

which is under the actual control of 

citizens of the United States, and in 

which at least 75% of the voting interest 

is owned or controlled by persons that 

are citizens of the United States. 

To be licensed, an airline that is, or 

is owned by, a corporation must be 

under the ‘‘actual control’’ of U.S. 

citizens to meet or continue to meet the 

citizenship standard. For many years, 

the standard and scope was refined 

through administrative case law dating 

back to 1940, first by the Civil 

Aeronautics Board (CAB) and then, after 

the CAB’s sunset in 1984, by the 

Department of Transportation.2 In 2004, 

‘‘actual control’’ was specifically 

codified in the statutory definition of a 

citizen of the United States reflecting 

Departmental precedent, but it remains 

for the Department to interpret that 

requirement.3 As part of the fitness 

review, the Department reviews the 

totality of circumstances of an airline’s 

organization, including its capital 

structure, management, and contractual 

relationships, to ensure its compliance 

with the ‘‘actual control’’ requirement 

before issuing an air carrier license, and 

thereafter as its circumstances change. 

On March 4, 2003, the Inspector 

General of the U.S. Department of 

Transportation issued a letter in 

response to a request by the Chairman 

of the House Transportation and 

Infrastructure Committee to review the 

Department’s procedures for making air 

carrier citizenship determinations in 

continuing fitness reviews, and to 

review the Department’s consideration 

of a docketed proceeding then-pending 

before the Department (In the matter of 

the citizenship of DHL Airways, Inc., 

Docket OST–2002–13089–32). In the 

letter, the Inspector General made two 

recommendations. First, the Department 

should publicly address the factors used 

to determine whether an air carrier is 

under the ‘‘actual control’’ of U.S. 

citizens. Second, the Department should 

consider modifying its procedures and 

regulations for reviewing an air carrier’s 

citizenship status during a continuing 

fitness review. 

1. Advance Notice of Proposed 

Rulemaking 

On July 30, 2003, the Department 

published an ANPRM in the Federal 

Register (68 FR 44675–78) seeking 

comments on the two recommendations 

contained in the Inspector General’s 

letter not directly related to the DHL 

case. 

The Inspector General stated in his 

letter, ‘‘There are seven factors that 

frequently recur in past orders of the 

Department addressing the issue of 

actual control. These factors, while 

known to Department and aviation 

attorneys, have not been delineated in 

any one public document. Good public 

policy would suggest that the 

Department address these and other 

factors in a document that is widely 

available.’’ The seven factors cited were: 

(1) Control via supermajority or 

disproportionate voting rights; (2) 

negative control/power to veto; (3) buyout clauses; (4) equity ownership; (5) 

significant contracts; (6) credit 

agreements/debt; and (7) family 

relationships/business relationships. We 

sought comments on whether there are 

other factors or criteria that the 

Department routinely considers in 

addition to those listed above. In doing 

so, however, we noted that the 

Department has repeatedly stated in 

decisions that citizenship 

determinations necessarily are made on 

a case-by-case basis because every case 

has its own unique set of circumstances, 

and no single list of factors or criteria 

could be exhaustive, due to the 

changing legal and market 

circumstances faced by carriers when 

organizing their corporate and financial 

structures. 

The Inspector General further stated 

that ‘‘[t]he informal process used for 

citizenship reviews can be beneficial 

when the issues are not complex or 

contentious by providing for open 

dialogue between the Department and 

carriers to resolve matters 

expeditiously.’’ The Inspector General 

recommended that: ‘‘for the future, we 

believe the Department should give 

consideration to a more transparent and 

formal process in complex and 

contentious cases.’’

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules 67391 

In the ANPRM, we asked for 

comments on the following questions: 

(1) Is the Department’s current 

informal, undocketed process for 

reviewing the citizenship of certificated 

and commuter air carriers following a 

substantial change in operations, 

ownership, or management sufficient to 

meet the statutory goals and 

requirements of evaluating a carrier’s 

continuing fitness prior to any decision 

to take public action? 

(2) Should air carriers proposing a 

substantial change in operations, 

ownership, or management that may 

affect their citizenship status be subject 

to a formal, public review of their 

citizenship, and if so, under what 

circumstances? 

(3) What are the benefits and burdens, 

including time, effort, or financial 

resources expended, to generate, 

maintain, or provide information that 

would be subject to such a docketed 

public review? How would an air 

carrier’s ability to obtain timely 

financing be affected? 

(4) What are the advantages and 

disadvantages of retaining the current 

rule at 14 CFR 204.5 without revision? 

(5) Should the Department establish 

separate procedures for handing 

complex, contentious, and controversial 

citizenship questions that arise in the 

context of continuing fitness reviews? If 

so, what procedures would be 

appropriate, and what standards should 

be used to designate such cases? 

(6) Should the Department issue a 

public notice when it initiates and/or 

completes a citizenship determination 

in the context of a continuing fitness 

review? How would such notice impact 

an air carrier’s business? What impact 

would such notice have on the 

willingness of an air carrier 

contemplating a future change in 

ownership, operations, and/or 

management to have candid discussions 

with the Department before formalizing 

any transaction? 

(7) How should competition issues 

and business confidentiality issues be 

addressed in any change to the current 

procedures? 

We have decided to respond to the 

Inspector General’s concerns in three 

ways. First, as he suggested, we are 

publishing a more complete discussion 

of the citizenship and control factors, as 

well as a non-exclusive list of the 

criteria that have developed over time 

and that the Department has used in 

making citizenship and control 

determinations. The discussion is now 

available in the information packets 

How to Become a Certificated Air 

Carrier and How to Become a Commuter 

Air Carrier that can be downloaded by 

applicant carriers from the Assistant 

Secretary for Aviation and International 

Affair’s Web site at http:// 

ostpxweb.ost.dot.gov/aviation/ 

index.html. Second, we are placing a 

separate discussion in a question and 

answer format on that web site. Third, 

we are proposing a Policy Statement 

about how we may interpret the actual 

control standard in application to an 

individual set of circumstances. As 

noted above, we are acting on a 

recommendation from the Inspector 

General to place this information in a 

central location, and have incorporated 

some commenter suggestions as 

mentioned below. 

2. Comments to the ANPRM 

Comments to the ANPRM were due 

by September 29, 2003. We received 12 

total comments to the ANPRM from 11 

commenters. We received comments 

from ABX Air, Inc. (‘‘ABX’’), Air Line 

Pilots Association, International 

(‘‘ALPA’’), American Airlines, Inc. 

(‘‘American’’), ASTAR Air Cargo, Inc. 

(‘‘ASTAR’’), TEM Enterprises, Inc. d/b/ 

a Casino Express Airlines and Murray 

Air, Inc. (joint filing) (‘‘Casino/ 

Murray’’), Delta Air Lines, Inc. 

(‘‘Delta’’), Federal Express Corporation 

(‘‘FedEx’’), United Air Lines, Inc. 

(‘‘United’’), United Parcel Service Co. 

(‘‘UPS’’), Dr. Dorothy Robyn and 

Stephen L. Gelband (joint filing) 

(‘‘Robyn/Gelband’’), and Barbara Sachau 

(‘‘Sachau’’). 

Criteria for Determining Control 

The commenters addressed the issues 

of whether the list of criteria as 

described in the Inspector General’s 

letter should be codified in some form 

other than case precedents, and whether 

there are other factors or criteria that the 

Department routinely considers in 

making citizenship determinations that 

were not mentioned in the letter. In 

their comments, ABX, American, Delta, 

FedEx, United, and UPS stated that it 

would not be a good idea to codify the 

list in the regulations. ABX said that any 

list would hinder the Department’s 

flexibility to address unique facts as the 

cases present themselves, an idea 

echoed in the comments of American 

and UPS. Delta commented that such a 

list would necessarily be suggestive of 

the most important factors while failing 

to be sufficiently comprehensive, and 

United commented that such a list 

could dictate the outcomes of certain 

investment and management structures, 

thereby limiting innovation and 

reactions to the dynamic aviation 

industry. FedEx commented that a 

significant body of precedent exists and 

there is no need to otherwise articulate 

it. Casino/Murray advocated codifying 

the list of criteria, stating that it would 

be both appropriate and helpful to 

publish the list in some form that would 

be readily available to the public, such 

as in a policy statement in part 399 of 

our regulations. ALPA commented that 

any list will serve only as a compilation 

of factors that have arisen in previous 

cases. Delta commented that it would 

have no objection to the Department 

publishing the list as advisory on an 

informal basis, such as on a Web site or 

other suitable location. UPS commented 

that the Department should make clear 

in any publication it may issue that no 

factor will be dispositive in the 

determination of a case. 

FedEx, Robyn/Gelband, and UPS 

commented on other factors that we 

should consider in the preparation of 

any list for publication. FedEx suggested 

adding the foreign revenue test located 

in § 2710, Public Law 108–11. 

Applicable to air carriers applying for 

Department of Defense (DoD) airlift 

contracts, the provision states that a 

carrier would not be eligible for such a 

contract if more than 50% of its revenue 

came from a foreign source in the 

previous 3 years, and that foreign 

source, directly or indirectly, either 

owns a voting interest in the carrier or 

is owned by an agency or 

instrumentality of a foreign state. ABX 

responded to FedEx’s comment in a 

supplemental filing, disputing the need 

to include the test when it only applies 

to DoD contracts and would break with 

longstanding Department precedent. 

Robyn/Gelband commented that any list 

should include the impact on 

competition, specifically the impact of 

bilateral relations with the country of 

which the foreign investor is a citizen 

and reciprocal market access. UPS 

suggested that the foreigner’s power to 

cause reorganization of the carrier 

should be included in the list, because 

we already consider as a factor the 

foreigner’s power to prevent 

reorganization. 

3. Procedural Changes 

We asked in the ANPRM for input on 

whether the Department should change 

its current informal, non-public process 

for evaluating citizenship in continuing 

fitness cases. Four commenters favored 

amending the regulations to allow for 

more public, formal procedures; seven 

commenters were opposed. Sachau 

commented that the public must be 

consulted on all matters, and that there 

should be a full public hearing. ALPA 

commented that the informal review 

process is inconsistent with the public 

review generally for fitness issues. The 

benefits of a public review of structural 

67392 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules 

4 49 U.S.C. 40101(a), (e). 

changes to a carrier’s ownership 

outweigh potential burdens that could 

arise. ALPA suggested that provisions of 

part 300, subpart B, could be revised to 

accommodate continuing fitness 

reviews. FedEx believes that the process 

should be open and transparent, and 

that the Department should publish 

notice of every filing under § 204.5. 

Because most carriers are public 

companies, the carriers would be 

required to make similar filings with the 

SEC. Public reviews of the carrier’s 

citizenship would begin upon request, 

and all relevant information would be 

placed in the docket. FedEx commented 

that third parties should be given the 

opportunity to show a case needs more 

than notice-and-comment, including 

more formal adjudicatory methods. UPS 

made three specific recommendations: 

(1) There should be public notice of the 

review in the Federal Register; (2) 

included in the notice would be a 

general summary of the facts omitting 

any confidential information; and (3) 

third parties should be afforded the 

opportunity to comment and review the 

materials under the Department’s Rule 

12 confidentiality requirements. 

ABX, opposed to changing the 

regulations, commented that the 

Department experts were well-qualified 

to complete reviews without formal 

proceedings involving third parties. 

More public procedures would invite 

anticompetitive behavior in an effort to 

thwart market forces. American believes 

that the current approach is adequate 

provided the Department has the 

discretion to establish more formal 

procedures when the situation arises. 

ASTAR also opposed changing the 

regulations, and stated that the informal 

process allows for an open exchange of 

information between the Department 

and the carrier. Like ABX’s comment, 

ASTAR stated that more public 

proceedings would invite 

‘‘anticompetitive mischief.’’ Delta 

commented that it would be 

unnecessarily burdensome to 

promulgate a new set of formal 

procedures, and would hamper the 

Department’s flexibility in resolving 

cases. Casino/Murray stated that the 

continuing fitness review process was 

not a mechanical exercise applying 

statutory formulas, but is flexible and 

the decisions are made subjectively. 

They further stated that the current 

system affords the Department the 

ability to use other procedures, and, 

similar to other commenters, noted that 

any public process could be subject to 

abuse by competitors. Robyn/Gelband 

pointed to the ASTAR hearing as an 

example of why the process should not 

be changed. They stated that there is no 

statutory requirement for public reviews 

of continuing fitness, and many cases 

may not be appropriate to review in a 

formal setting. Finally, United 

commented that the current process 

gives the Department the flexibility 

needed to accurately evaluate changes 

to a carrier’s structure, and pointed out 

that the ASTAR case was an anomaly. 

Four commenters also made specific 

comments regarding applying Rule 12 

confidentiality to continuing fitness 

reviews if the process were to become 

more public. ABX commented that 

reviews often involve highly sensitive 

documents, and they should not be 

made available to third parties for 

potentially ‘‘illegitimate, 

anticompetitive attacks.’’ ABX 

commented that the Department of 

Justice does not open up Hart-ScottRodino reviews for public commentary. 

ASTAR commented that permitting 

third parties to review confidential 

materials would stifle the open 

exchange of information with the 

Department, because currently carriers 

feel safe in knowing that competitors do 

not have access to their highly 

confidential documents. Casino/Murray 

stated that Rule 12 is an option, but 

using it would still create a situation 

where a carrier’s business relationships 

could be dangerously impaired at a time 

when the carrier is vulnerable. UPS 

commented that the Department should 

allow third parties to review documents 

under Rule 12 as part of a more public 

process. 

Proposed Amendments 

Continuing Fitness Procedures 

As many of the commenters noted, 

the Department has various means at its 

disposal to initiate more formal 

proceedings when we believe such 

procedures to be appropriate while 

conducting a continuing fitness review. 

Requiring public notification every time 

there is a citizenship question resulting 

from a substantial change in ownership 

will not only dampen our ability to 

obtain confidential information and 

resolve issues informally with the 

carrier before a proposed transaction is 

finalized, but also may serve to deter 

investment or ownership changes 

because of the uncertainty surrounding 

a timely decision by the Department. In 

addition, such procedures could become 

extremely burdensome on the affected 

air carriers. For these reasons, we 

propose not to expand upon or be more 

specific as to the process used, but to 

continue to use those means already 

available. We invite public comment on 

our proposed decision here not to 

change our current processes in these 

matters. 

‘‘Actual Control’’ in Fitness 

Determinations 

We have decided that this proposed 

rulemaking should consider whether the 

Department’s interpretation of ‘‘actual 

control’’ should be changed to reflect 

the substantial structural changes that 

have taken place in global financial 

markets. This proposal is consistent 

with our obligation to foster a safe, 

healthy, and competitive airline 

industry that will remain capable of 

supporting U.S. economic growth by 

meeting the public’s transportation 

needs.4

So that the U.S. air transportation 

industry can continue to compete and 

be a leader in the ever-growing global 

economy, there needs to be enhanced 

access to worldwide financial resources. 

Accordingly, we propose to adapt our 

interpretation of how this private 

foreign capitalization affects the ‘‘actual 

control’’ of U.S. airlines to reflect these 

new realties. 

U.S. aviation policy since 

deregulation has been to continue to 

reduce governmental intrusion in 

commercial decision-making by airlines, 

and to recognize and accommodate 

changes in the marketplace. This policy 

has been successful in areas such as 

pricing, route selection, fleet 

acquisition, and marketing, with 

positive consequences to many aspects 

of U.S. carrier economic activity. 

Airlines now provide seamless, end-toend service through global systems that 

depend upon webs of contractual 

networks among carriers, distribution 

companies, and service providers. These 

changes have enabled U.S. airlines to 

compete more effectively in domestic 

and international markets. 

Moreover, capital markets have 

evolved and now offer pools of highly 

mobile capital on a global basis. 

Innovations in the use of hedge funds, 

new forms of aircraft financing, and the 

growing role of international aircraft 

leasing companies have changed the 

nature of airline financing, even within 

the existing regulatory framework. 

Globalization has redefined the capital 

marketplace, and driven decisions 

regarding airline operations. Any 

regulatory impediments to this crucial 

access face a heavy burden of 

justification. 

With deregulation, the Federal 

government withdrew restrictions in 

most economic areas of airline 

operations, including the areas of 

domestic pricing and entry. This policy 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules 67393 

5 49 U.S.C. 40101(a), (e). 

6See 49 U.S.C. 40101(a)(13) (encouraging new 

and small carriers). 

7See Conclusions of the Department of 

Transportation regarding the citizenship of 

Continued 

has produced enormous public benefits 

by helping the aviation industry to grow 

and compete effectively in both 

domestic and international markets. 

Airlines are now free to enter and exit 

domestic markets based on their own 

assessment of economic value and are 

free to adjust fares to reflect competitive 

pressures. The Department has also 

aggressively sought to extend these 

principles to international markets. 

Today, the U.S. has open-skies aviation 

relationships with more than 70 other 

countries, permitting airlines of both 

nations much of the same independence 

from government restrictions in their 

international operations that U.S. 

carriers have long enjoyed domestically. 

U.S. carriers function in a virtually 

seamless global environment in 

virtually every aspect of their 

operations. However, an interpretation 

of ‘‘actual control’’ that does not 

recognize the global and structural 

changes in international finance and 

thereby take into account new avenues 

for investment, potentially excludes 

billions of dollars of foreign investment 

from airline capitalization sources. 

Reducing unnecessary regulatory 

obstacles to the use of cross-border 

investment will allow U.S. carriers to 

become more efficient economically, 

and allow them to continue to be a 

major presence in the global aviation 

marketplace. In some cases, foreign 

citizens have been unwilling to invest—

either in the form of debt or equity—

without certain protections 

commonplace in the financial world. 

New or expansion-seeking U.S. airlines 

in this situation have been either 

precluded from entering the U.S. market 

or forced to engage in costly and timeconsuming restructurings to facilitate 

the investment. 

These limitations and the related 

uncertainty also restrict the benefits of 

Open Skies agreements and of statutory 

deregulation. The industry’s ongoing 

financial difficulties highlight the need 

to ensure that our actual control policies 

do not unnecessarily constrain aviation 

access to capital. Since the year 2000, 

the U.S. scheduled passenger airline 

industry has lost nearly $30 billion, an 

amount equivalent to roughly one-third 

of the aviation industry’s total annual 

revenue. Since 2000, more than 100,000 

airline employees have lost their jobs. 

Four major air carriers and several other 

national air carriers have been operating 

under Chapter 11 bankruptcy protection 

and have struggled to find the capital 

necessary to enable them to exit Chapter 

11 protection. The large network air 

carriers continue to lose hundreds of 

millions of dollars every quarter. Such 

circumstances result in reductions in 

benefits that could be brought to 

travelers within the United States, as 

well as between the U.S. and Open 

Skies countries. 

Any refinement to and our 

articulation of our interpretation of the 

‘‘actual control’’ test as it currently 

exists in precedent and practice, 

however, must address and satisfy the 

following issues. First, it must provide 

guidance to the industry on future 

transactions. Second, it must allow 

globalization to take its course and 

permit the aviation industry to evolve 

with greater flexibility and more 

financing options. Third, it must foster 

robust partnerships with other nations, 

removing regulatory obstacles to permit 

the flourishing of a dynamic aviation 

industry. Fourth, it must come to terms 

with and adequately address anomalous 

cases that recently have been brought 

before the Department. Finally, it must 

continue to protect vital U.S. interests, 

such as the Civil Reserve Air Fleet 

Program, and security and safety 

policies. We are seeking to address these 

concerns with proposed language in 14 

CFR part 399. By refining and 

articulating our interpretation of the 

actual control requirement, we will 

ensure that we are effectively meeting 

our market-oriented statutory objectives, 

while promoting aviation policies that 

advance those objectives, and the future 

needs of the aviation industry and its 

consumers. 

We believe this proposed rulemaking 

should consider whether the 

Department’s interpretation of ‘‘actual 

control’’ should be changed to reflect 

substantial structural changes that have 

taken place in global financial markets, 

taking into account whether there is 

reciprocity for U.S. investment and an 

Open Skies agreement governs aviation 

relations between the United States and 

the home country of a foreign investor, 

or any other relevant international legal 

obligations. This proposal is consistent 

with our obligation to foster a safe, 

healthy, and competitive airline 

industry that will remain capable of 

supporting U.S. economic growth by 

meeting the public’s transportation 

needs, while retaining regulatory 

control over those areas within the 

appropriate realm of government 

oversight.5

We are proposing to place this 

guidance in 14 CFR part 399, which is 

reserved for general policy statements. 

This provision is not intended to be 

procedural, but to provide guidance to 

air carriers when submitting 

information to the Department for a 

fitness determination. 

We tentatively find that our 

interpretation of the actual control test 

has failed to keep pace with changes in 

the global economy and evolving 

financial and operational realities in the 

airline industry itself, to the detriment 

of U.S. carriers. In view of the 

increasingly global character of finance 

and transportation, two things need to 

be done: U.S. policy must be more 

receptive to foreign investment, and 

broad guidelines need to be published 

to attract that investment, while at the 

same time protecting those areas of 

airline operations where there currently 

remains significant government 

involvement or regulation. We propose 

to adapt our interpretation of how 

foreign capitalization affects the ‘‘actual 

control’’ of U.S. airlines to reflect the 

new realities of globalization in the 

airline and financial industries. With 

this new guidance, we are striving to 

alleviate concerns that air carriers are 

being barred from a significant source of 

potential capital. In granting greater 

access to global capital, we are 

continuing our policy of allowing the 

market to operate with minimal 

regulation. We are proposing to refine 

and articulate our policy in an effort to 

provide guidance to air carriers with 

questions concerning the Department’s 

interpretation of actual control. 

Carriers require significant capital 

investments in facilities, technology, 

and a variety of commercial 

arrangements. In their efforts to meet 

these challenges, U.S. air carriers should 

have the broadest access to the global 

capital markets permitted by law, so 

long as such access does not impinge on 

those areas of airline operations where 

there currently remains significant 

government involvement or regulation. 

Furthermore, new U.S. air carriers 

seeking to enter the market should 

similarly be able to obtain the financial 

capital necessary to launch their 

businesses.6 We tentatively do not 

believe that ‘‘actual control’’ should be 

interpreted in a way that needlessly 

restricts the commercial opportunities 

of U.S. air carriers and their ability to 

compete. In the context of several recent 

cases, where carriers have proposed 

using new cross-border financing 

vehicles, we have reviewed our policy 

and have begun to revise it to account 

for the ever-changing and increasingly 

liberalized financial markets. One such 

case is our recent decision regarding the 

Hawaiian Airlines reorganization.7 It is 

67394 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules 

Hawaiian Airlines, available at Issues and Events, 

at http://ostpxweb.dot.gov/aviation/index.html. 

8See 49 U.S.C. 40101(a)(6)(B) (placing maximum 

reliance on competitive market forces to attract 

capital); 49 U.S.C. 40101(a)(12) (encouraging, 

developing and maintaining an air transportation 

system relying on actual and potential competition); 

49 U.S.C. 40101(a)(13) (encouraging entry by new 

and existing carriers); 49 U.S.C. 40101(a)(14) 

(promoting, encouraging, and developing civil 

aeronautics as a viable, privately owned industry); 

49 U.S.C. 40101(a)(15) (strengthening competitive 

position of U.S. carriers to ensure parity with 

foreign carriers). 

9 In the Matter of the Acquisition of Northwest 

Airlines, Inc. by Wings Holdings, Inc., Order 

Modifying Conditions, Order 91–1–41 (Jan. 23, 

1991), at 9. 

10See 49 U.S.C. 40101(a)(15)(emphasizing U.S. 

carriers’ ability to compete with foreign carriers). 

The law directs us to consider relevant foreign laws 

and requirements in carrying out our regulatory 

responsibilities. 49 U.S.C. 40105(b)(B). 

11By the approach we are proposing here, we 

seek to balance and promote these considerations. 

With regard to international transportation, we are 

further exhorted to negotiate arrangements that 

provide for ‘‘strengthening the competitive position 

of air carriers to ensure at least equality with foreign 

air carriers * * *.’’ Id., § 40101(e)(1). It is in 

keeping with our goals here to extend the benefits 

of this liberalization to countries that support this 

policy, but not to those that resist it. 

12See 49 U.S.C. 40101(a)(1)–(3)(mandating safety 

as the highest priority) and § 40101(a)(7)(mandating 

regulatory system responsive to the needs of the 

national defense). 

a responsibility of the Department to 

ensure that the interpretation and 

application of its statutory obligations 

do not inadvertently or unnecessarily 

restrict access to the international 

capital markets by U.S. air carriers and 

prevent them from effectively 

competing in the global marketplace.8

We have refined the standard used in 

determining actual control in the past 

by ad hoc adjudications to reflect 

changing industry and financial 

circumstances. For example, in the 

Northwest/KLM case we said, 

During the course of these [citizenship] 

assessments, we have seen the complexity 

and international makeup of these 

arrangements increase, new financial 

instruments emerge, and the 

interrelationships of these new instruments 

grow. Based on that experience, we have 

reexamined our application of the control 

test in order to reflect more accurately 

today’s complex, global corporate and 

financial environment, consistent with the 

requirement for U.S. citizen control. 

Specifically, we have reviewed the 

relationship between voting equity, on the 

one hand, and nonvoting equity and debt, on 

the other.9

A key issue in the liberalization of our 

control standard is whether to also 

consider circumstances that apply to 

certain foreign interests, but not to 

others. We believe that several 

considerations militate in favor of doing 

so—specifically, more latitude with 

respect to foreign investment should be 

allowed for a foreign interest whose 

homeland has both an Open Skies 

relationship with the U.S. and extends 

reciprocal investment opportunities 

with respect to its own airlines to U.S. 

sources of capital.10 By this proposal, 

we are proposing to reduce substantially 

the significance, for purposes of 

determining citizenship, of foreign 

influence over many purely economic 

decisions, such as choice of markets, 

type of equipment, and rate-setting. We 

think it generally inappropriate to 

extend such latitude to nationals of 

countries that resist similar openness in 

access to aviation markets and in 

investment opportunities in their own 

airlines. Section 40101(a)(6) of our 

statute explicitly directs us to 

emphasize, generally, competition and 

access to capital. Among the policy 

factors we consider is ‘‘placing 

maximum reliance on competitive 

market forces * * * to encourage 

efficient and well-managed air carriers 

to earn adequate profits and attract 

capital * * *.’’ 11 Moreover, just as the 

United States has certain vital interests 

that we cannot permit to be 

compromised by control by foreign 

interests, such as national security, we 

also have a basic duty to ensure that our 

airlines, and indirectly consumers, are 

not placed at an unfair competitive 

disadvantage by extending benefits to 

foreign interests where such benefits are 

not available to U.S. interests abroad. 

That would be both unwise and 

contrary to the purpose and spirit of our 

statutory policy goals—to recognize and 

encourage open international markets. 

We will, of course, also consider any 

relevant U.S. international legal 

obligations (see 49 U.S.C. 40105(b)). 

The law requires U.S. control of U.S.- 

flag airlines. This has not changed. We 

do not propose to allow ‘‘actual control’’

to shift to foreign hands. We do propose 

to ensure that the application of an 

‘‘actual control’’ standard results in U.S. 

citizen control being exercised in those 

areas of airline operations where there 

currently remains significant 

governmental involvement or 

regulation. Moreover, we want to ensure 

that the test is not applied so broadly so 

as to unnecessarily inhibit U.S. carriers’

access to the global capital market. 

Our proposal would not affect the 

objective statutory requirements that a 

corporation must satisfy to qualify as a 

U.S. citizen, including the requirements 

that it be organized under the law of a 

U.S. jurisdiction; that 75 percent of the 

voting interest be owned or controlled 

by U.S. citizens; and that the President 

and two-thirds of the managing officers 

and directors be U.S. citizens. These 

standards are mandated by law and 

shall continue to be rigorously enforced, 

unless and until Congress changes them. 

In considering what areas of airline 

structure and finance should remain 

under the existing rubric of ‘‘actual 

control’’ we are mindful of certain 

important objectives. The first is the 

requirement that any U.S. carrier must 

maintain vigorous compliance with 

safety and security requirements. 

Similarly, U.S. carriers must be able to 

continue to incur and honor obligations 

made directly to the U.S. Government, 

in particular the Civil Reserve Air Fleet 

program administered by the U.S. 

Department of Defense. These are areas 

in which, despite economic 

deregulation, there continues to be 

significant Federal government 

regulation and involvement.12

This proposal also retains the 

requirement that U.S. citizens have 

control (i.e., the ability to make 

decisions that are not subject to 

substantial influence by foreign 

interests) over the creation and 

amendment of the organizational 

documents (such as the charter, 

certificate of incorporation and by-laws, 

and/or membership agreement) of the 

governing entity. This, of course, does 

not mean that the actual draftsman in a 

law firm or corporate legal department 

need be a U.S. citizen. Rather, such 

‘‘organic’’ documents must clearly 

reflect, by both genesis and content, 

initial and continued actual control by 

U.S. citizens. Foreign citizens may hold 

rights essential to protect their financial 

interests—for example, provisions 

requiring concurrence before a company 

may enter bankruptcy or be dissolved—

but the fundamental organization of the 

company must remain in U.S. citizen 

hands. 

With these considerations in mind, 

we propose a policy statement setting 

forth the criteria that will be used to 

determine whether an air carrier is 

under the ‘‘actual control’’ of U.S. 

citizens. 

With this refinement, responsibility 

for corporate documents and for policies 

and procedures related to safety, to 

security, and to CRAF must still be 

under the control of U.S. citizens to the 

extent that they are today. This 

approach will allow U.S. airlines to 

benefit from increased access to the 

foreign capital markets while ensuring 

that U.S. citizens continue to exert 

control in areas where significant 

government regulation and oversight 

remains. 

We recognize that practitioners will 

need guidance on the implementation of 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules 67395 

this policy in the context of actual cases, 

and we encourage consultation with the 

Department before any irrevocable 

decisions are made, as is customarily 

done now. We believe, however, that 

examples of how the new policy would 

apply may be useful. In offering such 

examples, we caution as always that no 

‘‘template’’ is possible, and that each 

case will continue to be examined on its 

own unique merits. 

In one case, foreign interest F, a 

citizen of an Open-Skies partner, will 

own an interest in U.S. air carrier A, 

including up to 25% of the voting stock. 

Two of A’s seven directors will 

represent F, and three of A’s twelve 

senior management officials will be 

nominated by F, so that there is 

compliance with the statute’s numerical 

requirements. One of these F nominees 

will be in charge of the airline’s day-today operations, and another will head a 

committee whose responsibility is 

setting market entry strategy; both will 

have influence in the purchase of 

aircraft. In the past, such 

responsibilities would have raised 

actual control issues. Under the 

proposed policy they would not, absent 

any other indicia of control, such as 

control over matters having an impact 

on CRAF participation, safety, security, 

by-laws or organizational documents. 

In a second example, foreign interest 

X, also a citizen of an Open-Skies 

partner, would have similar 

participation in U.S. air carrier B. In 

contrast to the first example, however, 

X’s homeland declines to extend 

reciprocal investment opportunities to 

U.S. air carriers and other U.S. interests, 

and there are no other relevant 

international legal obligations. X and B 

would therefore be subject to our 

traditional control analysis, including 

the question of unacceptable influence 

by officers nominated by X. 

We invite comments on our proposed 

policy statement on foreign investment 

in U.S. air carriers. Among the specific 

issues that we are interested in receiving 

comments on is whether reciprocal 

access to investment in other countries’

airlines should be required in order to 

take advantage of the revised 

interpretation of ‘‘actual control.’’

Part 204 Modifications 

In addition to the policy language we 

are proposing, we are also proposing 

minor changes to Part 204 that will 

correct typographical errors and update 

sections in compliance with the new 

statute. 

In § 204.1, we propose to add a 

sentence that will reference the new 

part 399 language so that air carriers 

will be directed to the new policy. In 

§ 204.2, we propose to amend the 

definition of ‘‘citizen of the United 

States’’ to mirror the language that is 

now contained in 49 U.S.C. 

40102(a)(15). The definition in the 

statute was amended by Congress in 

2004 to include the phrase ‘‘which is 

under the actual control of citizen of the 

United States’’ in the part of the 

definition concerning corporations. We 

believe that the regulations should 

mirror the text of the statute as it is 

currently written. Finally, we are also 

proposing minor changes to § 204.5 that 

will clarify language in paragraph (a)(2); 

delete a typographical error in 

paragraph (b); revise the address in 

paragraph (c); and add a new paragraph 

(d) that replaces the last sentence of 

paragraph (c). 

We believe that these amendments to 

part 204 will make the regulations easier 

understood by air carriers consulting the 

sections while submitting information 

to the Department. 

Rulemaking Analyses and Notices 

Executive Order 12866 (Regulatory 

Planning and Review) and DOT 

Regulatory Policies and Procedures 

Executive Order 12866, Regulatory 

Planning and Review, directs the 

Department to assess both the costs and 

the benefits of a regulatory change. We 

are not allowed to propose or adopt a 

regulation unless we make a reasoned 

determination that the benefits of the 

intended regulation justify the costs. 

Our assessment of this rulemaking 

indicates that its negative economic 

impact is minimal because the rule will 

not impose any new costs on the 

affected certificated and commuter air 

carriers. This rulemaking is considered 

significant under DOT Policies and 

Procedures and E.O. 12866 because of 

public interest. It was reviewed by the 

Office of Management and Budget under 

Executive Order 12866. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

(5 U.S.C. 601–612), as amended by the 

Small Business Regulatory Enforcement 

Fairness Act of 1996, requires federal 

agencies, as part of each proposed rule, 

to consider regulatory alternatives that 

minimize the impact on small entities 

while achieving the objectives of the 

rulemaking. This proposed rule clarifies 

and codifies the Department’s practice 

concerning its interpretation of ‘‘actual 

control’’ in determining air carrier 

fitness/citizenship to receive or retain a 

certificate of public convenience and 

necessity or commuter authority. We 

certify that this action will not have a 

significant economic impact on a 

substantial number of small entities. 

Trade Impact Assessments 

The Trade Agreement Act of 1979 

prohibits federal agencies from 

establishing any standards or engaging 

in related activities that create 

unnecessary obstacles to the foreign 

commerce of the United States. 

Legitimate domestic objectives, such as 

safety, are not considered unnecessary 

obstacles. The statute also requires 

consideration of international standards 

and, where appropriate, that U.S. 

standards be compatible. The 

Department has assessed the potential 

effect of this rulemaking and has 

determined that it will have no effect on 

any trade-sensitive activity. 

International Compatibility 

In keeping with U.S. obligations 

under the Convention on International 

Civil Aviation, it is the Department’s 

policy to comply with International 

Civil Aviation Organization (ICAO) 

Standards and Recommended Practices 

to the maximum extent practicable. The 

Department has determined that there 

are no ICAO Standards and 

Recommended Practices that 

correspond to these proposed 

regulations. 

Unfunded Mandates Reform Act of 1995 

The Unfunded Mandates Reform Act 

of 1955 (the Act) is intended, among 

other things, to curb the practice of 

imposing unfunded Federal mandates 

on State, local, and tribal governments. 

Title II of the Act requires each Federal 

agency to prepare a written statement 

assessing the effects of any Federal 

mandate in a proposed or final agency 

rule that may result in an expenditure 

of $100 million or more (adjusted 

annually for inflation) in any one year 

by State, local, and tribal governments, 

in the aggregate, or by the private sector; 

such a mandate is deemed to be a 

‘‘significant regulatory action.’’ This 

proposal does not contain such a 

mandate. The requirements of Title II of 

the Act, therefore, do not apply. 

Executive Order 13132, Federalism 

This action has been analyzed in 

accordance with the principles and 

criteria contained in Executive Order 

13132, dated August 4, 1999 (64 FR 

43255). This proposed rule does not 

have a substantial direct effect on, or 

significant federalism implications for 

the States, nor would it limit the 

policymaking discretion of the States. 

This proposed rule would not directly 

preempt any State law or regulation, nor 

impose burdens on the States. This 

67396 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules 

action would not have a significant 

effect on the States’ ability to execute 

traditional State governmental 

functions. The agency has therefore 

determined that this proposal does not 

have sufficient federalism implications 

to warrant the preparation of a 

federalism summary impact statement. 

Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA) (44 U.S.C. 3501 et seq.) requires 

federal agencies to obtain approval from 

the Office of Management and Budget 

(OMB) for each collection of 

information they conduct, sponsor, or 

require through regulation. The agency 

has determined that the proposed rule 

would not impose any additional 

requirements, but rather serves to codify 

our existing procedures. Thus, there is 

no change in the paperwork collection 

as currently exists. 

List of Subjects 

14 CFR Part 204 

Air carriers, Reporting and 

recordkeeping requirements. 

14 CFR Part 399 

Administrative practice and 

procedure, Air carriers, Air rates and 

fares, Air taxis, Consumer protection, 

Small businesses. 

For the reasons stated in the 

preamble, the Department proposes to 

amend 14 CFR part 204 and 14 CFR part 

399 as set forth below: 

PART 204—DATA TO SUPPORT 

FITNESS DETERMINATIONS 

1. The authority citation for part 204 

continues to read as follows: 

Authority: 49 U.S.C. Chapters 401, 411, 

417. 

2. Revise § 204.1 to read as follows: 

§ 204.1 Purpose. 

This part sets forth the fitness data 

that must be submitted by applicants for 

certificate authority, by applicants for 

authority to provide service as a 

commuter air carrier to an eligible place, 

by carriers proposing to provide 

essential air transportation, and by 

certificated air carriers and commuter 

air carriers proposing a substantial 

change in operations, ownership, or 

management. This part also contains the 

procedures and filing requirements 

applicable to carriers that hold dormant 

authority. See § 399.88 for policy 

statements concerning ‘‘actual control’’

of air carriers. 

3. Revise § 204.2(c)(3) to read as 

follows: 

§ 204.2 Definitions. 

* * * * * 

(c) Citizen of the United States means: 

* * * * * 

(3) A corporation or association 

organized under the laws of the United 

States or a State, the District of 

Columbia, or a territory or possession of 

the United States, of which the 

president and at least two-thirds of the 

board of directors and other managing 

officers are citizens of the United States, 

which is under the actual control of 

citizens of the United States, and in 

which at least 75 percent of the voting 

interest is owned or controlled by 

persons that are citizens of the United 

States. 

* * * * * 

4. Amend § 204.5 as follows: 

A. Revise paragraph (a)(2) to read as 

set forth below; 

B. Amend paragraph (b) to remove the 

‘‘s’’ after ‘‘Carrier’’ in the third sentence 

in the reference to ‘‘Air Carrier Fitness 

Division’’; 

C. Revise paragraph (c) to read as set 

forth below; and 

D. Add a new paragraph (d) before the 

OMB control number to read as set forth 

below. 

The revisions read as follows: 

§ 204.5 Certificated and commuter air 

carriers undergoing or proposing to 

undergo a substantial change in operations, 

ownership, or management. 

(a) * * * 

(2) The change substantially alters the 

factors upon which its latest fitness 

finding is based, even if no new 

authority is required. 

* * * * * 

(c) Information filings pursuant to this 

section made to support an application 

for new or amended certificate authority 

shall be filed with the application and 

addressed to Docket Operations, U.S. 

Department of Transportation, 400 

Seventh Street, SW., PL–401, 

Washington, DC 20590. 

(d) Information filed in support of a 

certificated or commuter air carrier’s 

continuing fitness to operate under its 

existing authority in light of substantial 

changes in its operations, management, 

or ownership, including changes that 

may affect the air carrier’s citizenship, 

shall be addressed to the Chief, Air 

Carrier Fitness Division, Office of the 

Secretary, U.S. Department of 

Transportation, 400 Seventh Street, 

SW., Washington, DC 20590. 

* * * * * 

PART 399—STATEMENTS OF 

GENERAL POLICY 

5. The authority citation for Part 399 

continues to read as follows: 

Authority: 49 U.S.C. 40101 et seq. 

6. Add a new § 399.88 to read as set 

forth below: 

§ 399.88 Actual control of U.S. air carriers. 

(a) Applicability. This policy shall 

apply to all direct air carriers submitting 

information to the Air Carrier Fitness 

Division under part 204 of this title, 

with respect to its status as a ‘‘Citizen 

of the United States’’ as defined in 49 

U.S.C. 40102(a)(15), of the Act. This 

policy shall only apply to the 

interpretation of ‘‘actual control’’

contained in 49 U.S.C. 40102(a)(15)(C) 

in determining air carrier fitness/ 

citizenship to receive or retain a 

certificate of public convenience and 

necessity. 

(b) Policy. In cases where there is 

significant involvement in investment 

by non-U.S. citizens and either where 

their home country does not deny 

citizens of the United States reciprocal 

access to investment in their carriers 

and does not deny U.S. carriers full and 

fair access to their air services market, 

as evidenced by an Open Skies 

agreement, or where it is otherwise 

appropriate to ensure consistency with 

U.S. international legal obligations, the 

Department will consider the following 

when determining whether U.S. citizens 

are in ‘‘actual control’’ of the carrier: 

(1) All necessary organizational 

documentation, including such 

documents as charter of incorporation, 

certificate of incorporation, by-laws, 

membership agreements, stockholder 

agreements, and other documents of 

similar nature. The documents will be 

reviewed to determine whether U.S. 

citizens have and will in fact retain 

actual control of the air carrier through 

such documents. 

(2) The carrier’s operational plans and 

actual operations to determine whether 

U.S. citizens have actual control with 

respect to: 

(A) Decisions whether to make and or 

continue Civil Reserve Air Fleet (CRAF) 

commitments, and, once made, the 

implementation of such commitments 

with the Department of Defense; 

(B) Carrier policies and 

implementation with respect to 

transportation security requirements 

specified by the Transportation Security 

Administration; and 

(C) Carrier policies and 

implementation with respect to safety 

requirements specified by the Federal 

Aviation Administration. 

Michael W. Reynolds, 

Acting Assistant Secretary for Aviation and 

International Affairs. 

[FR Doc. 05–22056 Filed 11–3–05; 8:58 am] 

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