Continental Airlines has said that, based on its initial review, the supplemental proposed rule allowing foreign control of U.S. airlines issued by the Department of Transportation fails to resolve the significant legal and policy concerns raised by Congress, industry and labor.While the revised DOT proposal purports to allow a U.S. shareholder majority to revoke foreign control of airline operations, this proposal makes it clear that foreign investors will be allowed to control all significant decisions at a U.S. air carrier and highlights the unworkable nature of bifurcating control of a corporation.

“The DOT has abdicated its responsibility to ensure actual control by U.S. citizens, relying instead on the unreasonable hope that U.S. shareholders and directors might reassert the very control DOT is unwilling to require,” said a Continental spokesperson, pointing out that “U.S. citizen shareholders are even less likely to revoke control held by foreign owners than U.S. voters are to amend the Constitution.”

The proposed rule, even as now supplemented by DOT, is still unlawful and will not withstand either Congressional scrutiny or the expected court challenges.

Only Congress can change the law regarding foreign control of U.S. airlines. Over the last six months, the Congressional message could not be clearer. The law requiring “actual control” of U.S. airlines by U.S. citizens means exactly what it says.

Congress has made its concerns abundantly clear to the DOT. The message is unmistakable and is coming from both sides of the Capitol and from Republicans and Democrats alike. Nearly 190 Members of the House of Representatives have introduced legislation which states that DOT’s proposals are contrary to the “plain language” of aviation statutes and prohibits DOT from issuing a final ruling for a period of one year. The House Appropriations Committee unanimously adopted report language directing the Secretary of Transportation to refrain from issuing a final rule for 120 days and expressing serious concerns about “any rule which would allow any minority foreign investor to exercise control or decision-making authority over any aspect of a U.S. carrier’s operation.” Finally, the Senate Appropriations Committee recently passed statutory language prohibiting DOT from using any money to make final a foreign control rule making.

While Members of Congress have been willing to give DOT a chance to rewrite the proposed rule in a manner consistent with the law, it is clear that Congress will not be mollified with the ineffectual changes proposed.

The DOT’s supplemental proposed rule is a bad rule designed to clench a bad deal between the European Union and the U.S. DOT has previously admitted that it is promulgating the proposed rule because the EU has demanded that it do so as a condition to signing the proposed U.S.-EU “open skies” treaty. DOT’s dogged defiance of Congress, as well as industry and labor critics, shows how far DOT will go to appease the EU. The “open skies” deal is anything but open, as neither it nor the DOT have provided for effective U.S. airline competition in the EU’s most important business aviation market, London Heathrow. Under the treaty, Continental will be permitted to fly to Heathrow, but it won’t be permitted to land there, as daily slots at commercially reasonable times are simply not available, nor are adequate facilities.
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