S. HRG. 112–850 THE GLOBAL COMPETITIVENESS OF THE U.S. AVIATION INDUSTRY: ADDRESSING COMPETITION ISSUES TO MAINTAIN U.S. LEADERSHIP IN THE AEROSPACE MARKET HEARING BEFORE THE SUBCOMMITTEE ON AVIATION OPERATIONS, SAFETY, AND SECURITY OF THE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION UNITED STATES SENATE ONE HUNDRED TWELFTH CONGRESS SECOND SESSION JULY 18, 2012 Printed for the use of the Committee on Commerce, Science, and Transportation ( U.S. GOVERNMENT PRINTING OFFICE 86–665 PDF WASHINGTON : 2014 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 12:35 Feb 19, 2014 Jkt 075679 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 S:\GPO\DOCS\86665.TXT JACKIE SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION ONE HUNDRED TWELFTH CONGRESS SECOND SESSION JOHN D. ROCKEFELLER IV, West Virginia, Chairman DANIEL K. INOUYE, Hawaii KAY BAILEY HUTCHISON, Texas, Ranking JOHN F. KERRY, Massachusetts OLYMPIA J. SNOWE, Maine BARBARA BOXER, California JIM DEMINT, South Carolina BILL NELSON, Florida JOHN THUNE, South Dakota MARIA CANTWELL, Washington ROGER F. WICKER, Mississippi FRANK R. LAUTENBERG, New Jersey JOHNNY ISAKSON, Georgia MARK PRYOR, Arkansas ROY BLUNT, Missouri CLAIRE MCCASKILL, Missouri JOHN BOOZMAN, Arkansas AMY KLOBUCHAR, Minnesota PATRICK J. TOOMEY, Pennsylvania TOM UDALL, New Mexico MARCO RUBIO, Florida MARK WARNER, Virginia KELLY AYOTTE, New Hampshire MARK BEGICH, Alaska DEAN HELLER, Nevada ELLEN L. DONESKI, Staff Director JAMES REID, Deputy Staff Director JOHN WILLIAMS, General Counsel RICHARD M. RUSSELL, Republican Staff Director DAVID QUINALTY, Republican Deputy Staff Director REBECCA SEIDEL, Republican General Counsel and Chief Investigator SUBCOMMITTEE ON AVIATION OPERATIONS, SAFETY, AND SECURITY MARIA CANTWELL, Washington, Chairman JOHN THUNE, South Dakota, Ranking DANIEL K. INOUYE, Hawaii Member BARBARA BOXER, California JIM DEMINT, South Carolina BILL NELSON, Florida ROGER F. WICKER, Mississippi FRANK R. LAUTENBERG, New Jersey JOHNNY ISAKSON, Georgia AMY KLOBUCHAR, Minnesota ROY BLUNT, Missouri TOM UDALL, New Mexico JOHN BOOZMAN, Arkansas MARK WARNER, Virginia PATRICK J. TOOMEY, Pennsylvania MARK BEGICH, Alaska DEAN HELLER, Nevada (II) VerDate Nov 24 2008 12:35 Feb 19, 2014 Jkt 075679 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 S:\GPO\DOCS\86665.TXT JACKIE C O N T E N T S Page Hearing held on July 18, 2012 ............................................................................... 1 Statement of Senator Cantwell .............................................................................. 1 Statement of Senator Thune ................................................................................... 3 Statement of Senator Isakson ................................................................................. 4 Prepared statement .......................................................................................... 4 Letter dated June 7, 2012 to Hon. Ray LaHood, Secretary of Transpira- tion, U.S. Department of Transportation .................................................... 5 Editorial dated July 16, 2012 from Aviation Week entitled, ‘‘Hawker Beechcraft’s Future May Rest With Chinese’’ ............................................ 6 Editorial dated July 16, 2012 from Aviation Week & Space Technology entitled, ‘‘Hawker Beechcraft’s Pending $1.79 Billion Sale Faces Hur- dles’’ ................................................................................................................ 8 Statement of Senator Begich .................................................................................. 48 Statement of Senator Lautenberg .......................................................................... 50 Statement of Senator Warner ................................................................................. 54 Statement of Senator Boozman .............................................................................. 56 WITNESSES Dr. John Tracy, Chief Technology Officer and Senior Vice President, Engi- neering, Operations and Technology, The Boeing Company ............................ 9 Prepared statement .......................................................................................... 10 Dan Elwell, Vice President, Civil Aviation, Aerospace Industries Association .. 15 Prepared statement .......................................................................................... 16 Dr. Stanley Sorscher, Society of Professional Engineering Employees in Aero- space, International Federation of Professional and Technical Engineers Local 2001 ............................................................................................................. 21 Prepared statement .......................................................................................... 22 Pete Bunce, President and CEO, General Aviation Manufacturers Association 25 Prepared statement .......................................................................................... 27 Nicholas E. Calio, President and Chief Executive Officer, Airlines for America (A4A) ..................................................................................................................... 31 Prepared statement .......................................................................................... 32 Letter dated July 27, 2012 to Hon. Maria Cantwell from James H. Zrust, Vice President—Tax, The Boeing Company ............................................... 42 APPENDIX Hon. Kay Bailey Hutchison, U.S. Senator from Texas, prepared statement ...... 77 Response to written questions submitted to Dr. John J. Tracy by: Hon. Maria Cantwell ........................................................................................ 77 Hon. Amy Klobuchar ........................................................................................ 79 Hon. Mark Warner ........................................................................................... 80 Hon. Tom Udall ................................................................................................ 82 Response to written questions submitted to Dan Elwell by: Hon. Amy Klobuchar ........................................................................................ 84 Hon. Mark Warner ........................................................................................... 85 Hon. Tom Udall ................................................................................................ 86 Response to written questions submitted to Dr. Stanley Sorscher by: Hon. Amy Klobuchar ........................................................................................ 88 Hon. Mark Warner ........................................................................................... 89 Hon. Tom Udall ................................................................................................ 90 (III) VerDate Nov 24 2008 12:35 Feb 19, 2014 Jkt 075679 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 S:\GPO\DOCS\86665.TXT JACKIE IV Page Response to written questions submitted to Pete Bunce by: Hon. Maria Cantwell ........................................................................................ 92 Hon. Amy Klobuchar ........................................................................................ 93 Hon. Mark Warner ........................................................................................... 93 Hon. Tom Udall ................................................................................................ 93 Response to written questions submitted to Nicholas E. Calio by: Hon. Maria Cantwell ........................................................................................ 94 Hon. Amy Klobuchar ........................................................................................ 96 Hon. Mark Warner ........................................................................................... 96 VerDate Nov 24 2008 12:35 Feb 19, 2014 Jkt 075679 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 S:\GPO\DOCS\86665.TXT JACKIE THE GLOBAL COMPETITIVENESS OF THE U.S. AVIATION INDUSTRY: ADDRESSING COMPETITION ISSUES TO MAINTAIN U.S. LEADERSHIP IN THE AEROSPACE MARKET WEDNESDAY, JULY 18, 2012 U.S. SENATE, SUBCOMMITTEE ON AVIATION OPERATIONS, SAFETY, AND SECURITY, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. The Committee met, pursuant to notice, at 3:01 p.m. in room SR–253, Russell Senate Office Building, Hon. Maria Cantwell, Chairman of the Subcommittee, presiding. OPENING STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR FROM WASHINGTON Senator CANTWELL. Good afternoon. The Senate Committee on Commerce, Science, and Transportation Subcommittee on Aviation Operations, Safety, and Security will come to order. I thank the witnesses for being here today for such an important hearing. I want to welcome each of them: from Chicago, Dr. John Tracy, Chief Technology Officer and Senior Vice President of Engi- neering and Operations for The Boeing Company; Dan Elwell, Vice President, Civil Aviation, Aerospace Industries Association—wel- come; Stan Sorscher, Labor Representative for the Society for Pro- fessional Engineering Employees in Aerospace—thank you for being here; Mr. Pete Bunce, President and Chief Executive Officer for the General Aviation Manufacturing Association; and, certainly not last in the regards to the importance to the sector, but very im- portant, Mr. Nick Calio, President