WASHINGTON AVIATION SUMMARY June 2017 EDITION CONTENTS I. REGULATORY NEWS .............................................................................................. 1 II. AIRPORTS ................................................................................................................ 4 III. SECURITY AND DATA PRIVACY ............................................................................ 7 IV. E-COMMERCE AND TECHNOLOGY ....................................................................... 9 V. ENERGY AND ENVIRONMENT .............................................................................. 10 VI. U.S. CONGRESS .................................................................................................... 11 VII. BILATERAL AND STATE DEPARTMENT NEWS ................................................... 15 VIII. EUROPE/AFRICA ................................................................................................... 16 IX. ASIA/PACIFIC/MIDDLE EAST ................................................................................ 18 X. AMERICAS ............................................................................................................. 20 For further information, including documents referenced, contact: Joanne W. Young Kirstein & Young PLLC 1750 K Street NW Suite 200 Washington, D.C. 20006 Telephone: (202) 331-3348 Fax: (202) 331-3933 Email: [email protected] http://www.yklaw.com The Kirstein & Young law firm specializes in representing U.S. and foreign airlines, airports, leasing companies, financial institutions and aviation-related companies before U.S. Government agencies, Congress, the courts and in commercial and financing matters. ©2017 Kirstein & Young PLLC. Washington Aviation Summary I. REGULATORY NEWS 1. Administration FY18 Budget Separates ATC from FAA. The President’s proposed budget for fiscal year 2018, beginning October 1, would reduce Department of Transportation (DOT) funding by $2.4 billion (down 13% from FY17). It proposes a multi-year reauthorization to move air traffic control (ATC) from the Federal Aviation Administration (FAA) to a non- governmental organization, which “would reduce spending caps by $70 billion, more than $10 billion a year starting in 2021 through 2027.” FAA’s safety and regulatory functions would remain governmental, with funding estimated at $2.4 billion in 2021. The budget funds the Airport Improvement Program at the current $3.35 billion, cuts Essential Air Service Program by $175 million and eliminates funding for Brand USA, the public-private partnership created by Congress to promote the U.S. as a tourist destination, which U.S. Travel Association said “was responsible for adding $8.9 billion to the U.S. economy in 2016 alone.” . $44.1 billion in discretionary budget authority was requested for the Department of Homeland Security (DHS), a $2.8 billion (6.7%) increase over FY17, with $2.7 billion for border security, including construction of a wall along areas of the Mexican border; $354 million for biometric and $971 million for cybersecurity initiatives; and “key investments in explosives detection research and developments to enhance aviation security.” The Transportation Security Administration (TSA) request includes $5.1 million for aviation passenger screening covering 43,190 TSA Officers and 1,047 canine teams; and $680.5 million for procurement, installation and maintenance of checkpoint and checked baggage technology. The passenger security fee would increase from $5.60 to $6.60 per one-way trip. 2. IATA: First Quarter Ends on Strong Note for Passenger Traffic. “Strong traffic demand continued throughout the first quarter, supported by a combination of lower fares and a broad•based upturn in global economic conditions,” said Alexandre de Juniac, Director General and CEO of the International Air Transport Association (IATA). “The price of air travel has fallen by around 10% in real terms over the past year and that has contributed to record load factors.” Global passenger traffic results for March show that demand (measured in revenue passenger kilometers) rose 6.8%, compared to same month a year ago. Capacity grew 6.1% and load factor climbed by half a percentage point to 80.4%. “We will have to wait another month to see the impact of the laptop ban on demand,” said de Juniac, noting that “responses of Canada, the EU and Australia to the same intelligence demonstrate that a ban Kirstein & Young PLLC / Attorneys at Law June 2017 — Page 1 Washington Aviation Summary on large electronic devices in the cabin is not the only way forward. Indeed, we believe that it is not sustainable in the long-run.” 3. Rosen Confirmed as DOT Deputy Secretary; Bahrami Returns to FAA. The Senate confirmed Jeffrey Rosen as DOT Deputy Secretary. He has served as General Counsel at both DOT and the Office of Management and Budget and is a former Chair of the American Bar Association’s Section of Administrative Law and Regulatory Practice. Rosen will serve as DOT’s Regulatory Reform Officer and Chairman of its Regulatory Reform Task Force (RRTF), formed to comply with an Executive Order that directs agencies “to make recommendations to alleviate unnecessary regulatory burdens.” DOT Secretary Elaine Chao directed the RRTF “to consider ways to accomplish DOT’s primary safety objectives in less burdensome ways and to further review ‘midnight rules’ that were issued at the end of the last Administration.” . Ali Bahrami will return to FAA to head the Aviation Safety Division, replacing Peggy Gilligan who has retired. Currently Vice President of the Civil Aviation division of Aerospace Industries Association, Bahrami worked at FAA from 1989 to 2013, principally as manager of the Transport Airplane Directorate of the Aircraft Certification Service. 4. FAA Orders Airlines to Replace Zodiac Seats. FAA adopted an airworthiness directive (AD) requiring removal of certain Zodiac seating systems, which may cause serious neck injury to the occupant during emergency landing conditions. Nearly 10,482 systems installed on Embraer and Bombardier regional jets and Boeing 717-200s and MD-90-30s are affected. Cost of compliance to airlines estimated at $891,000, plus seat replacement. FAA proposed a $435,000 civil penalty against United for allegedly operating a Boeing 787 that was not in an airworthy condition on 23 passenger flights before performing a required inspection. 5. Drone Update. The International Civil Aviation Organization (ICAO) plans to develop a framework for managing low-altitude airspace, which will include registration of drones or unmanned aerial vehicles (UAVs). The U.S. Court of Appeals for the District of Columbia blocked rules requiring hobbyists and recreational flyers to register drones, saying federal law prohibits FAA from regulating model aircraft. FAA is reviewing the decision, saying it “put registration and operational regulations in place to ensure that drones are operated in a way that is safe and does not pose security and privacy threats.” Air Line Pilots Association, Int’l (ALPA) called the court decision “a threat to the safety of our national airspace” and urged Congress “to enact legislation giving FAA clear authority to fully regulate hobbyists and recreational flyers of UAS.” . Kirstein & Young PLLC / Attorneys at Law June 2017 — Page 2 Washington Aviation Summary European Aviation Safety Agency published a proposal to regulate operation of small drones, “while allowing this industry to remain agile, to innovate and continue to grow. The risk posed to people on the ground and to other aircraft as well as privacy, security and data protection issues created by such drones are also taken into account.” . JD.com, China's largest online retailer, is developing a drone capable of carrying 2,000 pounds over long distances, to transport goods initially between cities, and eventually between provinces. The company will also establish a research and development campus in partnership with Xi’an National Civil Aerospace Industrial, where unmanned systems will be developed, manufactured and tested. 6. DOT Air Travel Consumer Report for March. Based on data filed by largest reporting carriers; tarmac data filed by all carriers. March Feb. Full Year ‘17 / ‘16 ‘17 2016 2015 2014 2013 2012 On-time arrivals % 79.9 / 81.5 82.6 81.4 79.9 76.2 78.34 81.85 Cancellations % 1.8 / 1.0 1.5 1.17 1.5 2.2 1.51 1.29 Mishandled baggage* 2.24 / 2.49 2.16 2.70 3.13 3.61 3.22 3.09 Consumer complaints: Airline service 1,132 / 1,427 950 17,904 20,175 15,539 13,176 15,338 Disability-related 56 / 77 55 862 944 784 683 741 Discrimination** 4 / 6 5 94 65 68 79 99 Note: In March, airlines reported no tarmac delays of more than three hours on domestic or more than four hours on international flights. * Reports per 1,000 passengers. **I.e., race, religion, national origin or sex. Kirstein & Young PLLC / Attorneys at Law June 2017 — Page 3 Washington Aviation Summary II. AIRPORTS 1. Philadelphia, American Agree on $900 Million Airport Investment. The 15 carriers operating at Philadelphia International, led by American Airlines, reached agreement with the city on a $900 million improvement plan that includes $396 million in maintenance and repairs to the airfield and terminals, and $200 million for a new ATC tower. Philadelphia Northeast Airport, which serves private and corporate aircraft, will receive $26 million for taxiway and runway rehabilitation and facility upgrades. The projects will be managed and delivered by Philadelphia’s Division of Aviation and American,