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Author:  Diane M. Grassi
Bio: Diane M. Grassi
Date:  February 15, 2006
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Topic category:  Other/General

Foreign Ownership of U.S. Airlines & Ports Deemed Troubling

With possible ownership of U.S. airlines possibly permitted within a year, control of operations and security of six U.S. ports will be given to the United Arab Emirates and based in Dubai.

The United States Department of Transportation (DOT) on February 8, 2005, presented its decision before the U.S. House of Representatives House Aviation Sub-Committee, to change a rule which would clear the way for foreign corporations to own and control U.S. airlines. But members of the House Aviation Sub-Committee were all in agreement that the DOT may lack the legal authority to unilaterally make such a change. Yet it does not begin to reveal all of the implications of such a historic shift in policy in bypassing the U.S. Congress in order to do so.

Trade negotiations with the European Union to loosen up regulations in ownership of U.S. airlines is seen as a tradeoff by the DOT in order for the U.S. to gain greater access to landing at London’s Heathrow Airport, where presently only American Airlines and United Airlines have limited service there. Known as the Open Skies Agreement, lawmakers in both parties believe that this proposition transcends ‘free trade’ or globalization as it becomes an issue which directly impacts labor and national security.

Currently, U.S. law requires that U.S. airlines must be under the “actual control” of U.S. citizens in order to be licensed for operation. And for corporations, 75% of the voting interest must be held by U.S. citizens and 66% of its board of directors and officers must also be U.S. citizens. But Secretary of Transportation, Norman Mineta, in a statement in November 2005 said that the rule change would be an “historic opportunity to increase travel, reduce fares, expand commerce and bring two continents closer together than ever before. It provides new opportunities for U.S. and European airlines, healthier competition for a growing travel market and greater connection between cities and towns of all sizes on both sides of the Atlantic.”

But the President of the Air Line Pilots Association, Intl. has a much different opinion. Captain Duane Woerth testified before the House Aviation Sub-Committee claiming, “Changes of this magnitude should be undertaken not be an administering agency but by the legislative branch. Pilots spend their entire careers accumulating the seniority required to gain access to international flying opportunities. In an era when the career expectations of pilots and other airline workers already have been repeatedly frustrated by airline bankruptcies, furloughs, wage concessions, pension plan terminations, and the like, it would be a crowning blow for the U.S. government now to adopt a policy that would tend to eliminate international flying by U.S. carriers.”

Should the new rule be adopted, with exception of few areas, all airline operations, including prices, scheduling markets, fleet structure, marketing and alliances have the option of being controlled by foreign investors. Additionally, U.S. labor law protections could be compromised and employees forced into losing out by being replaced by foreign employees. Aviation safety could be jeopardized as foreign-controlled management need meet only minimum FAA standards, far short of the present programs and practices U.S. airlines presently accord.

Surprisingly, the Department of Defense as well as the State Department have agreed with the DOT on this issue. But for several Congressmen, it does not pass muster and especially as concerns the Civilian Reserve Air Fleet (CRAF) which is used to transport U.S. troops including in times of war. The Open Skies Agreement would have to be redrafted to accommodate such. According to Rep. Peter DeFazio (D-OR), “During the Gulf War a European Union member didn’t supply us with a type of carrier we needed when we ran out because they didn’t support the war.”

Should the Congress fail to create legislation to block the proposed rule it would take effect, even though most U.S. airlines with the exception of cargo carriers, FEDEX and UPS as well as United Airlines, having recently reemerged from bankruptcy, are opposed to it. John Byerly, Deputy Assistant Secretary of State has maintained that in order for the EU to approve the Open Skies Agreement it is conditional on easing foreign ownership rules. But according to the Government Accountability Office, airport capacity limitations such as at Heaththrow would not be corrected by a deregulated agreement.

Rep. James Oberstar (D-MN), ranking Democrat on the House Transportation and Infrastructure Sub-Committee, in order to counter the proposed rule change introduced legislation that would require the rule be put on hold for one year, allowing the Congress to review its ramifications on national defense and homeland security, which are primary issues which must initially be addressed.

And while possible ownership of U.S. airlines may be permitted within a year, control of operations and security of six U.S. ports will be given to the United Arab Emirates and based in Dubai. The London-based Peninsular and Oriental Steam Navigation Co. was purchased on February 13, 2006 by Dubai Ports World. The deal is expected to be finalized on March 2, 2006. Peninsular and Oriental Steam Co. is the world’s fourth largest ports company and the sale affects the commercial U.S. ports of New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia.

The Committee on Foreign Investment in the U.S. (CFIUS) is a secretive government panel comprised of designees from the Department of Treasury, the Department of Defense, the Department of Justice, the Department of Commerce, the Department of State and the Department of Homeland Security. In January 2006, the Bush administration appointed a former Director of Operations for Europe and Latin America for Dubai Ports World as the new Maritime Administrator within the Department of Transportation, raising more than a few eyebrows.

But most puzzling to lawmakers is how Dubai, which provided most of the financing for the 19 hijackers on 9/11/2001, will now be overseeing the very port where nearly 3,000 lives were claimed that day. And Dubai was the base for much of the terrorist planning and operations for the attacks in New York and Washington, according to the FBI.

Since the Bush administration considers Dubai and the UAE a vital ally in the war against terrorism, it approves of the sale. However, it raises vital questions of U.S. national security and homeland security policies at ports where presently less than 5% of all cargo is inspected. And having an Islamist nation in charge of U.S. ports arguably makes little in allowing it to dictate port operations, given that U.S. ports remain top terrorist targets.

With the Department of Homeland Security still struggling to implement systems and operations to secure U.S. ports, allowing Dubai to run the ports could be a gateway for contraband, weapons of mass destruction and arsenals, as well as hiring practices without proper scrutiny, including the quality of security which would have to conform to U.S. law. Steve Coleman, Port Authority of New York/New Jersey spokesman stated, “We need to take a real close look at security before we approve such a company.”

James Lewis, a former State and Commerce Department contractor, sums it up by saying, “It’s in Dubai’s interest to make sure this runs well.” And unfortunately, it will take an act of Congress to prevent the finality of the sale in what will become the world’s second largest port operator. Hopefully, cooler heads in the Congress will prevail in the best interests of the U.S. in order to supercede those of foreign interests, all in the name of globalization. For the greatest asset to the U.S. is the American people, who not only deserve the protection of their government but one which vows to do its best to prevent terrorism on its shores ever again. Anything less is just unacceptable.

Diane M. Grassi

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Biography - Diane M. Grassi

Diane M. Grassi is an investigative and research journalist, providing topical and in-depth articles and analysis on U.S. public policy and governmental affairs; key federal and state legislation and court decisions relative to the public interests of average Americans. In addition, she reports on legal and governmental affairs relative to professional and amateur sports. She sticks to the facts on myriad issues, given short shrift by the mainstream press. With a passion for holding U.S. lawmakers and government officials accountable, Ms. Grassi has a resolve to keep readers informed in that they might become advocates on their own behalf.

You may contact Diane M. Grassi at dgrassi@cox.net


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