Equal Ground

Feb. 8, 2000

Equal Ground

A U.S. Representative evaluates the U.S. — E.U. Aviation Trade Relationship

U.S. Rep. William O. Lipinski

February 2000

There is a looming crisis facing America's aviation industry. European nations are joining together to challenge our nation's preeminent position in aviation.

The most obvious example, of course, is Airbus Industrie, the European aircraft manufacturer. Airbus is a consortium of the major aerospace companies of France, Germany, the U.K., and Spain. Airbus was created in the 1970s for the sole purpose of introducing a European competitor into the world market for commercial jet aircraft, which was dominated by U.S. companies. However, because of very large capital investment and product development costs, creation of a new competitor was impossible without substantial government assistance.

U.S. Rep. William O. Lipinski (D-IL), Ranking Member, U.S. House Subcommittee on Aviation

Airbus is not a government entity. Yet, since its inception, the governments of the member companies that make up Airbus have agreed to support Airbus' aircraft program, both politically and financially.

Airbus does not operate as a public corporation; rather, it has special legal status under French law. This special status allows member companies to pool resources without having to disclose specifics about their combined financial activities. In 1996, the U.S. Department of Commerce estimated that over $30 billion has been provided to Airbus by the partner governments. This may explain why Airbus is about to launch a massive development project, the A-3XX, a super jumbo jet. The estimated cost of development is as high as $15 billion. For most manufacturers, this would be a major gamble they would not undertake.

The Airbus partner governments also provide important political support to Airbus. The European Union (EU) and its Member States often apply political pressure to "persuade" air carriers and their national governments to purchase Airbus aircraft.

The Issue of Noise
On April 29, 1999, the European Council of Ministers adopted a regulation banning the addition to European registries of recertificated aircraft after May 1, 2000, and restricting their operation in the EU after April 1, 2002. The regulation was originally proposed to go into effect April 1, 2000, but was delayed after the U.S. House voted to ban the Concorde in the U.S. if the regulation was implemented. Recertifi-cated aircraft are former Stage 2 aircraft, mostly U.S. made.

ICAO has established internationally recognized noise standards known as Chapter 3, or Stage 3, requirements. The re-engined or hushkitted aircraft targeted by the EU regulation fully satisfy these ICAO standards. By unilaterally establishing a new standard for noise, the EU is taking local control over an international issue.

The economic implications of this rule are substantial. Existing hushkit manufacturers, all U.S. companies, will see their market dramatically reduced, if not eliminated. The fleet value of U.S. carriers will also dramatically decline. It is estimated that the European non-addition rule will cost the United States $2 billion.

The EU has indicated it might be willing to withdraw its hushkit regulation if significant progress is made with the U.S. on the development of the next-generation noise standard — Stage 4, or Chapter 4. The U.S. is working with the EU to accelerate the definition and implementation of a Stage 4 standard.

The Joint Aviation Authorities (JAA) are often referred to as the European equivalent of the FAA. The main objective of the JAA is to promote an efficient European aviation industry by providing consistent standards of safety and a level playing field for competition among member states. Although the JAA originally focused only on common certification codes for large aircraft and engines, the JAA now develops and implements requirements for certification of all classes of aircraft, for aircraft operations and maintenance, and for the licensing of personnel.

The JAA, with its close relationship with the European aviation industry, has issued so-called safety regulations that are, in reality, economic regulations designed to benefit the European aviation industry.

In June 1997, the JAA issued a Notice of Proposed Amendment on Flight Crew Licensing. The original proposal would have required schools conducting flight training for European pilots to be 51 percent European-owned and have their corporate headquarters in a JAA member country. After hearing strenuous objections from FAA and the U.S. flight school industry, the JAA modified its proposal. In effect, it makes a pilot license valid only in the issuing country. This has been a devastating loss to the U.S. flight school industry.

One of the primary functions of the JAA is to cooperate with foreign safety regulatory authorities, especially the FAA, on the certification of products and services. Despite this primary purpose, the JAA has made the process for JAA approval of U.S. manufactured aeronautical products excessively bureaucratic. It takes the FAA only 15 to 17 percent of the time it takes to certify an aircraft to validate a foreign-certified aircraft, whereas the JAA can spend as much as 52 percent of time it takes to certify an aircraft to validate an FAA-certified aircraft.

The U.S. must respond by protecting and promoting our own aviation industry. Recently, the Clinton Administration proposed the establishment of an early warning system under which the U.S. and the EU would jointly address policy proposals before they result in major trade disputes. With an early warning system, the U.S. will be better able to oppose, and hopefully curtail, harmful initiatives from the start. It is critical that the U.S. government enforces its rights under international trade agreements. In addition, the U.S. government should more actively promote our own aviation industry.