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Thursday, July 28, 2011

Challenge to the Boeing-Airbus Duopoly in Civil Aircraft: Issues for Competitiveness


Glennon J. Harrison
Specialist in Industry Policy

The importance of a successful aerospace industry to the United States economy has been repeatedly acknowledged by President Obama and members of his Cabinet, many Members of Congress, and by all concerned with the competitive fortunes of the U.S. aircraft manufacturing industry. The U.S. aerospace industry is highly competitive and global in scope. U.S. firms manufacture a wide range of products for civil and defense purposes and, in 2010, the value of aerospace industry shipments was estimated at $171 billion, of which civil aircraft and aircraft parts accounted for over half of all U.S. aerospace shipments. In 2010, the U.S. aerospace industry exported nearly $78 billion in products, of which $67 billion (or 86% of total exports) were civil aircraft, engines, equipment, and parts. The U.S. trade surplus (net exports) in aerospace products in 2010 was $43.6 billion – higher than for any other manufacturing industry. Aerospace employment totaled 477,000 workers, of which 228,400 were engaged in the manufacture of aircraft, 76,400 in the manufacture of engines and engine parts, and 97,600 in the manufacture of other parts and equipment. According to the International Trade Administration, “more jobs in the United States were supported by exports of U.S. aerospace products than of any other manufacturing or service industry.”

Boeing is the only U.S. manufacturer of large civil aircraft. Civil aircraft engines are manufactured by General Electric (GE), in partnership with Safran (of France), and by Pratt & Whitney. Numerous firms manufacture sections and parts of the airframe, as well as original equipment for both domestic and foreign airframe manufacturers. The civil and military aerospace sectors are complementary in that many firms manufacture products for both. Although the products tend to be dissimilar, workforce skills are transferable, so a decline in military aerospace budgets or private sector spending on civil aircraft have significant economic and competitive effects for the United States.

A major issue for policymakers is whether the United States can sustain its preeminent position in aerospace, given the intentions of numerous foreign manufacturers to enter the small commercial jet aircraft segment by 2016. That segment accounts for nearly half of all commercial aircraft revenues and for more than 60% of commercial aircraft deliveries. It is also the gateway to building larger commercial aircraft. Boeing and Airbus are the sole rivals across all segments of large commercial aircraft manufacturing, but during the next decade both will confront a potentially serious challenge in one of the most important segments of their business, small commercial jets (which are also referred to as narrow-body or single-aisle aircraft). The CEOs of Boeing and Airbus have both agreed that their duopoly over small commercial jets is nearly at an end.

Boeing and Airbus will face competition from government-owned and subsidized firms in Russia and China, as well as companies in Canada, Brazil, and Japan. Several factors will determine the outcome of the coming competition in small commercial jets, including the openness of markets to foreign commercial aircraft and aircraft engines and parts; whether state-owned aircraft manufacturers continue to receive substantial government subsidies; whether the challengers to Boeing and Airbus achieve their goal of building innovative, efficient aircraft that establish excellent safety and service records; whether airlines will buy aircraft from companies that have no track record; and the effect of collaborative partnerships with other aircraft manufacturers and suppliers as a strategy for success. Boeing and Airbus are engaged in a struggle to be the world’s preeminent manufacturer of civil aircraft and both have a depth of resources unmatched elsewhere. The competitive stakes for both companies will be very high during the next decade
.


Date of Report: July 18, 2011
Number of Pages: 33
Order Number: R41925
Price: $29.95

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Monday, July 25, 2011

Federal Aviation Administration (FAA) Reauthorization: An Overview of Legislative Action in the 112th Congress


Bart Elias, Coordinator
Specialist in Aviation Policy

Reauthorization of Federal Aviation Administration (FAA) programs has been an issue of considerable interest during the first session of the 112th Congress. The previous FAA authorization, Vision 100—Century of Aviation Reauthorization Act (P.L. 108-176, hereinafter referred to as “Vision 100”) expired at the end of FY2007. Attempts to enact a successor law failed in the 110th and 111th Congresses. As a result, aviation trust fund revenue collections and aviation program authority have continued under a series of short-term extensions. The latest of these, the Airport and Airway Extension Act of 2011, Part III (P.L. 112-21) will expire on July 22, 2011.

The House and Senate have passed separate versions of multiyear FAA reauthorization legislation (see S. 223 and H.R. 658), and the Senate has requested a conference to resolve the differences between the House-passed and Senate-passed bills. Whereas the Senate bill only covers FY2010 and FY2011, the House bill would authorize FAA programs through FY2014. For FY2011, the only year the two bills overlap, the House-passed total authorization level for FAA is $2,082 million less than that specified by the Senate. Moreover, the House-passed bill calls for further reductions in authorized FAA funding for FY2012 through FY2014. While these levels reflect broader government-wide efforts to reduce deficit spending, they could pose considerable challenges to ongoing air traffic modernization efforts, and affect FAA’s ability to address its future needs for controllers and technical specialists to operate and maintain the nation’s air traffic system. The Senate bill proposes an increase in jet fuel tax for general aviation and a new jet fuel surcharge for fractionally owned aircraft, while the House bill does not include any changes to existing aviation taxes and fees. Neither bill includes proposals to increase the cap on passenger facility charges, and the House bill does not include the controversial provision passed by the House in the 111
th Congress to bring non-aviation employees of express carriers under the National Labor Relations Act instead of the Railway Labor Act.

Key issues addressed in the FAA reauthorization bills include provisions intended to improve the management of and accelerate progress on the Next Generation Air Transportation System (NextGen); address FAA workforce and facility consolidation issues; improve the safety of air ambulance operations; improve runway safety; increase oversight of air carriers and foreign repair stations; integrate unmanned aircraft into the national airspace system; and address aircraft and airport noise and emissions.

While there are many similarities in language between the House-passed and Senate-passed bills, particularly with respect to major issues affecting FAA, several important differences remain to be reconciled. Provisions that may be of particular interest during this process include 

  • significant differences in authorized funding levels and aviation fuel taxes between House and Senate versions; 
  • a labor provision in the House bill that would overturn recent regulations that make it easier for certain employees covered under the Railway Labor Act to unionize; 
  • provisions regarding the allocation of takeoff and departure slots at Reagan National Airport; and 
  • provisions in the House bill to end the Essential Air Service (EAS) program, which subsidizes air carrier service to small and isolated communities.

Date of Report: July 1, 2011
Number of Pages: 51
Order Number: R41798
Price: $29.95

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Takings issues raised by discussion draft of Amtrak bill


Robert Meltz
Legislative Attorney

This memorandum discusses the takings issues raised by certain provisions in the June 15, 2011 discussion draft of a House bill titled "Competition for Intercity Passenger Train in America Act of 2011.


Date of Report: July 12, 2011
Number of Pages: 5
Order Number: M-071211
Price: $19.95

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Document available via e-mail as a pdf file or in paper form.
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