U.S. International Aviation Policy and Challenges

Thomas S. Engle
Deputy Assistant Secretary for Transportation, Bureau of Economic and Business Affairs
Airports Council International Annual International Aviation Issues Seminar Visit USA
Washington, DC
December 4, 2014

It’s a pleasure to be here with you today, and I appreciate this opportunity to share the Administration’s perspective on international aviation policy, particularly in regard to the debate over Open Skies. ACI has been a hugely important player over the years in helping shape U.S. policy and a staunch supporter of the value of Open Skies. I salute ACI for hosting today’s seminar, which is further evidence of the Council’s service to the wider aviation community and beyond, in providing a public platform to debate these timely issues.

I’d like to jump right in to the debate over Open Skies. In 1992 the United States signed its first Open Skies agreement, a landmark deal between the U.S. and the Netherlands that opened international aviation to market forces. Agreements with several European and Asian countries soon followed, and we have now reached Open Skies agreements with 114 countries around the world. So, have our lives improved?

The Open Skies legal framework remains the gold standard of aviation liberalization. Open Skies agreements are pro-consumer, pro-competition, and pro-growth. They represent a market-oriented approach to international-aviation relations by letting markets, not governments, decide which cities to serve, how often to fly, what aircraft to use, and what fares to charge. Open Skies agreements have helped to expand international passenger and cargo flights to and from the United States. They have opened new markets and created business opportunities for both American and foreign carriers. Open Skies agreements have brought growth to your airports, especially in international services, by promoting increased travel, tourism, and trade. They have enhanced productivity and spurred high-quality job opportunities and economic growth.

Airport executives here today will be keenly aware that international aviation has changed considerably in the last few decades. New airlines have emerged and grown in prominence both in North America and overseas. The number of direct overseas flights has increased dramatically, and those flights are reaching more North American airports. New airline alliances have integrated global air travel. Cargo services have become global as well. These changes, no doubt, have brought big challenges, along with the opportunities, to the aviation industry. Adjustments have at times been painful for some stakeholders. It is my firm belief, however, that the net benefits of Open Skies to the great majority of American stakeholders have been overwhelmingly positive. By enhancing our opportunities to travel and our ability to do business, Open Skies agreements have enhanced our creativity, prosperity, and quality of life.

Our travel and tourism industry is growing and has become an enormously important part of the U.S. economy, representing 2.8 percent of GDP and supporting some 8 million jobs. The United States now receives about 32 million overseas tourists per year, not counting visitors from Canada and Mexico. That number has increased by 68 percent since 1992, when we signed that first Open Skies agreement. Counting Canada and Mexico, we receive about 70 million international tourists per year.

More and more tourists are coming from farther away, especially from Asia. And unlike visitors from Canada and Mexico, virtually all of those visitors arrive by air. In 1992, 5 million visitors came from Asia; last year 9 million visitors came from Asia. Does anyone think this growth would have occurred without the liberal aviation agreements we’ve been able to negotiate? Indeed, growth in tourist visits has been especially rapid in the last few years, even while world economic growth has been modest. This suggests two things: First, that broader Administration efforts to promote U.S. travel and tourism, of which negotiating Open Skies agreements is a part, are succeeding. And second, that the full potential for growth in air travel enabled by liberal traffic rights has not yet been realized.

Americans too are increasingly travelling abroad. In 1995, 19 million Americans travelled to overseas destinations, not counting Canada and Mexico. Last year 29 million did. Again, the vast majority of those travelers went by air.

In 1992, about 17 million American passports were in circulation. Last year it was 117 million.

Before Open Skies began to liberalize the international aviation environment, airports like Dallas-Fort Worth, Detroit, Las Vegas, Minneapolis, Portland, and Salt Lake City had few or no direct international air connections. Now they enjoy direct connections to cities around the world. Numerous studies have shown how direct international flights have a multiplier effect on local economies. Portland estimated that its intercontinental services generated $240 million a year in airport and visitor revenue. This year a new non-stop service between Austin, Texas and London is expected to create, directly or indirectly, over 1,000 jobs in the Austin area, according to one study. IATA reckons that international departures from U.S. airports have increased 45 percent in the past 12 years, while domestic departures decreased 15 percent. Clearly, the international traffic enabled by Open Skies and other liberal aviation agreements has been the driver of recent growth at many U.S. airports.

Open Skies has also had positive impacts on international cargo transport, a vital component of our economy. In 1992 U.S. cargo carriers transported only 7.5 million ton-miles of international cargo. Today that figure is 50 million ton-miles. American cargo operations have not only boosted U.S. trade, but also considerable trade among other countries, opening new opportunities to developed and developing countries alike. The ease with which we can rapidly send shipments around the world by air has been a driving force behind the increased global prosperity that has improved the lives of millions over the last two decades. U.S. cargo operators represent innovative, world-beating American brands that recognize the key role Open Skies agreements have played in removing barriers and supporting their international growth.

Measured by the weight of goods shipped, less than 2 percent of world trade moves by air cargo; but measured by value, around 35 percent moves by air. The Open Skies legal framework is thus a key underpinning of a global economy in which international trade is growing as a share of global output, trade in the high-value, knowledge-intensive goods more likely to move by air is growing as a share of total trade, and the global supply chains that support modern manufacturing are increasingly complex.

For all these reasons, I am pleased to affirm that it remains U.S. policy to pursue an Open Skies agreement with any friendly country that wants one. And for large markets that are not yet ready to go for full Open Skies, we will negotiate bilateral terms as close to that gold standard as our partner is willing to accept. We firmly believe the Open Skies framework continues to serve the interests of a broad range of American stakeholders, including air carriers, organized labor, airports and local communities, the flying public, and the wider travel and tourism industry and its employees and customers. We consult with stakeholder representatives before negotiations, and they regularly join our negotiations as members of the U.S. delegation, where they provide valuable insight from the private-sector perspective. Again, ACI North America has been a valued partner in this respect.

Our work is about promoting the economic growth and prosperity of U.S. communities, increasing employment possibilities for Americans, helping businesses export their products to international markets, and giving people multiple possibilities to travel to destinations around the world. By increasing opportunities for airlines, we open the world to U.S. businesses and travelers and open the United States to foreign tourists and products. It is important that we who deal with aviation services ensure that our political leaders understand the important links among liberal aviation agreements, increased air services, and broader economic prosperity.

We’re proud of our record in concluding 114 Open Skies agreements, but we have not put ourselves out of a job yet. We have talks underway to expand business opportunities with a number of countries. Last month we initialed a new, more liberal air services agreement with Mexico. When it enters into force, this agreement will allow for unlimited entry for passenger and cargo airlines to fly between any city in Mexico and any city in the United States. The new agreement will also include intermodal rights, open pricing, and other important commercial rights.

We’ve also been meeting with Japanese government officials to discuss expanded opportunities for U.S. carriers to serve Tokyo’s Haneda airport, a popular airport for business travelers. We are now considering next steps in our continued engagement with Japan and are hopeful for a positive outcome. We’re also discussing possible Open Skies agreements with the governments of Ukraine, Azerbaijan and Cote d’Ivoire, among others. And we hope to meet with Chinese officials in the new year for talks on ensuring that our air services agreement continues to support the burgeoning economic and people-to-people contacts between the world’s two largest economies.

Looking around the world today, we see successful carriers of numerous nationalities serving global markets. These carriers are increasingly integrated into global alliance structures. Within such alliances, cooperation can range from codesharing and common levels of service quality to deeper integration involving joint decision-making on schedules and prices. Our Open Skies agreements have played a key role in facilitating these alliances by opening new markets and creating new business opportunities for our air carriers around the world. The flip side of closer alliances is that markets must be open to new entrants to ensure that consumers benefit from healthy competition. The Open Skies framework is designed to make competition from new entrants as easy as possible, and this is partly why we believe the policy has been good for both the aviation industry and consumers.

Now I’d like to say a few words about travel facilitation. I realize other seminar sessions have focused on this. We at the State Department are keenly aware of the impact of U.S. visa regulations on tourist travel and the airlines that serve it. We’re taking a range of steps to make it easier to visit the United States. For example, citizens from 38 countries can now make tourist or business trips for up to 90 days to the United States without first obtaining a visa.

Other steps recognize that the most rapid growth in tourist visits to the U.S. comes from emerging economies like China, which are not part of the visa waiver program. The recent decision to extend to ten years the validity period for U.S. tourist visas issued to Chinese nationals has been welcomed by both the U.S. travel and tourism industry and the people and government of China. Longer visa validity will allow more Chinese visitors to make multiple trips to the United States on a single visa, offering opportunities to explore new parts of the country beyond the usual gateways of California and New York. Wait times for visa application interviews have also been sharply reduced in China and other key countries. U.S. embassies around the world are constantly seeking other innovative ways to streamline the visa application process, while still complying with U.S. laws and security regulations. The Administration is committed to promoting legitimate travel to the United States.

The State Department also works with our interagency counterparts such as the Federal Aviation Administration, the Transportation Security Administration, the Coast Guard, and Customs and Border Protection to build support for important international aviation safety and security initiatives.

The security of our country and the passengers who board international flights to come here is, of course, paramount. We’re proud to be using technology and better management to enhance security and facilitate legitimate travel at the same time. Through the Preclearance program of the Customs and Border Protection Agency, for example, agents can screen inbound passengers at their point of departure, at a growing number of airports, rather than upon arrival. This program helps keep inadmissible travelers off of U.S.-bound aircraft, and prevents having to deal with them at American airports and send them back on another possibly lengthy and costly flight. Many of the executives here today are also implementing new steps in collaboration with federal agencies to reduce customs and immigration-control processing times for arriving passengers at our international airports. These steps reduce the number of missed onward domestic connections and improve the traveler’s overall experience. Like Open Skies, these advances are providing benefits for U.S. carriers and their employees, passengers, and your airports.

Our Open Skies policy reflects a firm commitment to the success of your airports and to the convenience, cost-savings and safety of your customers, including the traveling public, international visitors, businesses that rely on efficient cargo operations, and the airlines and other entities that support international aviation. We value the input that ACI has provided us over the years, and I am proud of the open lines of communication we maintain with ACI to ensure that our policy remains focused on these goals.

Thank you very much. I’d be happy to take a few questions.