Analysis: Growing opposition to administration’s plan to relax foreign ownership rule of U.S. airlines

The emotions and anxieties raised by the Dubai Port World’s storm continue. At heart is the question of the relationship between foreign ownership of U.S. companies and U.S. national security. The debate is complicated by two factors: First, there is no agreement over the three key issues related to foreign ownership: a) is all foreign ownership alike (maybe an English, Dutch, or Canadian owner is not as threatening to U.S. national security as, say, a Pakistani, Chinese, or Saudi owner); b) are all industries alike (would a foreign ownership of a port or a dam or an airline be more threatening to U.S. national security than ownership of an oil refinery or a meat processing company or a biotechnology company); c) are all parts of a company’s operations alike (maybe some operations are more national-security related than others). The second factor is that U.S. companies own foreign companies, and other countries, or groups of countries such as the EU, now say that foreign ownership should be a two-way street.

This cluster of issues is now on display as members of the House Transportation and Infrastructure Committee want the Department of Transportation (DoT) ) to put an end to a proposed rulemaking which would allow foreign investors to control U.S. airlines. 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. For corporations, 75 percent of the voting interest must be held by U.S. citizens and 66 percent of its board of directors and officers must also be U.S. citizens. Legislators say that before the pro-free trade forces in the administration change the rules, Congress should first look at the change and its affect on safety and security. The administration wants to relax a decades-old statute. Opponents say that changing the rule and allowing foreign ownership would complicate the obligation of U.S. airlines to participate in the Civil Reserve Air Fleet (CRAF) program, which diverts civilian aircraft for military transport when necessary.

We are back to parsing words here: DoT rulemaking involves the interpretation of the “actual control” clause “to mean that U.S. citizens only need to control safety, security, and the [CRAF] program, and that foreign citizens may control all of an airline’s commercial decisions, such as the cities served, the fares charged, and the aircraft purchased,” according to a letter to Transportation Secretary Norman Mineta signed by a bipartisan group of committee members. The members reminded Mineta of their “strong disapproval” of DoT’s move.

Opponents of the administration’s rule relaxation point out the distinction the administration makes between the business aspects and the national security aspects of an airline’s operation