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105th Congress                                            Rept. 105-822
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 1
_______________________________________________________________________


 
                AIRLINE SERVICE IMPROVEMENT ACT OF 1998

                                _______
                                

                October 15, 1998.--Ordered to be printed

_______________________________________________________________________


 Mr. Shuster, from the Committee on Transportation and Infrastructure, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 2748]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 2748) to amend title 49, United 
States Code, to provide assistance and slots with respect to 
air carrier service between high density airports and airports 
not receiving sufficient air service, to improve jet aircraft 
service to underserved markets, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Airline Service Improvement Act of 
1998''.

     TITLE I--SERVICE TO AIRPORTS NOT RECEIVING SUFFICIENT SERVICE

SEC. 101. AVAILABILITY OF SLOTS.

  (a) Period of Effectiveness.--
          (1) Slots for foreign air transportation.--Section 41714(b) 
        of title 49, United States Code, is amended by striking 
        paragraph (4).
          (2) Slots for new entrants.--Section 41714(c) of such title 
        is amended--
                  (A) by striking ``(1) In general.--'';
                  (B) by striking paragraph (2); and
                  (C) by moving the text of paragraph (1) so that it 
                follows the subsection heading and its margin is 
                aligned with the margin for subsection (g).
  (b) Slots for Airports Not Receiving Sufficient Service.--Section 
41714 of such title is amended--
          (1) by striking subsections (e) and (f) and inserting the 
        following:
  ``(e) Slots for Airports Not Receiving Sufficient Service.--
          ``(1) Exemptions.--Notwithstanding part D of chapter 491 of 
        this title, the Secretary may by order grant exemptions from 
        the requirements under subparts K and S of part 93 of title 14, 
        Code of Federal Regulations (pertaining to slots at high 
        density airports), to enable air carriers to provide nonstop 
        air transportation using jet aircraft that comply with the 
        stage 3 noise levels of part 36 of such title 14 between a high 
        density airport and a small hub airport or nonhub airport that 
        the Secretary determines is not receiving sufficient air 
        carrier service to and from such high density airport.
          ``(2) Limitations.--No more than 2 exemptions per hour may be 
        granted under this subsection for slots at any high density 
        airport, and no more than 6 exemptions per day may be granted 
        under this subsection for slots at Ronald Reagan Washington 
        National Airport. An exemption may be granted under this 
        subsection for a slot at Ronald Reagan Washington National 
        Airport only if the flight utilizing such slot begins or ends 
        within 1,250 miles of the Airport and a stage 3 aircraft is 
        used for such flight.
          ``(3) Application.--An air carrier interested in an exemption 
        under this subsection shall submit to the Secretary an 
        application for such exemption. No application may be submitted 
        to the Secretary before the last day of the 30-day period 
        beginning on the date of the enactment of this paragraph.
          ``(4) Deadline for decision.--Notwithstanding any other 
        provision of law, the Secretary shall make a decision with 
        regard to granting an exemption under this subsection on or 
        before the 120th day following the date of the application for 
        the exemption. If the Secretary does not make the decision on 
        or before such 120th day, the air carrier applying for the 
        service may provide such service until the Secretary makes the 
        decision or the Administrator of the Federal Aviation 
        Administration determines that providing such service would 
        have an adverse effect on air safety.
          ``(5) Period of effectiveness.--An exemption granted under 
        this subsection may remain in effect while the air carrier for 
        whom the exemption is granted continues to provide nonstop air 
        transportation between the airport that the Secretary 
        determined was not receiving sufficient air carrier service and 
        the high density airport.
          ``(6) Definitions.--In this subsection, the following 
        definitions apply:
                  ``(A) Nonhub airport.--The term `nonhub airport' 
                means an airport that each year has at least 2,500 
                passenger boardings but less than .05 percent of the 
                total annual boardings in the United States.
                  ``(B) Small hub airport.--The term `small hub 
                airport' means an airport that each year has at least 
                .05 percent but less than .25 percent of the total 
                annual boardings in the United States.
  ``(f) Treatment of Certain Commuter Air Carriers.--The Secretary 
shall treat all commuter air carriers that have cooperative agreements, 
including code share agreements with other air carriers, equally for 
determining eligibility for exemptions under this section regardless of 
the form of the corporate relationship between the commuter air carrier 
and the other air carrier.''.

SEC. 102. FUNDING FOR AIR CARRIER SERVICE TO AIRPORTS NOT RECEIVING 
                    SUFFICIENT SERVICE.

  (a) Funding for Small Community Air Service.--Section 41742(b) of 
title 49, United States Code, is amended to read as follows:
  ``(b) Funding for Small Community Air Service.--
          ``(1) In general.--Notwithstanding any other provision of 
        law, from moneys credited to the account established under 
        section 45303(a), including the funds derived from fees imposed 
        under the authority contained in section 45301(a)--
                  ``(A) not to exceed $45,000,000 for each fiscal year 
                beginning after September 30, 1998, shall be used to 
                carry out the essential air service program under this 
                subchapter; and
                  ``(B) not to exceed $5,000,000 for such fiscal year 
                shall be used--
                          ``(i) for assisting an air carrier to 
                        subsidize service to and from an underserved 
                        airport for a period not to exceed 3 years; and
                          ``(ii) for assisting an underserved airport 
                        to market service to and from the underserved 
                        airport.
          ``(2) Rural air safety.--Any funds that are made available by 
        paragraph (1) for a fiscal year and that the Secretary 
        determines will not be obligated or expended before the last 
        day of such fiscal year shall be available to the Administrator 
        for use under this subchapter in improving rural air safety at 
        airports with less than 100,000 annual boardings.
          ``(3) Allocation of additional funding.--If, for a fiscal 
        year beginning after September 30, 1998, more than $50,000,000 
        is made available under subsection (a) to carry out the small 
        community air service program, \1/2\ of the amounts in excess 
        of $50,000,000 shall be used for the purposes specified in 
        paragraph (1)(B), in addition to amounts made available for 
        such purposes under paragraph (1)(B).
          ``(4) Priority criteria for assisting airports not receiving 
        sufficient service.--In providing assistance to airports under 
        paragraph (1)(B), the Administrator shall give priority to 
        those airports for which a community will provide, from local 
        sources (other than airport revenues), a portion of the cost of 
        the activity to be assisted.
          ``(5) Underserved aiport defined.--In this subsection, the 
        term `underserved airport' means a nonhub airport or small hub 
        airport (as such terms are defined in section 41714(e)) that 
        the Secretary determines is not receiving sufficient air 
        carrier service.''.
  (b) Conforming Amendments.--Chapter 417 of such title is amended--
          (1) section 41742 is amended--
                  (A) in the section heading by striking ``Essential'' 
                and inserting ``Small community''; and
                  (B) in each of subsections (a) and (c) by striking 
                ``essential air'' and inserting ``small community''; 
                and
          (2) in the analysis for such chapter by striking the item 
        relating to section 41742 and inserting the following:

``41742. Small community air service authorization.''.

SEC. 103. WAIVER OF LOCAL CONTRIBUTION.

  Section 41736(b) of title 49, United States Code, is amended by 
adding at the end the following:
``Paragraph (4) shall not apply to any place for which a proposal was 
approved or that was designated as eligible under this section in the 
period beginning on October 1, 1991, and ending on December 31, 
1997.''.

SEC. 104. UNFAIR COMPETITION COMPLAINTS.

  Section 41712 of such title title 49, United States Code, is 
amended--
          (1) by inserting ``(a) In General.--'' before ``On''; and
          (2) by adding at the end the following:
  ``(b) Deadline for Decision on Unfair Competition Complaints.--The 
Secretary shall make a decision on any complaint the Secretary receives 
under this section regarding whether an air carrier has been or is 
engaged in an unfair method of competition in air transportation or the 
sale of air transportation not later than 180 days after the date of 
receipt of the complaint.''.

            TITLE II--REGIONAL AIR SERVICE INCENTIVE PROGRAM

SEC. 201. AMENDMENT OF TITLE 49, UNITED STATES CODE.

  (a) In General.--Chapter 417 of title 49, United States Code, is 
amended by adding at the end the following:

        ``SUBCHAPTER III--REGIONAL AIR SERVICE INCENTIVE PROGRAM

``Sec. 41761. Purpose

  ``The purpose of this subchapter is to improve service by jet 
aircraft to underserved markets by providing assistance, in the form of 
loan guarantees, to commuter air carriers that purchase regional jet 
aircraft for use in serving those markets.

``Sec. 41762. Definitions

  ``In this subchapter, the following definitions apply:
          ``(1) Aircraft purchase loan.--The term `aircraft purchase 
        loan' means any loan made for the purchase of commercial 
        transport aircraft, including spare parts normally associated 
        with the aircraft.
          ``(2) Commuter air carrier.--The term `commuter air carrier' 
        means an air carrier that primarily operates aircraft designed 
        to have a maximum passenger seating capacity of 75 or less in 
        accordance with published flight schedules.
          ``(3) New entrant air carrier.--The term `new entrant air 
        carrier' means an air carrier that has been providing air 
        transportation according to a published schedule for less than 
        5 years, including any person that has received authority from 
        the Secretary to provide air transportation but is not 
        providing air transportation.
          ``(4) Nonhub airport.--The term `nonhub airport' means an 
        airport that each year has at least 2,500 passenger boardings, 
        but less than .05 percent of the total annual boardings in the 
        United States.
          ``(5) Regional jet aircraft.--The term `regional jet 
        aircraft' means a civil aircraft--
                  ``(A) powered by jet propulsion; and
                  ``(B) designed to have a maximum passenger seating 
                capacity of not less than 30 nor more than 75.
          ``(6) Small hub airport.--The term `small hub airport' means 
        an airport that each year has at least .05 percent, but less 
        than .25 percent, of the total annual boardings in the United 
        States.
          ``(7) Underserved airport.--The term `underserved airport' 
        means an airport that--
                  ``(A) is a nonhub airport or a small hub airport;
                  ``(B) is not within a 40-mile radius of another 
                airport that each year has at least .25 percent of the 
                total annual boardings in the United States; and
                  ``(C) the Secretary determines does not have 
                sufficient air service.

``Sec. 41763. Loan guarantees

  ``(a) In General.--Subject to advance appropriations, the Secretary 
of Transportation may guarantee any lender against loss of principal or 
interest on any aircraft purchase loan made by that lender to a 
commuter air carrier or new entrant air carrier.
  ``(b) Form, Terms, and Conditions.--A guarantee shall be made under 
subsection (a)--
          ``(1) in such form and on such terms and conditions; and
          ``(2) pursuant to such regulations;
as the Secretary considers to be necessary and consistent with this 
subchapter.
  ``(c) Treatment of Certain Commuter Air Carriers.--The Secretary 
shall treat all commuter air carriers that have cooperative agreements, 
including code share agreements with other air carriers, equally for 
determining eligibility for guarantees under this section regardless of 
the form of the corporate relationship between the commuter air carrier 
and the other air carrier.

``Sec. 41764. Conditions and limitations

  ``(a) Limitations on Funds.--Subject to subsection (d), no loan 
guarantee shall be made under this subchapter--
          ``(1) extending to more than the unpaid interest and 80 
        percent of the unpaid principal of any loan;
          ``(2) on any loan or combination of loans for more than 80 
        percent of the purchase price of the aircraft, including spare 
        parts, to be purchased with the loan or loan combination;
          ``(3) on any loan with respect to which terms permit 
        repayment more than 15 years after the date the loan is made;
          ``(4) in any case in which the total face amount of the loan 
        and any other loans to the same air carrier or corporate 
        predecessor of that air carrier that are guaranteed and 
        outstanding under the terms of this subchapter exceed 
        $100,000,000.
  ``(b) Conditions for Making Loans.--Subject to subsection (c), the 
Secretary of Transportation may only make a loan guarantee under this 
subchapter if--
          ``(1) the Secretary finds that the aircraft to be purchased 
        with the loan is a regional jet aircraft to be used by the 
        commuter air carrier or new entrant air carrier;
          ``(2) the commuter air carrier or new entrant air carrier 
        agrees to use the aircraft to provide at least 2 round-trips 
        per day 5 days per week to the underserved airport; and
          ``(3) the Secretary finds that the prospective earning power 
        of the commuter air carrier or new entrant air carrier, 
        together with the character and value of the security pledged, 
        furnish--
                  ``(A) reasonable assurances of the air carrier's 
                ability and intention to repay the loan within the term 
                of the loan--
                          ``(i) to continue its operations as an air 
                        carrier; and
                          ``(ii) to the extent that the Secretary 
                        determines to be necessary, to continue its 
                        operations as an air carrier between the same 
                        route or routes being operated by the air 
                        carrier at the time of the loan guarantee; and
                  ``(B) reasonable protection to the United States.
  ``(c) Requirement.--Subject to subsection (d), no loan guarantee may 
be made under this subchapter on any loan or combination of loans for 
the purchase of any regional jet aircraft that does not comply with the 
stage 3 noise levels of part 36 of title 14 of the Code of Federal 
Regulations, as in effect on January 1, 1998.
  ``(d) Other Limitations.--
          ``(1) On purchase of regional jet aircraft.--No loan 
        guarantee shall be made by the Secretary under this subchapter 
        on any loan for the purchase of a regional jet aircraft unless 
        the commuter air carrier or new entrant air carrier agrees that 
        it will provide scheduled passenger air transportation to the 
        underserved airport for which the aircraft is purchased, or to 
        another underserved airport, for a period of not less than 24 
        consecutive months after the aircraft is placed in service.
          ``(2) On subordination.--No loan guarantee made under this 
        subchapter may be subordinated to another debt of the carrier 
        or to any other claims against the carrier.
          ``(3) To protect interests of united states.--No loan may be 
        guaranteed under this subchapter unless the Secretary 
        determines that the lender is responsible and that adequate 
        provision is made for servicing the loan on reasonable terms 
        and protecting the financial interests of the United States.

``Sec. 41765. Payment of losses

  ``(a) In General.--If, as a result of a default by a carrier under a 
loan guaranteed under this subchapter and after the holder of the loan 
has made such further collection efforts as the Secretary of 
Transportation may require, the Secretary determines that the holder 
has suffered a loss, the Secretary shall pay the holder the amount of 
the loss under the guarantee contract. Upon making the payment, the 
Secretary shall be subrogated to all the rights of the recipient of the 
payment.
  ``(b) Enforcement of United States Rights.--The Attorney General 
shall take such action as may be necessary to enforce any right 
accruing to the United States as a result of the issuance of any 
guarantee under this subchapter.
  ``(c) Limitation on Statutory Construction.--Nothing in this 
subchapter shall be construed as precluding any forbearance for the 
carrier which may be agreed upon by the parties to the guaranteed loan 
and approved by the Secretary.
  ``(d) Authority of Secretary.--Notwithstanding any other provision of 
law relating to the acquisition, handling, or disposal of property by 
the United States, the Secretary may complete, recondition, 
reconstruct, renovate, repair, maintain, operate, or sell any property 
acquired under this subchapter.

``Sec. 41766. Fees

  ``The Secretary of Transportation shall prescribe and collect from a 
lending institution a reasonable administrative fee in connection with 
each loan guaranteed under this subchapter.

``Sec. 41767. Use of Federal facilities and assistance

  ``(a) Use of Federal Facilities.--To permit the Secretary of 
Transportation to make use of such expert advice and services as the 
Secretary may require in carrying out this subchapter, the Secretary 
may use available services and facilities of other agencies and 
instrumentalities of the Federal Government--
          ``(1) with the consent of the appropriate Federal officials; 
        and
          ``(2) on a reimbursable basis.
  ``(b) Assistance.--The head of each appropriate department or agency 
of the Federal Government shall exercise the duties and functions of 
that head in such manner as to assist in carrying out the policy 
specified in section 41761.
  ``(c) Oversight.--The Secretary shall make available to the 
Comptroller General of the United States such information with respect 
to the loan guarantee program conducted under this subchapter as the 
Comptroller General may require to carry out the duties of the 
Comptroller General under chapter 7 of title 31.

``Sec. 41768. Payments; administrative expenses

  ``(a) Payments.--Payments to lenders required as a consequence of any 
loan guarantee made under this subchapter may be made from funds 
appropriated pursuant to the authorization under section 202 of the 
Airline Service Improvement Act of 1998.
  ``(b) Administrative Expenses.--In carrying out this subchapter, the 
Secretary shall use funds made available by appropriations to the 
Department of Transportation for the purpose of administration to cover 
administrative expenses of the loan guarantee program under this 
subchapter.

``Sec. 41769. Termination

  ``The authority of the Secretary of Transportation under section 
41763 shall terminate on the date that is 5 years after the date of the 
enactment of this subchapter.''.
  (b) Conforming Amendment.--The analysis for chapter 417 of such title 
is amended by adding at the end the following:

        ``SUBCHAPTER III--REGIONAL AIR SERVICE INCENTIVE PROGRAM

``41761. Purpose.
``41762. Definitions.
``41763. Loan guarantees.
``41764. Conditions and limitations.
``41765. Payment of losses.
``41766. Fees.
``41767. Use of Federal facilities and assistance.
``41768. Payments; administrative expenses.
``41769. Termination.''.

SEC. 202. AUTHORIZATION OF APPROPRIATIONS.

  There is authorized to be appropriated for the cost of loan guarantee 
commitments authorized in subchapter III of chapter 417 of title 49, 
United States Code, $120,000,000 per fiscal year for fiscal years 1999, 
2000, 2001, 2002, and 2003.

                   TITLE III--CONTRACT TOWER PROGRAM

SEC. 301. CONTRACT TOWERS.

  Section 47124(b) of title 49, United States Code, is amended by 
adding at the end the following:
          ``(3) Nonqualifying air traffic control towers.--
                  ``(A) In general.--The Secretary shall establish a 
                program to contract for air traffic control services at 
                not more than 20 level I air traffic control towers, as 
                defined by the Administrator of the Federal Aviation 
                Administration, that do not qualify for the program 
                established under subsection (a) and continued under 
                paragraph (1).
                  ``(B) Priority.--In selecting facilities to 
                participate in the program under this paragraph, the 
                Administrator shall give priority to the following:
                          ``(i) Air traffic control towers that are 
                        participating in the program continued under 
                        paragraph (1) but have been notified that they 
                        will be terminated from such program because 
                        the Administrator has determined that the 
                        benefit-to-cost ratio for their continuation in 
                        such program is less than 1.
                          ``(ii) Level I air traffic control towers of 
                        the Federal Aviation Administration that are 
                        closed as a result of the air traffic 
                        controllers strike in 1981.
                          ``(iii) Air traffic control towers that are 
                        located at airports that receive air service 
                        from an air carrier that is receiving 
                        compensation under the essential air service 
                        program of subchapter II of chapter 417.
                          ``(iv) Air traffic control towers located at 
                        airports that are prepared to assume 
                        responsibility for tower construction and 
                        maintenance costs.
                          ``(v) Air traffic control towers that are 
                        located at airports with safety or operational 
                        problems related to topography, weather, runway 
                        configuration, or mix of aircraft.
                  ``(C) Costs exceeding benefits.--If the costs of 
                operating a control tower under the program established 
                under this paragraph exceed the benefits, the airport 
                sponsor or State or local government having 
                jurisdiction over the airport shall pay the portion of 
                the costs that exceed such benefits.
                  ``(D) Authorization of appropriations.--There is 
                authorized to be appropriated $6,000,000 per fiscal 
                year to carry out this paragraph.''.

                   TITLE IV--AIR CARRIER COMPETITION

SEC. 401. JOINT VENTURE AGREEMENTS.

  (a) In General.--Subchapter I of chapter 417 of title 49, United 
States Code, is amended by adding at the end the following:

``Sec. 41716. Joint venture agreements

  ``(a) Definitions.--In this section, the following definitions apply:
          ``(1) Joint venture agreement.--The term `joint venture 
        agreement' means an agreement entered into by a major air 
        carrier on or after January 1, 1998, with regard to (A) code-
        sharing, blocked-space arrangements, long-term wet leases (as 
        defined in section 207.1 of title 14, Code of Federal 
        Regulations) of a substantial number (as defined by the 
        Secretary by regulation) of aircraft, or frequent flyer 
        programs, or (B) any other cooperative working arrangement (as 
        defined by the Secretary by regulation) between 2 or more major 
        air carriers that affects more than 15 percent of the total 
        number of available seat miles offered by the major air 
        carriers.
          ``(2) Major air carrier.--The term `major air carrier' means 
        a passenger air carrier that is certificated under chapter 411 
        of this title and included in Carrier Group III under criteria 
        contained in section 04 of part 241 of title 14, Code of 
        Federal Regulations.
  ``(b) Submission of Joint Venture Agreement.--At least 30 days before 
a joint venture agreement may take effect, each of the major air 
carriers that entered into the agreement shall submit to the 
Secretary--
          ``(1) a complete copy of the joint venture agreement and all 
        related agreements; and
          ``(2) other information and documentary material that the 
        Secretary may require by regulation.
  ``(c) Extension of waiting period.--
          ``(1) In general.--The Secretary may extend the 30-day period 
        referred to in subsection (b) until--
                  ``(A) in the case of a joint venture agreement with 
                regard to code-sharing, the 150th day following the 
                last day of such period; and
                  ``(B) in the case of any other joint venture 
                agreement, the 60th day following the last day of such 
                period.
          ``(2) Publication of reasons for extension.--If the Secretary 
        extends the 30-day period referred to in subsection (b), the 
        Secretary shall publish in the Federal Register the Secretary's 
        reasons for making the extension.
  ``(d) Termination of waiting period.--At any time after the date of 
submission of a joint venture agreement under subsection (b), the 
Secretary may terminate the waiting periods referred to in subsections 
(b) and (c) with respect to the agreement.
  ``(e) Regulations.--The effectiveness of a joint venture agreement 
may not be delayed due to any failure of the Secretary to issue 
regulations to carry out this section.
  ``(f) Memorandum To Prevent Duplicative Reviews.--Promptly after the 
date of enactment of this section, the Secretary shall consult with the 
Assistant Attorney General of the Antitrust Division of the Department 
of Justice in order to establish, through a written memorandum of 
understanding, preclearance procedures to prevent unnecessary 
duplication of effort by the Secretary and the Assistant Attorney 
General under this section and the antitrust laws of the United States, 
respectively.
  ``(g) Prior Agreements.--With respect to a joint venture agreement 
entered into before the date of enactment of this section as to which 
the Secretary finds that--
          ``(1) the parties submitted the agreement to the Secretary 
        before such date of enactment; and
          ``(2) the parties submitted all information on the agreement 
        requested by the Secretary,
the waiting period described in paragraphs (2) and (3) shall begin on 
the date, as determined by the Secretary, on which all such information 
was submitted and end on the last day to which the period could be 
extended under this section.
  ``(h) Limitation on Statutory Construction.--The authority granted to 
the Secretary under this subsection shall not in any way limit the 
authority of the Attorney General to enforce the antitrust laws as 
defined in the first section of the Clayton Act (15 U.S.C. 12).''.
  (b) Conforming Amendment.--The analysis for subchapter I of such 
chapter is amended by adding at the end the following:

``41716. Joint venture agreements.''.

SEC. 402. COMPETITIVE PRACTICES IN THE AIRLINE INDUSTRY.

  (a) National Research Council.--
          (1) Study.--The National Research Council of the National 
        Academy of Sciences shall complete a comprehensive update of 
        the 1991 study of airline deregulation prepared by the 
        Transportation Research Board of the Council. The update shall 
        include updated versions of the chapters contained in the study 
        pertaining to competitive issues in the airline industry as 
        well as recommendations for changes in the statutory framework 
        under which the airline industry operates.
          (2) Report by national research council.--Not later than 6 
        months after the date of enactment of this Act, the National 
        Research Council shall transmit to Congress and the Secretary 
        of Transportation a report containing the results of the study 
        conducted under paragraph (1).
          (3) Report by the secretary.--Not later than 2 months after 
        the date on which the Secretary receives the report of the 
        National Research Council under paragraph (2), the Secretary 
        shall transmit to Congress a report containing the response of 
        the Secretary to the findings and recommendations of the 
        National Research Council.
  (b) Report to Congress.--The Secretary shall conduct a study and 
transmit to Congress a report that includes--
          (1) a description of any complaints received by the Secretary 
        concerning acts of unfair competition or predatory pricing in 
        the airline industry (including the number of such complaints) 
        and of specific examples of such acts;
          (2) a description of the options of the Secretary for 
        addressing any acts of unfair competition or predatory pricing 
        identified under paragraph (1);
          (3) an analysis of the guidelines proposed in Docket OST-98-
        3713, including information documenting and quantifying the 
        impact of the guidelines on the items listed in subsection 
        (c)(3); and
          (4) a description of the manner in which the Secretary plans 
        to coordinate the handling of predatory pricing and unfair 
        competition complaints against air carriers filed with the 
        Secretary and similar complaints filed with the Attorney 
        General, including methods to ensure efficient use of limited 
        government resources and to ensure that all parties avoid 
        duplicate requests by government agencies for information 
        unless each of the agencies needs the information to carry out 
        its statutory responsibilities.
  (c) Guidelines.--
          (1) Issuance.--The Secretary shall not issue final guidelines 
        in Docket OST-98-3713 before the date of transmittal to 
        Congress of a report under subsection (b).
          (2) Transmittal to congress.--If the Secretary issues final 
        guidelines in Docket OST-98-3713, the Secretary shall transmit 
        the guidelines to Congress.
          (3) Impact of guidelines.--If, as a result of the study 
        conducted under subsection (b), the Secretary decides to issue 
        final guidelines in Docket OST-98-3713 that are different from 
        the guidelines originally proposed, the Secretary shall, as 
        part of the transmittal under paragraph (2), include 
        information that documents and quantifies the impact of the 
        guidelines on the following:
                  (A) Scheduled service to small- and medium-sized 
                communities.
                  (B) Airfares, including the availability of senior 
                citizen, Internet, and standby discounts on routes 
                covered by the guidelines.
                  (C) The incentive and ability of major air carriers 
                to offer low airfares.
                  (D) The incentive of new entrant air carriers to 
                offer low airfares.
                  (E) The ability of air carriers to offer inclusive 
                leisure travel for which airfares are not separately 
                advertised.
                  (F) Members of frequent flyer programs.
                  (G) The ability of air carriers to carry non-
                origination and destination traffic on the portion of 
                routes that are served by new entrant air carriers 
                covered by the guidelines.
                  (H) Airline employees.
  (d) Consultation.--In conducting the study under section (b), the 
Secretary shall consult with the Attorney General, major air carriers, 
new entrant air carriers, airport and community leaders, academic and 
economic experts, and airline employees and passengers.
  (e) Effective Date.--The guidelines adopted in Docket OST-98-3713, or 
any similar guidelines, shall not become effective before the last day 
of the 12-week period beginning on the date of transmittal to Congress 
of final guidelines in Docket OST-98-3713, except that a week shall not 
count toward such 12-week period unless the House of Representatives is 
in session for legislative business at least 1 day during the week.

                               Background

    The Airline Deregulation Act was enacted 20 years ago.\1\ 
This legislation phased out 40 years of government regulation 
permitting airlines to fly where passenger demand dictated and 
charge fares that could be justified under free market 
conditions.
---------------------------------------------------------------------------
    \1\ Public Law 95-504, 92 Stat. 1705, October 24, 1978.
---------------------------------------------------------------------------
    As a result of this legislation, passengers have enjoyed 
enormous benefits. Two hundred seventy million more passengers 
fly each year now than flew when the airlines were 
regulated.\2\ The number of scheduled departures have increased 
by 50% at smaller airports and 68% at larger ones.\3\ And, a 
review of annual reports from the National Transportation 
Safety Board shows that the fatal accident rate for airlines 
has decreased even as the number of flights has increased.
---------------------------------------------------------------------------
    \2\ ``Impact of Recent Alliances, International Agreements, DOT 
Actions, and Pending Legislation on Air Fares, Air Service, and 
Competition in the Airline Industry'': Hearings Before the Subcommittee 
on Aviation of the House Committee on Transportation and 
Infrastructure, 105th Congress, 2nd Session (April 1998) (Statement of 
Nancy E. McFadden, General Counsel, U.S. Department of Transportation) 
[Hereinafter cited as Competition Hearing].
    \3\ U.S. General Accounting Office, ``Airline Deregulation: Changes 
in Airfares, Service, and Safety at Small, Medium-Sized, and Large 
Communities'' 6 (April 1996).
---------------------------------------------------------------------------
    Most dramatic has been the effect on air fares. Depending 
on the source, air fares have dropped either 28%,\4\ 33%,\5\ or 
40% \6\ as a result of the free market forces unleashed by 
airline deregulation. This has provided savings to passengers 
of between $6 billion \7\ and $19 billion \8\ annually. Indeed, 
airline discounts have become such a prevalent part of the 
American cultural landscape that it is now commonly accepted 
that it may be cheaper to fly half way across the country than 
to go down the street to a nice restaurant.\9\
---------------------------------------------------------------------------
    \4\ ``Market-Based Solutions for Air Service problems at Medium-
Sized Communities'': Hearings before the Subcommittee on Aviation of 
the House Committee on Transportation and Infrastructure, 105-30, 105th 
Congress, 1st Session, (June 25, 1997) 129 [Hereinafter cited as Air 
Service Hearing].
    \5\ Competition Hearing, Supra Note 2, (Statement of Nancy 
McFadden).
    \6\ Thierer, 20th Anniversary of Airline Deregulation: Cause for 
Celebration, Not Re-Regulation, The Heritage Foundation Backgrounder 6 
(April 22, 1998).
    \7\ Air Service Hearing, Supra Note 4, at 22.
    \8\ Thierer, Supra Note 6, at 7.
    \9\ J. Berendt, ``Midnight in the Garden of Good and Evil,'' at 25 
(1994).
---------------------------------------------------------------------------
    However, although the benefits of the Deregulation Act are 
widespread, they are not universal. Some airports, particularly 
those serving small and medium-sized communities in the East 
and upper Midwest, have experienced higher fares and diminished 
service since deregulation.\10\ It has been said that 
deregulation has benefited 70% to 75% of the country and that 
the question is how to address the needs of the other 25% to 
30% without ruining it for the majority of air travelers.\11\
---------------------------------------------------------------------------
    \10\ Air Service Hearing, Supra Note 4, at 61.
    \11\ Id, at 34.
---------------------------------------------------------------------------
    In February 1997, Chattanooga, Tennessee hosted the 
National Air Service Roundtable and in February 1998, Jackson 
Mississippi hosted a similar conference. Representatives from 
airports across the country, airlines, corporations, government 
officials, and others gathered to consider market-based 
solutions to local air service problems.
    A key conclusion of these conferences was that greater 
Federal, regional, State, and local efforts were needed to 
promote economic growth and attract established and new 
airlines to serve medium-sized markets in the East, Southeast, 
and Upper Midwest.
    The Aviation Subcommittee held a hearing on June 25, 1997, 
which examined market-based solutions to air service problems 
experienced by some medium-sized and smaller communities across 
the Nation. At that hearing, the Subcommittee heard from a 
number of witnesses, including representatives from airports 
and communities that have experienced higher fares and limited 
air service since the deregulation of the airline industry in 
1978.
    As a result of these conferences and hearings, the reported 
bill (H.R. 2748) was introduced by Subcommittee Chairman Duncan 
and seven cosponsors. The legislation attempts to address some 
of the air service problems experienced by medium-sized and 
smaller communities without undermining the benefits most 
people have realized from airline deregulation.

                            Slot Exemptions

    One barrier to improved service that was often cited was 
the high density rule.\12\
---------------------------------------------------------------------------
    \12\ Id, at 62 and 132.
---------------------------------------------------------------------------
    At almost all airports in the U.S., there is no limit on 
the number of flights an airline can offer. However, there are 
four airports (Chicago O'Hare, LaGuardia and Kennedy in New 
York, and Reagan National near Washington, D.C.) at which 
flights are limited by the High Density Rule (HDR).\13\ The HDR 
was adopted in 1969 as a ``temporary'' measure to reduce 
congestion and delays. At the four airports covered by it, an 
aircraft must have a slot in order to take-off or land.
---------------------------------------------------------------------------
    \13\ 14 CFR Part 93, Subpart K.
---------------------------------------------------------------------------
    Although deregulation increased demand for access to these 
airports, many carriers have been unable to establish new 
service there because of the lack of slot availability. It is 
likely to be passengers from the smaller airports which are 
unable to obtain access to the high density airports as a 
result of these slot constraints.
    In 1993, a blue ribbon panel recommended a series of 
actions to strengthen the financial health and competitiveness 
of the U.S. airline industry. Among its recommendations, the 
panel urged the FAA to ``review the rule that limits operations 
at `high density' airports with the aim of either removing 
these artificial limits or raising them to the highest 
practicable level consistent with safety requirements.'' \14\
---------------------------------------------------------------------------
    \14\ ``The National Commission to Ensure a Strong Competitive 
Airline Industry'', Change Challenge and Competition 9 (1993).
---------------------------------------------------------------------------
    A slot exemption provision was enacted in 1994 to allow 
some new air service at O'Hare, La Guardia, and Kennedy.\15\ 
This provision allowed new service in three situations. 
Exemptions could be granted for essential air service to the 
smallest communities, for international air service authorized 
by bilateral air service agreements, and for service by new 
entrant airlines in cases where the Department of 
Transportation (DOT) ``finds it to be in the public interest 
and the circumstances to be exceptional.'' DOT has granted some 
exemptions under this provision.
---------------------------------------------------------------------------
    \15\ Public Law 103-305, 108 Stat. 1584, 49 U.S.C. 41714 (August 
23, 1994).
---------------------------------------------------------------------------
    The reported bill adds a fourth category where exemptions 
from the slot rules could be granted. This would permit such 
exemptions for flights between a high density airport and an 
underserved airport. Exemptions could be provided to any 
airline, either an established one or a new entrant, if it was 
willing to provide air service from the high density airport to 
the underserved one. DOT would have the discretion to decide 
which small hub or non-hub airports were underserved.
    Exemptions would be limited to two per hour at all four 
airports. At Reagan National, the number of exemptions would be 
further limited to six per day. If applications for the slot 
exemptions exceed the number available, DOT would be expected 
to use expedited procedures in order to meet the 120-day 
deadline for a decision mandated by the bill.
    This limited exemption from the slot rules should have 
several beneficial effects. The ability to grant exemptions 
should reduce whatever pressure now exists to completely 
eliminate the slot rule or to take slots away from existing 
airlines in order to accommodate underserved communities. Where 
this authority leads to a modest increase in flights, that will 
have a beneficial impact on competition, consumer choice, and 
the fares that passengers pay. This will benefit all 
passengers, both in the area of the high density airport, the 
underserved airport, and throughout the country. There will be 
no adverse impact on safety since section 41714(e)(4), as 
amended by section 101(b) of the reported bill, specifically 
authorizes the Federal Aviation Administration to block the new 
service if it ``determines that providing such service would 
have an adverse effect on air safety.''
    The limited exemption authority also represents a 
reasonable compromise between the needs of passengers and those 
who live near the high density airports. In recent years, 
Congress has banned the use of the loudest Stage 1 aircraft and 
mandated the phase-out of the noisy Stage 2 aircraft. This 
phase-out will be completed by the end of the decade. No 
exemption can be granted under the reported bill unless the 
airline providing the service utilizes aircraft complying with 
the quiet Stage 3 noise standards.
    The ban and phase-out have required airlines to re-equip 
their fleet at considerable cost. This cost has most likely 
been passed on to the passengers. At the same time, as noted 
above, passenger demand for air travel has increased 
dramatically. It is unrealistic to expect that air service can 
be perpetually frozen at levels established 20 or 30 years ago 
when a modest amount of additional service can be accommodated 
safely. The reported bill would accommodate only a small 
portion of this additional demand and direct it to where it is 
needed most--to underserved non-hubs and small hubs, while 
ensuring safety and local community concerns.

                                Funding

    Other factors cited for the air service problems at some 
communities are slower economic growth, harsher weather, and 
the dominance of large airlines at nearby airports.\16\
---------------------------------------------------------------------------
    \16\ Air Service Hearing, Supra Note 4, at 61.
---------------------------------------------------------------------------
    The reported bill addresses this issue by tapping into a 
fund that already exists. This money could be used to market 
the underserved airport and attempt to attract more passengers 
to it. This, in turn, could attract more air service to the 
community and help make that service viable over the long-term. 
To help an airline beginning service at a community establish 
itself there, the fund could also be used to subsidize that 
airline for a period not to exceed 3 years.
    It is important to note that this funding program will not 
require an increase in taxes. There is already $50 million 
available in a pot of money created in 1996.\17\ That money is 
now dedicated to the Essential Air Service (EAS) Program. 
However, the EAS program has not been authorized to receive 
more than $38.6 million in the past 10 years and, in fact, was 
appropriated only $25.9 million last year.\18\ Therefore, 
taking $5 million out of this fund, as the reported bill would 
do, would leave the EAS program with $45 million, much more 
than has been authorized or appropriated for it in recent 
years. The $5 million will help communities that are too large 
to benefit from the EAS program but are not large enough to 
secure adequate air service without some assistance.
---------------------------------------------------------------------------
    \17\ Public Law 104-264, 110 Stat. 3249, 49 U.S.C. 41742 (October 
9, 1996).
    \18\ Public Law 104-205, 110 Stat. 2952 (September 30, 1996).
---------------------------------------------------------------------------
    The $45 million remaining should continue to ensure that 
the air service needs of the smallest communities are 
protected. The Committee recognizes that the EAS program plays 
an extremely important role in ensuring that smaller 
communities can continue to have access to the national air 
transportation system. As a result of P.L. 104-264, this 
program is permanently authorized and funded independent of 
appropriations through fees collected pursuant to 49 U.S.C. 
45301(a)(1). The Committee supports this provision and the 
goals of the program.

                         Loan Guarantee Program

    The growing trend toward the use of Regional Jets has and 
will continue to offer a service option in markets with light 
to moderate traffic where it otherwise would be too expensive 
to provide adequate service. It is perfectly suited for serving 
the type of communities that the reported bill is designed to 
assist.
    According to the Regional Airline Association (RAA), 28.2 
million passengers flew on turboprop regional aircraft in 1986. 
That number has now more than doubled to over 60 million. The 
Regional Jet comprised only 10.6 percent of all seats flown by 
regional airlines in 1996. When factoring in the Regional Jets 
currently on order, nearly 40 percent of all regional airline 
passengers will eventually be on these type of planes in the 
near future.
    Regional Jets can fly farther, faster, and quieter than 
turboprops and will give airlines the option of flying around 
or over major hub airports. Currently, these regional jets are 
being bought by the major airlines for their commuter 
affiliates. The reported bill establishes a loan guarantee 
program to help other airlines buy these aircraft. This should 
make some of the smaller regionals viable customers. These are 
the airlines most likely to fly to the underserved markets.
    The reported bill conditions the grant of the loan 
guarantee on a commitment to provide air service to an 
underserved market. The Regional Jets could do much to improve 
air serve at many of the communities that have not benefited 
from deregulation so far.

                         Contract Tower Program

    Since 1982, the FAA has provided air traffic control (ATC) 
services at many low activity Level I visual flight rule (VFR) 
airports by contracting with ATC companies in the private 
sector. This contract tower program has provided significant 
cost savings and enhanced aviation safety. By the end of this 
fiscal year, it is expected that more than 180 airports will 
participate in the contract tower program.
    Participating airports and aviation users have generally 
expressed strong support for the program. Indeed, without this 
program, many of these airports would be without air traffic 
control services since FAA does not have the financial 
resources to staff these towers with its own personnel. The 
average contract tower costs about $250,000 per year, about 
half of what it would cost FAA to operate the tower itself.
    In deciding at which airport to contract for air traffic 
control services, the FAA does a cost-benefit analysis. If the 
analysis results in a ratio of benefits to costs of less than 
1, FAA will not contract for ATC services there.
    There are some airports whose ratio is slightly less than 1 
or which are in danger of dropping below 1. These airports will 
not have the safety and service benefits of the contract tower 
program.
    As part of its effort to improve air service at these 
airports, the reported bill authorizes $6 million to fund 
contract tower services at airports that fall just below the 
cost benefit threshold and at other similar airports that have 
a legitimate need for this service as specified in the bill.
    However, the reported bill does require these airports to 
share in the cost of the program. The local share would be in 
proportion to the amount that the airport's ratio falls below 
1. So, for example, if the airport had a benefit to cost ratio 
of 0.8, it would have to absorb 20% of the cost.

                        Major Airline Alliances

    Alliances between major airlines and regional airlines are 
quite common. These usually involve code-sharing and other 
marketing arrangements. However, such alliances between two 
major airlines are more unusual.
    Earlier this year, Northwest and Continental, United and 
Delta, and American and US Airways announced plans to form 3 
separate alliances. These 6 airlines carry about 70% of 
passengers within the U.S.\19\ These airlines contend that 
their alliances will benefit passengers by increasing the 
number of destinations and flights they can offer economically. 
Critics, however, argue that this consolidation will undermine 
the benefits of deregulation by decreasing competition, which 
will ultimately reduce passengers' choices and increase fares.
---------------------------------------------------------------------------
    \19\ Hearings Before the Subcommittee on Aviation of the Senate 
Committee on Commerce, Science, and Transportation, 105th Congress, 2d 
Session (June 4, 1998) (Statement of John H. Anderson, Jr., Director, 
Transportation Issues; Resources, Community, and Economic Development 
Division, U.S. General Accounting Office).
---------------------------------------------------------------------------
    Committee members have differing views on the merits of 
these alliances. However, the Committee does believe that they 
raise important issues that should be considered by the DOT. 
Accordingly, the reported bill establishes a procedure under 
which DOT is given a specified period of time to review the 
alliances before implementation.
    It is important to note that the reported bill does not 
expand or diminish DOT's authority to review airline alliances. 
It simply provides for a waiting period before a proposed 
alliance can take effect. During that period, DOT can take 
action it deems necessary under its existing statutory 
authority. No additional substantive authority is provided by 
the reported bill.

                         Competition Guidelines

    On April 10, 1998, DOT issued a request for comments on an 
``Enforcement Policy Regarding Unfair Exclusionary Conduct in 
the Air Transportation Industry.'' \20\ It took this action in 
response to complaints from new entrant airlines that the 
larger more established airlines were using unfair methods to 
compete against them.
---------------------------------------------------------------------------
    \20\ 63 Fed. Reg. 17919. April 10, 1998.
---------------------------------------------------------------------------
    Under this proposed policy, DOT stated that it would 
trigger a review, including possible enforcement action, in the 
following circumstances:
          1. When the major airline both adds flights and sells 
        such a large number of seats at very low fares that it 
        ends up losing more money than it would have if it had 
        adopted a more reasonable competitive response;
          2. When the major airline carries more passengers at 
        the new airline's low fares than the new airline has in 
        available seats and as a result ends up losing more 
        money than it would have if it had adopted a more 
        reasonable competitive response; or
          3. When the major airline carries more passengers at 
        the new airline's low fares than the new airline 
        carries and as a result ends up losing more money than 
        it would have if it had adopted a more reasonable 
        competitive response.
    The Committee certainly supports fair competition and 
believes that new entrants should have a reasonable chance to 
survive since they often are the catalyst for low fares and 
improved air service to many communities including the sort of 
communities that are the focus of this bill.
    Many have expressed support for the Department's 
guidelines. The Attorney General of Iowa, the co-chair of a 
working group of over 20 states which are reviewing airline 
competition, stated the proposed guidelines are ``a sound 
common-sense, and much-needed tool'' with regard to airline 
competition. In testimony before Congress, Spirit Airlines 
stated that it wasforced out of markets because a major 
airline, in protecting a monopoly route, was engaging in exactly the 
type of behavior the Department is proposing to find unlawful. And 
Alfred Kahn, the father of deregulation, has praised the Department's 
initiative for promoting competition by providing air carriers clear 
guidance in distinguishing legitimate competition from what is intended 
to drive competitors out and exploit consumers.
    However, others have expressed concern that the proposed 
guidelines will not increase competition but may hurt the very 
communities that they are designed to help by raising air fares 
and reducing air service, the exact opposite of the goals of 
the reported bill. Not only the major airlines, but also small 
and medium-sized airports, airline employees, both liberal and 
conservative think tanks, and at least one consumer group have 
indicated their opposition to the guidelines. For example, the 
Aviation Consumer Action Project stated that the ``DOT 
initiative in the area of airline competition is likely to 
effectively prohibit airfare price wars and increase airfares 
higher than they would otherwise be'' \21\ and a small airport 
wrote to DOT on May 25, 1998 complaining that under its 
guidelines, ``the loser is the consumers in small markets who 
are looking for increased service and capacity.''
---------------------------------------------------------------------------
    \21\ Competition hearing, Supra Note 2, (Statement of Paul Hudson).
---------------------------------------------------------------------------
    In light of these arguments, it is important that a closer 
look be taken at the issue. Accordingly, the reported bill 
mandates two studies.
    The first, by the Transportation Research Board (TRB), 
would update their highly-regarded work on airline deregulation 
published 7 years ago.\22\ This is designed to take a broad 
look at the issue of airline competition today and provide 
guidance to Congress and DOT for future policy decisions. While 
it is hoped that TRB can complete its work soon enough so that 
DOT can take advantage of it in its reconsideration of its 
guidelines, the issuance of the guidelines is not tied to 
completion of TRB's work.
---------------------------------------------------------------------------
    \22\ Transportation Research Board, National Research Council, 
``Winds of Change: Domestic Air Transport Since Deregulation,'' (1991).
---------------------------------------------------------------------------
    The second study would be conducted by DOT and would be 
focused more specifically on the proposed guidelines and any 
alternatives to it. DOT would be expected to address many of 
the concerns raised by the opponents of the proposed guidelines 
in this study.
    No deadline is imposed on DOT for the completion of its 
study. However, it could not issue final guidelines until the 
completed study was transmitted to Congress. If as a result of 
the study, DOT still believes the guidelines are justified, 
those guidelines would have to be transmitted to Congress as 
well and there would be a period for Congressional review 
before those guidelines could become effective.
    As with the alliances, it is important to note here as well 
that the reported bill does not take any position on DOT's 
authority to adopt competition guidelines. The reported bill 
merely calls for studies on the factors which may impact 
competition in the airline industry. These studies are designed 
to provide guidance to Congress and DOT in deciding what if any 
action should be taken to enhance or modify the level of 
competition in the airline industry.
    If, upon completion of these studies, DOT decides to issue 
competition guidelines, those guidelines must be within the 
agency's existing statutory authority. Nothing in the reported 
bill expands or diminishes DOT's authority in this regard or 
expresses a position on DOT's existing authority.

                          Miscellaneous Issues

    The Committee had been urged to include in the reported 
bill a modification of the preemption provision \23\ but has 
elected not to do so. This issue was raised by some who felt 
that passengers were being blocked from breach of contract or 
tort suits against the airlines by that provision. The 
Committee certainly believes people should be able to have 
their day in court. However the Committee is concerned that 
modifying the preemption law may have unintended consequences 
that could undermine the national nature of the air 
transportation system on which the current legal and regulatory 
structure is based. Moreover, there have been several cases 
that have upheld one's right to bring breach of contract and 
tort suits against the airlines.\24\ The Committee tends to 
believe those cases were decided correctly. However, the 
Aviation Subcommittee will continue to consider this issue and 
toward that end held hearings on September 10, 1998.
---------------------------------------------------------------------------
    \23\ 49 U.S.C. 41713.
    \24\ See for example American Airlines v. Wolens, 513 U.S. 219 
(1995) (breach of contract action not preempted) and Ducombs v. Trans 
World Airlines. 937 F. Supp. 897 (N.D. Cal. 1996) (tort action not 
preempted).
---------------------------------------------------------------------------
    In addition, the Committee is aware of recent reports about 
the oversight by airlines of unaccompanied minors on airline 
flights. Some of these reports have involved minors being left 
alone at gates for hours or left to move from one gate to 
another on their own. The Committee is concerned about the 
potential for harm to these children and urges DOT to survey 
and evaluate airline plans for unaccompanied minors to ensure 
they adequately protect the welfare of the minor. In addition, 
DOT should develop an effective outreach plan so parents are 
more aware of ways to ensure their children's safety and a 
tracking system to allow for an evaluation of complaints about 
airline service to unaccompanied minors.

                       Section-by-Section Summary

    Section 1 is the short title.

     TITLE I--SERVICE TO AIRPORTS NOT RECEIVING SUFFICIENT SERVICE

Section 101. Availability of slots

    Subsection (a) deletes obsolete provisions relating to a 
rule that was never issued.
    Subsection (b) adds a new subsection (e) to current section 
41714 to permit additional air service from smaller airports to 
the 4 slot controlled airports (O'Hare, LaGuardia, Kennedy, and 
Reagan National).
    Paragraph (e)(1) allows DOT to grant exemptions from the 
slot rules to permit airlines using quiet jet aircraft to offer 
flights from an undeserved airport to a slot-controlled 
airport.
    Paragraph (e)(2) limits these flights to no more than 2 per 
hour, per slot-controlled airport and no more than 6 per day at 
Reagan National. It further specifies that the flights to 
Reagan National must be within the 1,250 perimeter and use 
Stage 3 aircraft.
    Paragraph (e)(3) requires airlines interested in providing 
the flights to apply to DOT. The application process cannot 
begin until 30 days after enactment.
    Paragraph (e)(4) requires DOT to make a decision on an 
application within 120 days. If the Secretary does not do so, 
the airline can begin the service until DOT acts or FAA 
determines the additional service to be unsafe. The 
introductory clause of the paragraph is designed to ensure that 
the Secretary cannot use the obligations or limitations of any 
other law as an excuse for not meeting the 120 deadline. 
However, that clause does remain subject to the FAA's safety 
authority as set forth at the end of the paragraph.
    Paragraph (e)(5) permits the airline to continue to hold 
the exemption from the slot rules as long as it continues to 
provide the service to the small airport that was the subject 
of the original application. It cannot take the slot exemption 
and use it to serve another airport. If the airline attempted 
to do so, the Secretary would be expected to withdraw the 
exemption and take other appropriate enforcement action.
    Paragraph (6) defines terms.
    Subsection (f) makes clear that whether a carrier is owned, 
allied or has another sort of relationship with some other 
carrier will not affect its ability to obtain slot exemptions 
under this section.

Section 102. Funding for air carrier service to airports not receiving 
        sufficient service

    Paragraph (1) states that the current fund in 49 U.S.C. 
41742 shall be spent as follows:
          (A) $45 million to carry out the Essential Air 
        Service (EAS) Program;
          (B) $5 million to subsidize service to an underserved 
        airport for no more than 3 years or to assist an 
        underserved airport to market its air service.
    Paragraph (2) permits any money left over to be used to 
improve air safety at rural airports (those with less than 
100,000 passengers). The 100,000 threshold is used because it 
is consistent with the definition of rural airports for ticket 
tax purposes in section 1031(e) of Public Law 105-34, 111 Stat. 
930.
    Paragraph (3) makes clear that if more than $50 million 
becomes available to the fund in 49 U.S.C. 41742, at least half 
of that additional amount must be used for the subsidy and 
marketing at underserved airports described in paragraph (1)(B) 
above.
    Paragraph (4) directs DOT to give priority for funding to 
those communities that are willing to provide local tax revenue 
to assist in the effort to improve air service at their 
airport.
    Paragraph (5) defines terms.

Section 103. Waiver of local contribution

    Waives the local contribution that is required for certain 
communities receiving subsidized essential air service if the 
community was designated as eligible or its proposal was 
approved within the specified dates.

Section 104. Unfair competition complaints

    Requires DOT to make a decision within 180 days on any 
complaint charging unfair competition against an airline.

            TITLE II--REGIONAL AIR SERVICE INCENTIVE PROGRAM

Section 201. Amendment of Title 49, United States Code

    Section 41761 states that the purpose of the program is to 
improve jet service to underserved markets by assisting 
commuter airlines in the purchase of Regional Jets.
    Section 41762 defines terms.
    Section 41763 authorizes, subject to appropriation, DOT to 
provide loan guarantees for aircraft purchases to commuter 
airlines and new airlines. All commuters are to be treated 
equally under this program regardless of whether they are owned 
by, allied with, code-share with, or have some other 
relationship with a major airline.
    Section 41764 establishes conditions and limitations on the 
loan guarantees.
    Subsection (a) states that DOT can't guarantee loans for 
more than --
          (1) the interest and 80% of the principal;
          (2) 80% of the purchase price;
          (3) 15 years; or
          (4) $100 million to any one airline.
    Subsection (b) requires DOT, before making a loan 
guarantee, to find that:
          (1) the aircraft being purchased is a regional jet;
          (2) the airline will use the jet to serve an 
        underserved market with at least 2 round-trips per day, 
        5 days per week; and
          (3) the airline will be able to pay off the loan.
    Subsection (c) states that the aircraft subject to the loan 
guarantee must be a stage 3 quiet aircraft.
    Subsection (d) requires the aircraft to be used to serve an 
underserved market for at least 2 years and prohibits the loan 
guarantee from being subordinated to another debt of the 
airline or to any other claims against the airline.
    Section 41765 governs payment of losses.
    Subsection (a) permits DOT to pay the holder of a loan that 
it guaranteed if it determines that the holder has suffered a 
loss and has made efforts to collect on the loan. If DOT pays 
the holder, DOT shall be subrogated to all the rights of the 
holder against the airline.
    Subsection (b) permits the Justice Department to enforce 
any right of the U.S. under this program.
    Subsection (c) makes clear that nothing in the law would 
prohibit leniency in the collection of the loan if that is 
agreed to by the parties to the loan and approved by DOT.
    Subsection (d) gives DOT discretion in handling aircraft or 
other property acquired under this program.
    Section 41766 requires DOT to collect a reasonable 
guarantee fee from the lending institution.
    Section 41767 permits DOT to utilize the services of other 
Federal agencies in implementing this program and requires DOT 
to make available to GAO any information requested.
    Section 41768 sets forth various administrative 
requirements.
    Section 41769 terminates the loan guarantee program after 5 
years.

Section 202. Authorization of appropriations

    Authorizes $120 million per year for the next 5 years to 
carry out this loan guarantee program.

                   TITLE III--CONTRACT TOWER PROGRAM

Section 301. Contract towers

    Paragraph (A) directs DOT to extend the current contract 
tower program to not more than 20 low activity air traffic 
control (ATC) towers that do not now qualify for the program.
    Paragraph (B) lists the characteristics of the airport that 
the FAA should consider in deciding which ones should get 
priority under this program. They are the following:
          (i) Airports that are participating in the current 
        program but have been notified that they will be 
        terminated because their benefit to cost ratio is less 
        than 1.
          (ii) Airports at which the tower was closed as a 
        result of the air traffic controllers strike in 1981.
          (iii) Airports that are receiving subsidized 
        essential air service.
          (iv) Airports that are prepared to assume the 
        construction and maintenance costs of the tower.
          (v) Airports with safety or operational problems 
        related to their topography, weather, runway 
        configuration, or mix of aircraft.
    Paragraph (C) requires the airport or State or local 
government to share in the costs of operating the tower to the 
extent that the costs of that operation exceed the benefits.
    Paragraph (D) authorizes $6 million for this program.

                   TITLE IV--AIR CARRIER COMPETITION

Section 401. Joint venture agreements

    Establishes a procedure for DOT review of major airline 
alliances.
    Subsection (a) defines terms.
    Paragraph (1) defines the sort of alliances between major 
airlines that are covered by this section. They are--
          (A) Code-sharing, blocked space, long-term wet 
        leases, and frequent flyer programs; and
          (B) Other cooperative working arrangements that 
        affect more than 15% of the major airlines' available 
        seat miles.
    Paragraph (2) cross-references Part 241 of DOT rules to 
define which airlines are covered by this section.
    Subsection (b) requires major airlines covered by this 
section to file with DOT a copy of their alliance agreement and 
other information that DOT, by regulation, requires at least 30 
days before an alliance covered by this section takes effect.
    Subsection (c) permits DOT to extend the 30-day period for 
150 days in the case of an alliance involving code-sharing and 
for 60 days in the case of any other alliance covered by this 
section. However, DOT could not automatically extend the time 
as a matter of course but would have to publish in the Federal 
Register the reasons that the extension is needed.
    Subsection (d) permits DOT to shorten the waiting periods 
at any time.
    Subsection (e) makes clear that the waiting periods could 
not be delayed while DOT is developing regulations to implement 
this section.
    Subsection (f) directs DOT and the Justice Department to 
develop a memorandum of understanding on pre-clearance 
procedures to prevent unnecessary duplication of effort.
    Subsection (g) states that the waiting period for alliances 
entered into before the date of enactment begins on the date, 
as determined by the Secretary, on which all of the required 
information was submitted and ends on the last day under which 
the waiting period could have been extended under subsection 
(c) above.
    Subsection (h) makes clear that the procedural authority 
granted to DOT under this section does not limit the authority 
of the Justice Department to enforce the antitrust laws.

Section 402. Competitive practices in the airline industry

    Subsection (a) requires certain studies.
    Paragraph (1) requires the Transportation Research Board to 
update the portions of its 1991 study of airline deregulation 
that deal with competition issues in the airline industry and 
include any recommendations for changes in the statutory 
framework under which the airline industry operates.
    Paragraph (2) requires this study to be transmitted to 
Congress and DOT within 6 months of the date of enactment.
    Paragraph (3) requires DOT to respond to this study within 
2 months.
    Subsection (b) directs DOT to conduct a study and transmit 
to Congress a report that includes the following:
          (1) A description of complaints DOT has received 
        alleging predatory pricing or unfair competition, the 
        number of such complaints, and specific examples of 
        unfair competition or predatory pricing;
          (2) A description of the options DOT has for 
        addressing these problems;
          (3) An analysis of its proposed competition 
        guidelines including the analysis required by 
        subsection (c) below; and
          (4) A description of how DOT will coordinate the 
        handling of predatory pricing and unfair competition 
        complaints with the Justice Department.
    Subsection (c) prohibits DOT from issuing final competition 
guidelines until it transmits the report described above to 
Congress. If DOT decides to issue such guidelines, it must 
transmit them to Congress. If the guidelines transmitted are 
different from the ones it originally proposed, DOT must 
include, as part of its transmittal to Congress, information 
documenting and quantifying the impact of these final 
guidelines on the following:
          (A) Scheduled service to small and medium-sized 
        communities;
          (B) Air fares including the availability of senior 
        citizen, Internet, and standby discounts;
          (C) The incentive and ability of major airlines to 
        offer low air fares;
          (D) The incentive of new airlines to offer low air 
        fares;
          (E) The ability of airlines to offer inclusive 
        leisure travel for which air fares are not separately 
        advertised;
          (F) Members of frequent flyer programs;
          (G) The ability of airlines to carry connecting 
        passengers on the portion of the routes served by new 
        airlines covered by the guidelines; and
          (H) Airline employees.
    Subsection (d) requires DOT, in conducting the study, to 
consult with the Justice Department, airlines, airports, 
academic and economic experts, airline employees, and 
passengers.
    Subsection (e) states that, if DOT issues final competition 
guidelines, those guidelines shall not become effective until 
12 weeks after they were transmitted to Congress. A week shall 
only be counted toward the 12 if the House was in session for 
legislative business (with votes as opposed to a pro forma 
session) during at least one day of that week.

                    Hearings and Legislative History

    The Subcommittee on Aviation held hearings on the issue of 
airline service on June 25, 1997. H.R. 2748 was introduced on 
October 28, 1997. Hearings were held on that bill on April 23, 
1998 and April 30, 1998.

                        Committee Consideration

    On June 18, 1998, the Subcommittee on Aviation reported the 
bill, by unanimous voice vote, to the Committee on 
Transportation and Infrastructure. On June 25, 1998, the 
Committee on Transportation and Infrastructure ordered the bill 
reported, with an amendment, by voice vote with a quorum 
present. There were no recorded votes taken during Committee 
consideration of H.R. 2748.

                             Rollcall Votes

    Clause 2(l)(2)(B) of rule XI requires each committee report 
to include the total number of votes cast for and against on 
each rollcall vote on a motion to report and on any amendment 
offered to the measure or matter, and the names of those 
members voting for and against. There were no recorded votes 
taken in connection with ordering H.R. 2748 reported. A motion 
by Mr. Duncan to order H.R. 2748 favorably reported to the 
House, without amendment, was agreed to by voice vote, a quorum 
being present.

                      Committee Oversight Findings

    With respect to the requirements of clause 2(l)(3)(A) of 
rule XI of the Rules of House of Representatives, the 
Committee's oversight findings and recommendations are 
reflected in this report.

                        Cost of the Legislation

    Clause 7 of rule XIII of the Rules of the House of 
Representatives does not apply where a cost estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974 has been timely submitted prior to the filing of the 
report and is included in the report. Such a cost estimate is 
included in this report.

                     Compliance with House Rule XI

    1. With respect to the requirement of clause 2(l)(3)(B) of 
rule XI of the Rules of the House of Representatives, and 
section 308(a) of the Congressional Budget Act of 1974, the 
Committee references the report of the Congressional Budget 
Office included below.
    2. With respect to the requirement of clause 2(l)(3)(D) of 
rule XI of the Rules of the House of Representatives, the 
Committee has received no report of oversight findings and 
recommendations from the Committee on Government Reform and 
Oversight on the subject of H.R. 2748.
    3. With respect to the requirement of clause 2(l)(3)(C) of 
rule XI of the Rules of the House of Representatives and 
section 402 of the Congressional Budget Act of 1974, the 
Committee has received the following cost estimate for H.R. 
2748 from the Director of the Congressional Budget Office.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 15, 1998.
Hon. Bud Shuster,
Chairman, Committee on Transportation and Infrastructure, House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2748, the Airline 
Service Improvement Act of 1998.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Clare 
Doherty (for federal costs), and Lisa Cash Driskill (for the 
state and local impact).
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

H.R. 2748--Airline Service Improvement Act of 1998

    Summary: H.R. 2748 would authorize the appropriation of 
$630 million for a loan program and air traffic control 
services administered by the Federal Aviation Administration 
(FAA) for fiscal years 1999 through 2003. Because the bill 
would not affect direct spending or receipts, pay-as-you-go 
procedures would not apply. H.R. 2748 contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would impose no 
significant costs on state, local, or tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 2748 is shown in the following table. 
The costs of this legislation fall within budget function 400 
(transportation).

----------------------------------------------------------------------------------------------------------------
                                                                       By fiscal years in millions of dollars--
                                                                    --------------------------------------------
                                                                       1999     2000     2001     2002     2003
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION
Authorization Level................................................      126      126      126      126      126
Estimated Outlays..................................................       24       84      126      126      126
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: For purposes of this estimate, CBO 
assumes that the entire amounts authorized in the bill will be 
appropriated by the start of each fiscal year. H.R. 2748 would 
authorize subsidyappropriations of $120 million a year for 
fiscal years 1999 through 2003 for loan guarantees to commuter air 
carriers that purchase jet aircraft for use in underserved markets. For 
purposes of this estimate, CBO assumes that the loans would be 
disbursed over a three-year period with the bulk of each year's 
obligations leading to disbursements in the year after obligations.
    The bill would also authorize the appropriations of $6 
million per fiscal year for a program to contract for air 
traffic control services at not more than 20 air traffic 
control towers.
    In addition, H.R. 2748 would require the Secretary of 
Transportation to consult with the Department of Justice on 
joint-venture agreements and establish a written memorandum of 
understanding. The bill also would require the National 
Research Council at the National Academy of Sciences to 
complete a comprehensive update of the 1991 study on airline 
deregulation. Based on information from the National Research 
Council. CBO estimates that the cost of completing the six-
month study would be less than $500,000. Upon completion of 
this report, the Secretary of Transportation would be required 
to submit a report to the Congress with responses to the 
findings of the council. In addition, the bill would require 
the Secretary to complete a report and possible guidelines on 
airline competition. CBO expects that the additional costs to 
the Department of Transportation would not be significant.
    Pay-as-you-go considerations: None.
    Estimated impact on State, local, and tribe governments: 
H.R. 2748 contains no intergovernmental mandates as defined in 
UMRA and would impose no significant costs on state, local, or 
tribal governments. In the aggregate, airports managed by state 
and local governments would benefit from this bill. It would 
establish a contract tower program and authorize $6 million to 
subsidize the cost of air traffic control services at no more 
than 20 locations not currently served by the DOT air traffic 
control contract programs. In addition, two communities, 
Dickinson, North Dakota and Fergus Falls, Minnesota, would no 
longer be required to match the money they receive from the 
Small Community Airservice Program. Finally, by earmarking some 
of the money currently authorized to support the essential air 
service program, the bill would redirect a total of $15 million 
over the 1999-2001 period to assist in increasing service to 
and from underserved airports.
    The bill also would allow the Secretary of Transportation 
to grant air carriers flying to or from an underserved airport 
a small number of exemptions from slot regulations at the 
nations four high density airports. In general, as a condition 
of receiving aid from the Airport Improvement Fund, airports 
must agree to provide gate access, if available, to air 
carriers granted such exemptions. CBO estimates that providing 
this access would have an insignificant budgetary impact.
    Estimated impact on the private sector: H.R. 2748 would 
impose no new private-sector mandates as defined in UMRA.
    Estimate prepared by: Federal Costs: Clare Doherty. Impact 
on State, Local, and Tribal Governments: Lisa Cash Driskill.
    Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                APPLICABILITY TO THE LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

                       FEDERAL MANDATES STATEMENT

    The Committee adopts as its own the estimate of the Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act (Public Law 104-4).

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Pursuant to clause (2)(l)(4) of rule XI of the Rules of the 
House of Representatives, committee reports on a bill or joint 
resolution of a public character shall include a statement 
citing the specific powers granted to the Congress in the 
Constitution to enact the measure. The Committee on 
Transportation and Infrastructure finds that Congress has the 
authority to enact this measure pursuant to its powers granted 
under article I, section 8 of the Constitution.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):

TITLE 49, UNITED STATES CODE

           *       *       *       *       *       *       *


SUBTITLE VII--AVIATION PROGRAMS

           *       *       *       *       *       *       *


PART A--AIR COMMERCE AND SAFETY

           *       *       *       *       *       *       *


SUBPART II--ECONOMIC REGULATION

           *       *       *       *       *       *       *


                  CHAPTER 417--OPERATIONS OF CARRIERS

                       SUBCHAPTER I--REQUIREMENTS

Sec.
41701.  Classification of air carriers.
     * * * * * * *
41716.  Joint venture agreements.

         SUBCHAPTER III--REGIONAL AIR SERVICE INCENTIVE PROGRAM

41761.  Purpose.
41762.  Definitions.
41763.  Loan guarantees.
41764.  Conditions and limitations.
41765.  Payment of losses.
41766.  Fees.
41767.  Use of Federal facilities and assistance.
41768.  Payments; administrative expenses.
41769.  Termination.
     * * * * * * *

               SUBCHAPTER II--SMALL COMMUNITY AIR SERVICE

     * * * * * * *
[41742.  Essential air service authorization.]
     * * * * * * *
41742.  Small community air service authorization.

SUBCHAPTER I--REQUIREMENTS

           *       *       *       *       *       *       *


Sec. 41712. Unfair and deceptive practices and unfair methods of 
                    competition

  (a) In General.--On the initiative of the Secretary of 
Transportation or the complaint of an air carrier, foreign air 
carrier, or ticket agent, and if the Secretary considers it is 
in the public interest, the Secretary may investigate and 
decide whether an air carrier, foreign air carrier, or ticket 
agent has been or is engaged in an unfair or deceptive practice 
or an unfair method of competition in air transportation or the 
sale of air transportation. If the Secretary, after notice and 
an opportunity for a hearing, finds that an air carrier, 
foreign air carrier, or ticket agent is engaged in an unfair or 
deceptive practice or unfair method of competition, the 
Secretary shall order the air carrier, foreign air carrier, or 
ticket agent to stop the practice or method.
  (b) Deadline for Decision on Unfair Competition Complaints.--
The Secretary shall make a decision on any complaint the 
Secretary receives under this section regarding whether an air 
carrier has been or is engaged in an unfair method of 
competition in air transportation or the sale of air 
transportation not later than 180 days after the date of 
receipt of the complaint.

           *       *       *       *       *       *       *


Sec. 41714. Availability of slots

  (a) * * *
  (b) Slots for Foreign Air Transportation.--
          (1) * * *

           *       *       *       *       *       *       *

          [(4) Period of effectiveness.--This subsection and 
        exemptions issued under this subsection shall cease to 
        be in effect when the final rules issued under 
        subsection (f) become effective.]
  (c) Slots for New Entrants.--
          [(1) In general.--] If the Secretary finds it to be 
        in the public interest and the circumstances to be 
        exceptional, the Secretary may by order grant 
        exemptions from the requirements under subparts K and S 
        of part 93 of title 14, Code of Federal Regulations 
        (pertaining to slots at high density airports), to 
        enable new entrant air carriers to provide air 
        transportation at high density airports (other than 
        Ronald Reagan Washington National Airport).
          [(2) Period of effectiveness.--Exemptions issued 
        under this section shall cease to be in effect on or 
        after the date on which the final rules issued under 
        subsection (f) become effective.]

           *       *       *       *       *       *       *

  [(e) Study.--
          [(1) Matters to be considered.--The Secretary shall 
        continue the Secretary's current examination of slot 
        regulations and shall ensure that the examination 
        includes consideration of--
                  [(A) whether improvements in technology and 
                procedures of the air traffic control system 
                and the use of quieter aircraft make it 
                possible to eliminate the limitations on hourly 
                operations imposed by the high density rule 
                contained in part 93 of title 14 of the Code of 
                Federal Regulations or to increase the number 
                of operations permitted under such rule;
                  [(B) the effects of the elimination of 
                limitations or an increase in the number of 
                operations allowed on each of the following:
                          [(i) congestion and delay in any part 
                        of the national aviation system;
                          [(ii) the impact of noise on persons 
                        living near the airport;
                          [(iii) competition in the air 
                        transportation system;
                          [(iv) the profitability of operations 
                        of airlines serving the airport; and
                          [(v) aviation safety;
                  [(C) the impact of the current slot 
                allocation process upon the ability of air 
                carriers to provide essential air service under 
                subchapter II of this chapter;
                  [(D) the impact of such allocation process 
                upon the ability of new entrant air carriers to 
                obtain slots in time periods that enable them 
                to provide service;
                  [(E) the impact of such allocation process on 
                the ability of foreign air carriers to obtain 
                slots;
                  [(F) the fairness of such process to air 
                carriers and the extent to which air carriers 
                are provided equivalent rights of access to the 
                air transportation market in the countries of 
                which foreign air carriers holding slots are 
                citizens;
                  [(G) the impact, on the ability of air 
                carriers to provide domestic and international 
                air service, of the withdrawal of slots from 
                air carriers in order to provide slots for 
                foreign air carriers; and
                  [(H) the impact of the prohibition on slot 
                withdrawals in subsections (b)(2) and (b)(3) of 
                this section on the aviation relationship 
                between the United States Government and 
                foreign governments, including whether the 
                prohibition in such subsections will require 
                the withdrawal of slots from general and 
                military aviation in order to meet the needs of 
                air carriers and foreign air carriers providing 
                foreign air transportation (and the impact of 
                such withdrawal on general aviation and 
                military aviation) and whether slots will 
                become available to meet the needs of air 
                carriers and foreign air carriers to provide 
                foreign air transportation as a result of the 
                planned relocation of Air Force Reserve units 
                and the Air National Guard at O'Hare 
                International Airport.
          [(2) Report.--Not later than January 31, 1995, the 
        Secretary shall complete the current examination of 
        slot regulations and shall transmit to the Committee on 
        Commerce, Science, and Transportation of the Senate and 
        the Committee on Transportation and Infrastructure of 
        the House of Representatives a report containing the 
        results of such examination.
  [(f) Rulemaking.--The Secretary shall conduct a rulemaking 
proceeding based on the results of the study described in 
subsection (e). In the course of such proceeding, the Secretary 
shall issue a notice of proposed rulemaking not later than 
August 1, 1995, and shall issue a final rule not later than 90 
days after public comments are due on the notice of proposed 
rulemaking.]
  (e) Slots for Airports Not Receiving Sufficient Service.--
          (1) Exemptions.--Notwithstanding part D of chapter 
        491 of this title, the Secretary may by order grant 
        exemptions from the requirements under subparts K and S 
        of part 93 of title 14, Code of Federal Regulations 
        (pertaining to slots at high density airports), to 
        enable air carriers to provide nonstop air 
        transportation using jet aircraft that comply with the 
        stage 3 noise levels of part 36 of such title 14 
        between a high density airport and a small hub airport 
        or nonhub airport that the Secretary determines is not 
        receiving sufficient air carrier service to and from 
        such high density airport.
          (2) Limitations.--No more than 2 exemptions per hour 
        may be granted under this subsection for slots at any 
        high density airport, and no more than 6 exemptions per 
        day may be granted under this subsection for slots at 
        Ronald Reagan Washington National Airport. An exemption 
        may be granted under this subsection for a slot at 
        Ronald Reagan Washington National Airport only if the 
        flight utilizing such slot begins or ends within 1,250 
        miles of the Airport and a stage 3 aircraft is used for 
        such flight.
          (3) Application.--An air carrier interested in an 
        exemption under this subsection shall submit to the 
        Secretary an application for such exemption. No 
        application may be submitted to the Secretary before 
        the last day of the 30-day period beginning on the date 
        of the enactment of this paragraph.
          (4) Deadline for decision.--Notwithstanding any other 
        provision of law, the Secretary shall make a decision 
        with regard to granting an exemption under this 
        subsection on or before the 120th day following the 
        date of the application for the exemption. If the 
        Secretary does not make the decision on or before such 
        120th day, the air carrier applying for the service may 
        provide such service until the Secretary makes the 
        decision or the Administrator of the Federal Aviation 
        Administration determines that providing such service 
        would have an adverse effect on air safety.
          (5) Period of effectiveness.--An exemption granted 
        under this subsection may remain in effect while the 
        air carrier for whom the exemption is granted continues 
        to provide nonstop air transportation between the 
        airport that the Secretary determined was not receiving 
        sufficient air carrier service and the high density 
        airport.
          (6) Definitions.--In this subsection, the following 
        definitions apply:
                  (A) Nonhub airport.--The term ``nonhub 
                airport'' means an airport that each year has 
                at least 2,500 passenger boardings but less 
                than .05 percent of the total annual boardings 
                in the United States.
                  (B) Small hub airport.--The term ``small hub 
                airport'' means an airport that each year has 
                at least .05 percent but less than .25 percent 
                of the total annual boardings in the United 
                States.
  (f) Treatment of Certain Commuter Air Carriers.--The 
Secretary shall treat all commuter air carriers that have 
cooperative agreements, including code share agreements with 
other air carriers, equally for determining eligibility for 
exemptions under this section regardless of the form of the 
corporate relationship between the commuter air carrier and the 
other air carrier.

           *       *       *       *       *       *       *


Sec. 41716. Joint venture agreements

  (a) Definitions.--In this section, the following definitions 
apply:
          (1) Joint venture agreement.--The term ``joint 
        venture agreement'' means an agreement entered into by 
        a major air carrier on or after January 1, 1998, with 
        regard to (A) code-sharing, blocked-space arrangements, 
        long-term wet leases (as defined in section 207.1 of 
        title 14, Code of Federal Regulations) of a substantial 
        number (as defined by the Secretary by regulation) of 
        aircraft, or frequent flyer programs, or (B) any other 
        cooperative working arrangement (as defined by the 
        Secretary by regulation) between 2 or more major air 
        carriers that affects more than 15 percent of the total 
        number of available seat miles offered by the major air 
        carriers.
          (2) Major air carrier.--The term ``major air 
        carrier'' means a passenger air carrier that is 
        certificated under chapter 411 of this title and 
        included in Carrier Group III under criteria contained 
        in section 04 of part 241 of title 14, Code of Federal 
        Regulations.
  (b) Submission of Joint Venture Agreement.--At least 30 days 
before a joint venture agreement may take effect, each of the 
major air carriers that entered into the agreement shall submit 
to the Secretary--
          (1) a complete copy of the joint venture agreement 
        and all related agreements; and
          (2) other information and documentary material that 
        the Secretary may require by regulation.
  (c) Extension of waiting period.--
          (1) In general.--The Secretary may extend the 30-day 
        period referred to in subsection (b) until--
                  (A) in the case of a joint venture agreement 
                with regard to code-sharing, the 150th day 
                following the last day of such period; and
                  (B) in the case of any other joint venture 
                agreement, the 60th day following the last day 
                of such period.
          (2) Publication of reasons for extension.--If the 
        Secretary extends the 30-day period referred to in 
        subsection (b), the Secretary shall publish in the 
        Federal Register the Secretary's reasons for making the 
        extension.
  (d) Termination of waiting period.--At any time after the 
date of submission of a joint venture agreement under 
subsection (b), the Secretary may terminate the waiting periods 
referred to in subsections (b) and (c) with respect to the 
agreement.
  (e) Regulations.--The effectiveness of a joint venture 
agreement may not be delayed due to any failure of the 
Secretary to issue regulations to carry out this section.
  (f) Memorandum To Prevent Duplicative Reviews.--Promptly 
after the date of enactment of this section, the Secretary 
shall consult with the Assistant Attorney General of the 
Antitrust Division of the Department of Justice in order to 
establish, through a written memorandum of understanding, 
preclearance procedures to prevent unnecessary duplication of 
effort by the Secretary and the Assistant Attorney General 
under this section and the antitrust laws of the United States, 
respectively.
  (g) Prior Agreements.--With respect to a joint venture 
agreement entered into before the date of enactment of this 
section as to which the Secretary finds that--
          (1) the parties submitted the agreement to the 
        Secretary before such date of enactment; and
          (2) the parties submitted all information on the 
        agreement requested by the Secretary,
the waiting period described in paragraphs (2) and (3) shall 
begin on the date, as determined by the Secretary, on which all 
such information was submitted and end on the last day to which 
the period could be extended under this section.
  (h) Limitation on Statutory Construction.--The authority 
granted to the Secretary under this subsection shall not in any 
way limit the authority of the Attorney General to enforce the 
antitrust laws as defined in the first section of the Clayton 
Act (15 U.S.C. 12).

           *       *       *       *       *       *       *


SUBCHAPTER II--SMALL COMMUNITY AIR SERVICE

           *       *       *       *       *       *       *


Sec. 41736. Air transportation to noneligible places

  (a) * * *

           *       *       *       *       *       *       *

  (b) Approval for Certain Air Transportation.--Notwithstanding 
subsection (a)(1)(B) of this section, the Secretary shall 
approve a proposal under this section to compensate an air 
carrier for providing air transportation to a place in the 48 
contiguous States or the District of Columbia and designate the 
place as eligible for compensation under this section if--
          (1) * * *

           *       *       *       *       *       *       *

          (4) the State or local government submitting the 
        proposal or a person is willing and able to pay 25 
        percent of the cost of providing the compensated 
        transportation.
Paragraph (4) shall not apply to any place for which a proposal 
was approved or that was designated as eligible under this 
section in the period beginning on October 1, 1991, and ending 
on December 31, 1997.

Sec. 41742. [Essential] Small community air service authorization

  (a) In General.--Out of the amounts received by the Federal 
Aviation Administration credited to the account established 
under section 45303 of this title or otherwise provided to the 
Administration, the sum of $50,000,000 is authorized and shall 
be made available immediately for obligation and expenditure to 
carry out the [essential air] small community service program 
under this subchapter for each fiscal year.
  [(b) Funding for Small Community Air Service.--
Notwithstanding any other provision of law, moneys credited to 
the account established under section 45303(a) of this title, 
including the funds derived from fees imposed under the 
authority contained in section 45301(a) of this title, shall be 
used to carry out the essential air service program under this 
subchapter. Notwithstanding section 47114(g) of this title, any 
amounts from those fees that are not obligated or expended at 
the end of the fiscal year for the purpose of funding the 
essential air service program under this subchapter shall be 
made available to the Administration for use in improving rural 
air safety under subchapter I of chapter 471 of this title and 
shall be used exclusively for projects at rural airports under 
this subchapter.]
  (b) Funding for Small Community Air Service.--
          (1) In general.--Notwithstanding any other provision 
        of law, from moneys credited to the account established 
        under section 45303(a), including the funds derived 
        from fees imposed under the authority contained in 
        section 45301(a)--
                  (A) not to exceed $45,000,000 for each fiscal 
                year beginning after September 30, 1998, shall 
                be used to carry out the essential air service 
                program under this subchapter; and
                  (B) not to exceed $5,000,000 for such fiscal 
                year shall be used--
                          (i) for assisting an air carrier to 
                        subsidize service to and from an 
                        underserved airport for a period not to 
                        exceed 3 years; and
                          (ii) for assisting an underserved 
                        airport to market service to and from 
                        the underserved airport.
          (2) Rural air safety.--Any funds that are made 
        available by paragraph (1) for a fiscal year and that 
        the Secretary determines will not be obligated or 
        expended before the last day of such fiscal year shall 
        be available to the Administrator for use under this 
        subchapter in improving rural air safety at airports 
        with less than 100,000 annual boardings.
          (3) Allocation of additional funding.--If, for a 
        fiscal year beginning after September 30, 1998, more 
        than $50,000,000 is made available under subsection (a) 
        to carry out the small community air service program, 
        \1/2\ of the amounts in excess of $50,000,000 shall be 
        used for the purposes specified in paragraph (1)(B), in 
        addition to amounts made available for such purposes 
        under paragraph (1)(B).
          (4) Priority criteria for assisting airports not 
        receiving sufficient service.--In providing assistance 
        to airports under paragraph (1)(B), the Administrator 
        shall give priority to those airports for which a 
        community will provide, from local sources (other than 
        airport revenues), a portion of the cost of the 
        activity to be assisted.
          (5) Underserved airport defined.--In this subsection, 
        the term ``underserved airport'' means a nonhub airport 
        or small hub airport (as such terms are defined in 
        section 41714(e)) that the Secretary determines is not 
        receiving sufficient air carrier service.
  (c) Special Rule for Fiscal Year 1997.--Notwithstanding 
subsections (a) and (b), in fiscal year 1997, amounts in excess 
of $75,000,000 that are collected in fees pursuant to section 
45301(a)(1) of this title shall be available for the [essential 
air] small community service program under this subchapter, in 
addition to amounts specifically provided for in appropriations 
Acts.

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         SUBCHAPTER III--REGIONAL AIR SERVICE INCENTIVE PROGRAM

Sec. 41761. Purpose

  The purpose of this subchapter is to improve service by jet 
aircraft to underserved markets by providing assistance, in the 
form of loan guarantees, to commuter air carriers that purchase 
regional jet aircraft for use in serving those markets.

Sec. 41762. Definitions

  In this subchapter, the following definitions apply:
          (1) Aircraft purchase loan.--The term ``aircraft 
        purchase loan'' means any loan made for the purchase of 
        commercial transport aircraft, including spare parts 
        normally associated with the aircraft.
          (2) Commuter air carrier.--The term ``commuter air 
        carrier'' means an air carrier that primarily operates 
        aircraft designed to have a maximum passenger seating 
        capacity of 75 or less in accordance with published 
        flight schedules.
          (3) New entrant air carrier.--The term ``new entrant 
        air carrier'' means an air carrier that has been 
        providing air transportation according to a published 
        schedule for less than 5 years, including any person 
        that has received authority from the Secretary to 
        provide air transportation but is not providing air 
        transportation.
          (4) Nonhub airport.--The term ``nonhub airport'' 
        means an airport that each year has at least 2,500 
        passenger boardings, but less than .05 percent of the 
        total annual boardings in the United States.
          (5) Regional jet aircraft.--The term ``regional jet 
        aircraft'' means a civil aircraft--
                  (A) powered by jet propulsion; and
                  (B) designed to have a maximum passenger 
                seating capacity of not less than 30 nor more 
                than 75.
          (6) Small hub airport.--The term ``small hub 
        airport'' means an airport that each year has at least 
        .05 percent, but less than .25 percent, of the total 
        annual boardings in the United States.
          (7) Underserved airport.--The term ``underserved 
        airport'' means an airport that--
                  (A) is a nonhub airport or a small hub 
                airport;
                  (B) is not within a 40-mile radius of another 
                airport that each year has at least .25 percent 
                of the total annual boardings in the United 
                States; and
                  (C) the Secretary determines does not have 
                sufficient air service.

Sec. 41763. Loan guarantees

  (a) In General.--Subject to advance appropriations, the 
Secretary of Transportation may guarantee any lender against 
loss of principal or interest on any aircraft purchase loan 
made by that lender to a commuter air carrier or new entrant 
air carrier.
  (b) Form, Terms, and Conditions.--A guarantee shall be made 
under subsection (a)--
          (1) in such form and on such terms and conditions; 
        and
          (2) pursuant to such regulations;
as the Secretary considers to be necessary and consistent with 
this subchapter.
  (c) Treatment of Certain Commuter Air Carriers.--The 
Secretary shall treat all commuter air carriers that have 
cooperative agreements, including code share agreements with 
other air carriers, equally for determining eligibility for 
guarantees under this section regardless of the form of the 
corporate relationship between the commuter air carrier and the 
other air carrier.

Sec. 41764. Conditions and limitations

  (a) Limitations on Funds.--Subject to subsection (d), no loan 
guarantee shall be made under this subchapter--
          (1) extending to more than the unpaid interest and 80 
        percent of the unpaid principal of any loan;
          (2) on any loan or combination of loans for more than 
        80 percent of the purchase price of the aircraft, 
        including spare parts, to be purchased with the loan or 
        loan combination;
          (3) on any loan with respect to which terms permit 
        repayment more than 15 years after the date the loan is 
        made;
          (4) in any case in which the total face amount of the 
        loan and any other loans to the same air carrier or 
        corporate predecessor of that air carrier that are 
        guaranteed and outstanding under the terms of this 
        subchapter exceed $100,000,000.
  (b) Conditions for Making Loans.--Subject to subsection (c), 
the Secretary of Transportation may only make a loan guarantee 
under this subchapter if--
          (1) the Secretary finds that the aircraft to be 
        purchased with the loan is a regional jet aircraft to 
        be used by the commuter air carrier or new entrant air 
        carrier;
          (2) the commuter air carrier or new entrant air 
        carrier agrees to use the aircraft to provide at least 
        2 round-trips per day 5 days per week to the 
        underserved airport; and
          (3) the Secretary finds that the prospective earning 
        power of the commuter air carrier or new entrant air 
        carrier, together with the character and value of the 
        security pledged, furnish--
                  (A) reasonable assurances of the air 
                carrier's ability and intention to repay the 
                loan within the term of the loan--
                          (i) to continue its operations as an 
                        air carrier; and
                          (ii) to the extent that the Secretary 
                        determines to be necessary, to continue 
                        its operations as an air carrier 
                        between the same route or routes being 
                        operated by the air carrier at the time 
                        of the loan guarantee; and
                  (B) reasonable protection to the United 
                States.
  (c) Requirement.--Subject to subsection (d), no loan 
guarantee may be made under this subchapter on any loan or 
combination of loans for the purchase of any regional jet 
aircraft that does not comply with the stage 3 noise levels of 
part 36 of title 14 of the Code of Federal Regulations, as in 
effect on January 1, 1998.
  (d) Other Limitations.--
          (1) On purchase of regional jet aircraft.--No loan 
        guarantee shall be made by the Secretary under this 
        subchapter on any loan for the purchase of a regional 
        jet aircraft unless the commuter air carrier or new 
        entrant air carrier agrees that it will provide 
        scheduled passenger air transportation to the 
        underserved airport for which the aircraft is 
        purchased, or to another underserved airport, for a 
        period of not less than 24 consecutive months after the 
        aircraft is placed in service.
          (2) On subordination.--No loan guarantee made under 
        this subchapter may be subordinated to another debt of 
        the carrier or to any other claims against the carrier.
          (3) To protect interests of united states.--No loan 
        may be guaranteed under this subchapter unless the 
        Secretary determines that the lender is responsible and 
        that adequate provision is made for servicing the loan 
        on reasonable terms and protecting the financial 
        interests of the United States.

Sec. 41765. Payment of losses

  (a) In General.--If, as a result of a default by a carrier 
under a loan guaranteed under this subchapter and after the 
holder of the loan has made such further collection efforts as 
the Secretary of Transportation may require, the Secretary 
determines that the holder has suffered a loss, the Secretary 
shall pay the holder the amount of the loss under the guarantee 
contract. Upon making the payment, the Secretary shall be 
subrogated to all the rights of the recipient of the payment.
  (b) Enforcement of United States Rights.--The Attorney 
General shall take such action as may be necessary to enforce 
any right accruing to the United States as a result of the 
issuance of any guarantee under this subchapter.
  (c) Limitation on Statutory Construction.--Nothing in this 
subchapter shall be construed as precluding any forbearance for 
the carrier which may be agreed upon by the parties to the 
guaranteed loan and approved by the Secretary.
  (d) Authority of Secretary.--Notwithstanding any other 
provision of law relating to the acquisition, handling, or 
disposal of property by the United States, the Secretary may 
complete, recondition, reconstruct, renovate, repair, maintain, 
operate, or sell any property acquired under this subchapter.

Sec. 41766. Fees

  The Secretary of Transportation shall prescribe and collect 
from a lending institution a reasonable administrative fee in 
connection with each loan guaranteed under this subchapter.

Sec. 41767. Use of Federal facilities and assistance

  (a) Use of Federal Facilities.--To permit the Secretary of 
Transportation to make use of such expert advice and services 
as the Secretary may require in carrying out this subchapter, 
the Secretary may use available services and facilities of 
other agencies and instrumentalities of the Federal 
Government--
          (1) with the consent of the appropriate Federal 
        officials; and
          (2) on a reimbursable basis.
  (b) Assistance.--The head of each appropriate department or 
agency of the Federal Government shall exercise the duties and 
functions of that head in such manner as to assist in carrying 
out the policy specified in section 41761.
  (c) Oversight.--The Secretary shall make available to the 
Comptroller General of the United States such information with 
respect to the loan guarantee program conducted under this 
subchapter as the Comptroller General may require to carry out 
the duties of the Comptroller General under chapter 7 of title 
31.

Sec. 41768. Payments; administrative expenses

  (a) Payments.--Payments to lenders required as a consequence 
of any loan guarantee made under this subchapter may be made 
from funds appropriated pursuant to the authorization under 
section 202 of the Airline Service Improvement Act of 1998.
  (b) Administrative Expenses.--In carrying out this 
subchapter, the Secretary shall use funds made available by 
appropriations to the Department of Transportation for the 
purpose of administration to cover administrative expenses of 
the loan guarantee program under this subchapter.

Sec. 41769. Termination

  The authority of the Secretary of Transportation under 
section 41763 shall terminate on the date that is 5 years after 
the date of the enactment of this subchapter.

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                 PART B--AIRPORT DEVELOPMENT AND NOISE

CHAPTER 471--AIRPORT DEVELOPMENT

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SUBCHAPTER I--AIRPORT IMPROVEMENT

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Sec. 47124. Agreements for State and local operation of airport 
                    facilities

  (a) * * *
  (b) Air Traffic Control Contract Program.--(1) The Secretary 
shall continue the low activity (Visual Flight Rules) level I 
air traffic control tower contract program established under 
subsection (a) of this section for towers existing on December 
30, 1987, and extend the program to other towers as 
practicable.

           *       *       *       *       *       *       *

          (3) Nonqualifying air traffic control towers.--
                  (A) In general.--The Secretary shall 
                establish a program to contract for air traffic 
                control services at not more than 20 level I 
                air traffic control towers, as defined by the 
                Administrator of the Federal Aviation 
                Administration, that do not qualify for the 
                program established under subsection (a) and 
                continued under paragraph (1).
                  (B) Priority.--In selecting facilities to 
                participate in the program under this 
                paragraph, the Administrator shall give 
                priority to the following:
                          (i) Air traffic control towers that 
                        are participating in the program 
                        continued under paragraph (1) but have 
                        been notified that they will be 
                        terminated from such program because 
                        the Administrator has determined that 
                        the benefit-to-cost ratio for their 
                        continuation in such program is less 
                        than 1.
                          (ii) Level I air traffic control 
                        towers of the Federal Aviation 
                        Administration that are closed as a 
                        result of the air traffic controllers 
                        strike in 1981.
                          (iii) Air traffic control towers that 
                        are located at airports that receive 
                        air service from an air carrier that is 
                        receiving compensation under the 
                        essential air service program of 
                        subchapter II of chapter 417.
                          (iv) Air traffic control towers 
                        located at airports that are prepared 
                        to assume responsibility for tower 
                        construction and maintenance costs.
                          (v) Air traffic control towers that 
                        are located at airports with safety or 
                        operational problems related to 
                        topography, weather, runway 
                        configuration, or mix of aircraft.
                  (C) Costs exceeding benefits.--If the costs 
                of operating a control tower under the program 
                established under this paragraph exceed the 
                benefits, the airport sponsor or State or local 
                government having jurisdiction over the airport 
                shall pay the portion of the costs that exceed 
                such benefits.
                  (D) Authorization of appropriations.--There 
                is authorized to be appropriated $6,000,000 per 
                fiscal year to carry out this paragraph.

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