Continental Airlines President Jeff Smisek has testified that the Department of Transportation’s supplemental proposed rule to allow foreign control of U.S. airlines is both unlawful and unworkable, and that Congress should take the reins in creating appropriate laws under which foreign entities could increase capital investment in American carriers.Testifying before the Aviation Subcommittee of the Senate Committee on Commerce, Science and Transportation, Smisek said, “In their Alice in Wonderland world, the Department of Transportation is trying to ‘interpret’ a requirement that actual control of U.S. air carriers must be in the hands of U.S. citizens to mean that actual control of U.S. air carriers may be in the hands of foreign citizens.

“The truth of the matter is that the proposed rule doesn’t offer any protection from foreign domination and control, except for the limited, naive and impractically crafted attempt by DOT to carve-out safety, security, military airlift and organizational documents,” Smisek added.

“DOT is promising foreign investors that they will have control of U.S. airlines because otherwise the EU will refuse to sign an open skies agreement,” Smisek said. “And DOT is promising the Congress that foreigners won’t have control of U.S. airlines. But the rule can’t—and doesn’t—do both. DOT is telling Europeans they can control U.S. airlines and telling Congress that the foreign control can be revoked by the U.S. shareholders at any time, but DOT cannot have it both ways.

“The DOT’s supplemental proposal will be reversed by the courts if issued by DOT as currently drafted,” Smisek said.

Thousands have registered concerns and objections in the DOT docket, and nearly 190 Members of Congress have voiced support for legislation designed to prevent DOT from issuing the final rule for at least a year or until further studies have been completed.

DOT is rushing to change the “actual control” standard to entice the European Commission into ratifying an agreement with the U.S. that fails to open up the most important airport in Europe to competitive entry by Continental and other U.S. carriers. Without commercially viable slots and facilities at London Heathrow, which are unavailable, the right to fly to London Heathrow would be meaningless, as there would be no right to land.

Congress, not DOT, must address any changes in the “actual control” standard to provide a clear, lawful policy that would truly enhance foreign investment in U.S. airlines. Congress should require that the DOT withdraw the supplemental proposed rule and begin the process to change the law in a way that meets the needs of all stakeholders. And the DOT should go back to the EU bargaining table to insist on fair access to commercially viable slots and facilities at London Heathrow.
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