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International Competitiveness Has Direct Impact on U.S. Airline Jobs, TTD President Tells Senate Panel

By Admin



March 13, 2014

Chairwoman Cantwell, Ranking Member Ayotte, and members of the Senate Commerce, Science, and Transportation Committee’s Aviation subcommittee, thank you for the opportunity to testify today on the international competitiveness of the U.S. aviation industry.

As the President of the Transportation Trades Department, AFL-CIO (TTD), I am honored to speak on behalf of the employees who operate, maintain, service and build our nation’s aviation system. By way of background, TTD consists of 32 affiliated unions that represent workers in every mode of transportation, private and public sector, including those who work in aviation . Today, America is confronted with enormous challenges as the effects of globalization ripple throughout the aviation sector and its workforce. The policy and trade decisions of our government and the business decisions of our air carriers in the next few years will determine the fate of this vital sector of the U.S. economy.

With trade liberalization policies taking hold around the world, our government – with appropriate congressional oversight – has the responsibility to ensure U.S. airlines can compete on a level playing field worldwide and to protect and expand middle class aviation jobs. Specifically, the Administration and Congress must carefully manage aviation trade relationships to ensure we avoid the land mines and pit falls of unscrupulous liberalization, protect against outsourcing of critical safety and security work, oppose regulatory overreaches by foreign states, and provide stable and robust financing for our aviation infrastructure and FAA workforce.

We are currently faced with a particularly dangerous instance of liberalization run amok that could have far-reaching negative implications for the U.S. aviation industry and its employees. Norwegian Air Shuttle (NAS), which is incorporated in Norway and holds an air operators certificate (AOC) in that country has developed a business model that is designed to exploit European aviation and labor laws and the U.S.-EU Air Transport Agreement (ATA) in order to evade its collective bargaining obligations in Norway and Norway’s laws. NAS has created a subsidiary, Norwegian Air International (NAI) which applied for and received an Irish AOC even though it will not serve Ireland. NAI has also registered its 787 aircraft in Ireland and has applied for a foreign air operators certificate with the U.S. Department of Transportation (DOT) as an Irish carrier. Despite being a subsidiary of a Norwegian company and registering as an Irish airline, NAI is using pilots who will be based in Thailand and employed under individual employment contracts that are governed by the laws of Singapore to crew these flights. The pilot crew will not be employed directly by NAI but by a pilot recruitment company that will then contract, or more accurately “rent” them to NAI. A similar arrangement will apply to the flight attendants who will work on the 787s.

The goal here is clear. NAI is using the unique nature of EU aviation laws to effectively shop around for the labor laws and regulations that best suit its bottom line. It’s using a “Flag of Convenience” strategy at the expense of high labor standards. NAI is also taking advantage of the liberalized transatlantic aviation market provided by the U.S.-EU ATA, and claiming that this agreement alone provides unlimited access to the U.S. market. NAI has never disputed the assertion by TTD and other U.S. and European labor organizations as well as major air carriers on both sides of the Atlantic that they are simply using this business model to avoid Norwegian labor, tax and other laws. The airline has presented a number of economic reasons for registering in Ireland, but each of these is unsubstantiated and has only been recently presented. Rather than presenting legitimate, fact-based economic benefits, NAI’s claims appear to be part of a publicity campaign designed to distract the general public and federal regulators from their true goal and purpose: to undermine labor standards and secure access to the transatlantic aviation market with bottom of the barrel labor costs.

We raise this not just to complain about a foreign airline operator or to insulate U.S. carriers from legitimate competition. If allowed to proceed, the NAI business model will have an immediate impact on U.S. airlines and their employees. With plans to serve Los Angeles, Oakland, Orlando and other American cities if its application secures DOT approval, NAI would undercut U.S. air carriers and their employees that serve those same markets by as much as 50 percent. If NAI’s plan is approved, in the long term this type of “Flag of Convenience” model could become the norm, with more and more airlines seeking to compete by scouring the globe for cheap labor and lax regulations.

Fortunately, negotiators for the EU-U.S. ATA foresaw this type of nefarious business model as a potential problem and included, for the first time ever, a labor article designed to prevent benefits from the ATA from having adverse effects on aviation jobs. This provision, Article 17 bis (“Social Dimension”), states that “the opportunities created by the Agreement are not intended to undermine labour standards or the labour-related rights and principles contained in the Parties’ respective laws.” It further states that “the principles in paragraph 1 shall guide the Parties as they implement the Agreement.”

The inclusion of Article 17 bis in the ATA represented important progress in our global effort to ensure that market-opening trade initiatives are not used to harm good jobs and undermine labor standards, and was praised by both U.S. and European negotiators. The article is also consistent with U.S. law that requires DOT to apply, among other factors, a public interest standard as it considers these aviation policy questions. We believe that NAI’s business model is a clear violation of Article 17 bis and U.S. public interest standards, and gives DOT ample grounds on which to reject the application. We are also pleased that over a quarter of the U.S. Senate, including many of you here today, joined a letter that was led by Senators Schatz, Blunt and Rockefeller to DOT raising many of these concerns, and urging Secretary Foxx to ensure the NAI application is fully compliant with U.S. law and the U.S.-EU ATA. I want to thank these Senators for their support. Our government must make it clear that NAI’s operating scheme runs contrary to the faith and intent of the US-EU ATA and will not be rewarded with expanded access to our lucrative aviation market.

In addition to the NAI dispute, another pending trade issue that is vital to our aviation sector is the U.S.-EU negotiations over a Transatlantic Trade and Investment Partnership, better known as TTIP. These negotiations encompass a wide variety of trade issues, yet despite the historical precedent of excluding air services in these types of broad trade negotiations, the EU is attempting to include aviation liberalization in these talks. We are strongly opposed to this approach, as it is an attempt by the EU to force changes to U.S. rules that limit foreign ownership and control of U.S. airlines and reserve domestic point-to-point service, or cabotage, to U.S.-controlled carriers. Because the EU has failed in its attempts to force unwanted reforms to these U.S. laws, it is attempting to do so in complex TTIP talks with hopes that somehow our aviation interests would be “traded away” for other trade objectives. This strategy must be rejected and we have communicated these views to the Administration and the EU.

The good news is that risking our aviation interests in a broader trade negotiation isn’t necessary if the objective is opening aviation markets and expanding trade and jobs. Over 100 trade liberalization pacts, referred to as “Open Skies” agreements already exist between the U.S. and various governments, and new and expanded agreements are on the table. In other words, aviation trade is expanding through existing negotiating frameworks overseen by the subject-matter experts at the Departments of Transportation and State. There is no need for our government to throw aviation into a larger, more complex pot of trade issues.

We know that the expansion of international air transportation opportunities can offer lucrative business opportunities for U.S. airlines and, if done the right way, create good aviation jobs. At the same time, we know that globalization without checks and balances can have devastating effects on entire industries and middle class American jobs. TTD has always rejected efforts that seek aviation liberalization at any cost and without adequate protections for the men and women who work in our aviation industry. Decades of unfair trade policy have ravaged workers in many U.S. industries, and we will not relent in our commitment to ensuring that aviation trade liberalization does not have the same result for U.S. aviation employees.

As noted above, we were pleased to see the inclusion of a labor article in the U.S.-EU ATA as well a process through which the parties can seek to address adverse effects of the agreement on aviation employees. The U.S. also wisely rejected efforts by the EU to force changes to our rules and regulations governing foreign ownership and control of U.S. airlines. It was decided by our government that foreign investment in our airlines was appropriate but not to a degree that ceded actual control to foreign investors.

Foreign ownership and control rules, and prohibitions against foreign carriers engaging in cabotage have ensured a viable U.S. airline industry and have protected U.S. aviation workers against unfair competition, preserved workers’ rights and ensured our nation’s status as the world’s leader in air transportation. Foreign states have long lobbied to loosen these restrictions in order to gain a foothold in the lucrative U.S. aviation market, the world’s largest, and syphon away good middle class jobs. In rejecting these proposals, despite the heavy-handed tactics of the EU, the final U.S.-EU accord proved again that liberalization agreements can be reached that include important protections for a vital U.S. industry and good jobs. With companies such as NAI already seeking to exploit an Open Skies agreement with a clear labor protection article, it would be particularly dangerous to further muddy the regulatory waters by throwing air traffic rights issues into a broad free trade agreement.

The expanding web of aviation liberalization agreements throughout the world is making the global aviation system increasingly interconnected and integrated. With this comes a host of regulatory issues and concerns that will need to be addressed. One such issue is the impact of aircraft carbon emissions on the environment and global climate change. TTD is committed to working with U.S. carriers and the U.S. government to seeking a global solution to reducing aviation emissions, but we believe that any solution must be truly global in order to provide meaningful results and ensure competitive balance. Piecemeal unilateral attempts to curb carbon emissions would place an unreasonable financial burden on U.S. carriers and their employees and only further delay the process of reaching an international, consensus-based agreement. This includes the EU’s Emissions Trading Scheme (ETS), a plan that if implemented would apply to all flights entering and leaving EU airspace.

I would like to thank Senators Thune and McCaskill for leading the effort last year to pass legislation that allowed the Secretary of Transportation to combat the harmful effects of the EU ETS and ensured that U.S. airlines were not subject to the EU cap-and-trade tax penalties. Because of this legislation and other international pressure, the EU postponed implementation of ETS for a year to give the International Civil Aviation Organization (ICAO) an opportunity to draft a global plan. We were pleased, then, when late last year ICAO’s general assembly approved a plan that will provide for the development, over the next three years, of a global framework for addressing aviation’s impact on climate change, with the goal of implementing the plan worldwide by 2020. The ICAO action was an important step toward implementing a global solution to this problem, and we look forward to working with ICAO to develop a framework that will substantially reduce global emissions, improve the efficiency and cost-effectiveness of our aviation system, and promote sound environmental stewardship while maintaining competitive balance and fairness in the international aviation marketplace.

We are also pleased that EU officials have tentatively backed off a plan to continue pushing the misguided ETS scheme. In the aftermath of the ICAO general assembly meeting, the European Commission (EC) proposed revising the EU law so that the ETS would cover all flights over EU airspace, including those flown by international carriers. Last week EU officials announced that they would not pursue this course of action, but a final vote is pending in April. We hope that the EU will completely suspend its plans to unilaterally implement its ETS scheme and work with the U.S. and others toward a truly global solution through ICAO.

We also must ensure that the more than 700 foreign-based aircraft repair stations certified by the FAA to work on U.S. aircraft are held to the same safety and security rules that we require for work done in this country. Too often this has not been the case. For example, aircraft mechanics working in the United States either employed at air carriers or at domestic contract repair stations are required to undergo various drug and alcohol screenings to ensure their ability to perform safety-sensitive repairs. Yet employees working at repair stations based overseas are exempt from these tests despite the fact that they work on the same U.S. aircraft and at repair stations certified by the FAA. To address this and other safety loopholes, Senator McCaskill championed a number of reforms to aircraft repair station regulations in the context of the FAA Modernization and Reform Act of 2012. I want to thank and recognize the Senator for her leadership on this issue. Specifically, the final law included a provision (Section 308(d)(2)) directing the FAA, within one year of enactment, to issue a proposed rule requiring all repair station employees responsible for safety-sensitive maintenance on U.S. aircraft to be subject to an alcohol and controlled substance testing program. While we are pleased that Congress moved to address this safety issue, the FAA is now over a year late in fulfilling this mandate and the provision will have no impact until it is formally implemented by the FAA. This delay is unacceptable and particularly grievous since additional time will be needed to implement the final regulations after the proposed rule is finally released.

We are also extremely disappointed in the final security rule on foreign and domestic repair stations issued by the Transportation Security Administration (TSA) in January. When TSA issued an NPRM in 2010, we raised significant concerns that the proposal did not go far enough to address the security questions that have been raised. We agree with TSA’s assessment, noted in the agency’s NPRM, that as TSA “tightens security in other areas of aviation, repair stations increasingly may become attractive targets for terrorist organizations attempting to evade aviation security protections currently in place.” That is why we were dismayed that the final rule further rolls back the already weak security requirements TSA proposed in 2010, fails to address security loopholes we identified in the proposed rule, and runs counter to the congressional requirement that TSA ensure the security of maintenance work performed at contract repair stations.

The final rule eliminates the proposal that repair stations certified by the FAA that work on U.S. aircraft adopt and implement a security program to help control access to a facility. Instead, limited and weak security measures will apply only to stations that are on or adjacent to an airport. The security challenges raised by the heavy use of contract maintenance are not limited to stations at airports and Congress clearly did not identify this distinction when it mandated security enhancements.

The final rule also did nothing to address concern with adequate background checks of contract station employees. In fact, it went in the opposite direction by only applying these reviews to individuals at a repair station designated as a TSA point of contact and those who have the means to prevent the unauthorized operation of large aircraft.

Finally, TSA does not intend to fully inspect FAA certified repair stations, weakening the agency’s ability to ensure their security. This rule also fails to give TSA the clear authority to conduct unannounced inspections of foreign repair stations. While the rule extols the virtues of unannounced inspections at domestic stations, it notes that for foreign stations “it will always coordinate any inspection with the host government prior to starting an inspection.” The final rule fails to fulfill the intent of Congress, and we look forward to working with this Committee to improve the safety and security of foreign repair stations.

Beyond TTIP, Open Skies negotiations and ICAO global aviation emission issues, the U.S. government must embrace policies that promote the competitiveness of U.S. airlines and protect and expand U.S. airline jobs. It also must not advance policies that provide a competitive advantage to foreign airlines, particularly state owned or subsidized airlines. Unfortunately the Department of Homeland Security (DHS) has been doing the latter. Earlier this year DHS opened a Customs and Border Protection (CBP) pre-clearance facility at the Abu Dhabi International Airport in the United Arab Emirates (UAE), despite an outpouring of objections from the U.S. aviation community, including labor, U.S. airlines and airports. CBP pre-clearance facilities are popular with passengers and can help relieve congestion at customs check points in U.S. airports. However, no U.S. carrier currently flies between the U.S. and Abu Dhabi. This facility is staffed by U.S. customs agents at significant cost to the U.S. taxpayer, yet it only benefits Etihad – the state-owned air carrier of the UAE. This is also a significant departure from the prevailing construct of preclearance operations, which is to facilitate U.S. travel and to benefit U.S. travelers. Preclearance should not be a vehicle to put U.S. air carriers and U.S. airline jobs at risk by advantaging a foreign competitor exclusively. And given that Etihad only operates three routes between Abu Dhabi and the U.S., we believe CBP resources and personnel would be better used here at home to relieve overburdened customs lines in U.S. airports. While the Abu Dhabi facility is now up and running, we are concerned that this will lead to other pre-clearance facilities in airports that have a minimal U.S. presence such as Dubai and Doha. We will work closely with Congress in the coming months to ensure that our customs resources are used in a way that help alleviate congestion at our airports while also promoting the competitiveness of U.S. airlines.

In order to remain competitive in the global marketplace and continue in our commitment to serving the flying public, the U.S. must invest in the FAA’s workforce and aging infrastructure, stabilize the FAA’s operating budget, ensure enhanced oversight of the industry and airspace, and continue modernizing the National Airspace System (NAS) through the Next Generation Air Transportation System (NextGen) initiative. We have all witnessed the impact that government shutdowns have had on these programs and each time this occurs, these initiatives, designed to make air travel safer and more efficient and to expand capacity, are grounded or idled.

The government shutdown is just the latest disruption for the FAA. Passage of the 2012 FAA Reauthorization Act was delayed over three years with 23 extensions before finally being signed into law. In fact, when an agreement could not be reached on the 21st extension, the FAA was partially shut down for two weeks during the summer of 2011, costing the government nearly $30 million a day. More recently, in April 2013, sequestration forced the FAA to furlough every employee, including air traffic controllers and safety inspectors, and look at closing towers in order to achieve the mandated spending cuts. Sufficient and predictable long-term funding is desperately needed to ensure that our aviation system is as safe and efficient as possible.

This lack of stable funding has already caused damage, some of which will be difficult if not impossible to reverse. For example, stop-and-start funding means that the FAA can’t plan for the future, making long term improvement and modernization projects even more difficult. In addition, restarting modernization projects is very expensive and some projects may need to begin again from square one. The April 2013 furloughs caused delays to modernization projects like En Route Automation Modernization (ERAM) that are costing $6 million per month of delay (currently estimated to be about $42 million).

Due to budget cuts, preventative maintenance has been halted, and engineers and systems specialists must contend with a fix-on-fail policy, meaning they must wait until equipment actually breaks before replacing it. This creates an obvious safety concern and may also result in excessive and avoidable air traffic delays. Sequestration-mandated furloughs in April 2013 caused severe delays: during the week of April 21-27 2013, delays nearly tripled at our nation’s airports, from 5,103 delays to 13,694. These funding cuts are problematic, and will continue until Congress finds a responsible way to end sequestration. Until then, our NAS is in jeopardy of falling behind on efficiency, safety, and capacity.

The FAA also continues to face serious problems regarding staffing, especially considering that one-third of its workforce, including air traffic controllers, aviation safety inspectors and systems specialists, will be eligible to retire starting this year. Furthermore, even if the FAA replaced these retiring workers immediately, the training for employees throughout the agency is extensive and it can take two to five years to fully train new hires. In addition, FAA operations within the current budget environment are presenting major challenges for the FAA workforce and the aviation system, which is resulting in limited funding for travel, challenges performing inspections and other surveillance activity, reduced or delayed maintenance of critical systems and equipment, and difficultly in meeting growing industry demands with its manufacturing and certification process. Without clear funding in place to ensure the current workforce remains on the job and a new generation of employees is in place with access to thorough on-the-job training, there is no way the FAA can guarantee there will be enough aviation safety inspectors, air traffic controllers, systems specialists and other employees in place to secure the safety and efficiency of the system.

The U.S. must also foster programs that will help develop a workforce with the skills and expertise necessary for the manufacture and maintenance of modern, technologically advanced aircraft. U.S. aviation cannot compete globally without maintaining its world leadership in producing the highest quality aircraft. To that end the International Association of Machinists and Aerospace Workers (IAM), a TTD affiliate, has partnered with the Boeing Company to create the Quality Through Training Program. The IAM and Boeing jointly design and administer a host of programs designed to continually upgrade the skills and abilities of the incumbent workforce. These programs comprise career planning, education assistance, and a variety of onsite training programs including apprenticeships.

We also want to refer the committee to the Modular Manufacturing Development Project, developed by IAM in collaboration with Goodwin College, the Connecticut Center for Advanced Technology (CCAT) and other manufacturing organizations. This project is a shining example of a program designed to increase our manufacturing capabilities to meet the demands of U.S. aviation and around the world. This project has identified gaps in our manufacturing capabilities and brings together industry stakeholders, including labor, to recognize and address the needs of our manufacturing workforce. I commend IAM, led by President R. Thomas Buffenbarger, for its leadership and vision in collaborating on this project, and hope that it will serve as model for workforce development and technological advancement in aviation manufacturing.

The U.S. aviation industry and its workers face significant challenges and opportunities as globalization and liberalization become more prevalent. Already, U.S. aviation crews have seen their jobs threatened by corporate schemes such as alliances between U.S. and foreign air carriers, and the “flag of convenience” scheme being advanced by NAI. Similarly, foreign outsourcing of aircraft maintenance and passenger service functions is sending good U.S. aviation jobs overseas, while our own FAA remains paralyzed by sequestration and budgetary uncertainly. The U.S. aviation system remains the best and safest in the world, however, and through smart government policies and investment that promote U.S. competitiveness, middle class job creation, and technological modernization we can thrive in the international marketplace.

Thank you for the opportunity to testify today, and I look forward to working with the committee to promote the competitiveness of the U.S. aviation industry and to protect and expand our middle class aviation industry workforce.