Even as the Obama Administration is gaining kudos for its dramatic about face on many Bush Administration policies which rankled its European counterparts, the U.S. is also courting retaliation from those same counterparts as Congressional action reverses bilateral aviation policies such as alliances and maintenance, repair and overhaul (MRO) activities – part of the recently passed House version of the Federal Aviation Administration reauthorization legislation.

The European Commission is also concerned about the Travel Promotion Act saying that current practices in Europe against entrance fees and visa-free travel would be threatened. (See story below)

Get ready for a steep increase in the cost of outsourcing which will be incurred by U.S. MRO facilities as Europe threatens to retaliate against anti-outsourcing provisions in the reauthorization legislation. The European Aviation Safety Agency is imposing increased fees on Part 145 applications and renewals to cover the expected costs increases. The new fees will be €1,500 for initial approvals and €750 for renewals. US MROs will likely have to apply for full Part 145 approval replacing the current bilateral status, according to a letter sent by EASA Executive Director Patrick Goudou in response to a request by the European Commission. This would eliminate the current US-EU bilateral accepted approval between Europe and the U.S. However, it would not impact bilateral agreements between individual countries and the U.S., according to EC’s Air Transport Director Daniel Calleja.

The House and EASA actions will only end up raising costs for U.S. MRO businesses, the airlines, and ultimately, passengers at a time they can least afford it. Such moves also threaten the efforts to harmonize regulations between the U.S. and Europe, which would eliminate the efficiency streamlining sought by both industry and government on both sides of the Atlantic. The growing distrust between the two entities could also threaten international cooperation on air traffic management.

In his letter to the EC, Goudou said from July 2010, it will begin inspecting all 1,233 MRO facilities in the U.S. should the reauthorization language, calling for twice annual inspection by the FAA of the 235 European MROS working on U.S. aircraft, pass.

“The agreement between the EC and the US signed on 30 June, 2009 is based on mutual trust,” said Goudou in his letter to the European Commission. “Therefore, the legislative proposal affecting the US FAA Reauthorization Act …particularly contravene the confidence built in the regulatory oversight carried out by both parties. As a result, I do have the same opinion that measures should be put in place to make sure, that the European side will act in a reciprocal manner, if the act is finally adopted.”

Those who favor the house language – corporate travel interests and unions – likely greeted the news with joy, thinking the more inspections of repair stations the better, regardless of the impact on costs. In addition, raising the costs of outsourcing, they say, will likely preserve U.S. jobs. What they do not seem to get is the fact that there are far more US MROs working on foreign aircraft than the reverse and the likely impact of any retaliation will probably present a higher threat to US jobs.

In a recent Aero Club speech, House Transportation and Infrastructure Chair James Oberstar doubted the Europeans would retaliate. The Senate is now crafting its own bill. Draft measures for EASA inspections were presented to the EU-US Joint Committee on June 22, two days before the EU-US Joint Committee meeting.

EASA, which issued the draft measures to be taken should the provision remain in the FAA reauthorization, said it will send a letter to U.S. MRO’s informing them of its plans. It expect the letter to prompt a reaction from repair stations.

EASA is currently studying the most efficient way to complete oversight of U.S. facilities including the establishment of EASA offices in the U.S. The study would outline the staffing and budgetary needs for such a program. In addition, the study will identify any regulatory changes necessary including fees and charges.

EC Concerned About Travel Promotion Act
Ambassador John Bruton, Head of the European Commission Delegation to the United States, sees a catch in the proposed Travel Promotion Act of 2009 pending before Congress opposing fees that would pay for a non-profit organization to communicate US entry policies to international travel while promoting leisure, businesses and scholarly travel to the US.

“If passed, a fee of at least $10 would be assessed on foreign travelers,” he said. “It would be a tax on tourists to encourage tourism – a questionable concept. I fully sympathize with the US intent behind this bill. Just as in Europe, the United States has seen a significant drop in visitors due to the economic downturn. That in turn leads to a loss in revenue and thousands of travel-related jobs. Being a prime tourist destination ourselves in Europe, we fully understand the desire to boost tourism.

Bruton noted that should the act pass, the EC would have to reconsider its current reciprocal visa-free travel between the European Union and the United States if it perceived, after it reexamines Electronic (System for) Travel Authorization (ESTA), the new requirements a “visa in disguise.”

“We are concerned that with the establishment of this entrance tax by the Congress, there will be a demand for Americans to pay the same fees for travel to Europe, which could further depress transatlantic travel,” he said.

Bruton cited Department of Commerce statistics that 3.8 million international visitors traveled to the United States in March 2009, a decrease of 20 percent compared to March 2008, saying the drop was owing to a combination of the economic downturn and increased security procedures.

“The Senate Commerce Committee noted recently that tightened security standards and waiting periods at US borders following 9/11 'had the unintended consequence of erecting barriers to travel,'” he said. “Adding to that, by charging $10 per passenger would simply mean erecting yet another barrier to travel to the US and would be a step backwards in our joint endeavor to ease transatlantic mobility. The fee might actually result in fewer, not more travelers coming to the United States.”

Bruton also objected to the fact that the “visitor tax” could be increase to cover unrelated funding needs as well as the fact it will only be imposed on non-US citizens making it discriminatory.

“This tax on European travelers entering the United States, in combination with other Congressional measures in the FAA [Federal Aviation Administration] reauthorization bill, substantially increases the cost of flying across the Atlantic,” he said. "Furthermore, as the bill stipulates, the fee would be paid as part of a traveler's application for an Electronic (System for) Travel Authorization (ESTA), which is required for every visitor traveling to the US under the Visa Waiver Program. The imposition of the fee is a change in the understanding under which ESTA was established as a security program by the US. It was difficult to achieve consensus inside the European Union on meeting the data collection requirements of this US system, but although consensus was achieved, ESTA remains unpopular in Europe. Charging a fee as well will not help matters. The link of the visitor tax with ESTA may discourage travelers from registering their information well in advance to avoid losing the fee if they end up not travelling. This risks undermining the security objectives of the system.”

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