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Continental Airlines said changes to the U.S. Department of Transportation's proposal to allow further foreign control of U.S. airlines "fails to resolve the significant legal and policy concerns raised by Congress, industry and labor."
Corporate citizenship laws in the aviation industry cap the amount of voting stock owned by foreigners at 25 percent and require two-thirds of the upper management and board of directors be American. The law regarding foreign control of U.S. airlines can only be changed by Congress. Following the uproar over DP World's takeover of British ports operator P&O, a raft of anti-foreign investment bills have been tabled in both houses of Congress.
The DOT Wednesday put forward a revised proposal that would prevent international investors from having the ability to hire, fire or control the budgets of senior U.S. airline managers with direct responsibility for safety, security and national defense airlift commitments. The initial proposal in November was designed to raise foreign investment for the ailing U.S. airlines by allowing international investors more say in some aspects of airline operations such as scheduling and marketing.
"The supplemental proposal would make clear that U.S. citizens who are members of a domestic airline's board or the voting shareholders, must retain the authority to revoke decision-making authority that international investors may acquire," the DOT said.
"For example, domestic board members might decide to revoke international investors' decision-making authority over scheduling and fleet composition if they felt that those decisions were not in their airlines' best interests. The new provision would make clear that U.S. citizens remain in 'actual control' of the airline, as required by statute."
The DOT's proposal would only apply to international investors from countries that have "open skies" aviation agreements with the United States and allow similar investments by American citizens in their domestic airlines.
"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," Continental said in a statement.
"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.
"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," Continental said.
"The DOT's supplemental proposed rule is a bad rule designed to clench a bad deal between the European Union and the U.S.,” the airline said. “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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