AIRCRAFT HUSHKITS: NOISE AND INTERNATIONAL TRADE

CRS Report for Congress
Aircraft Hushkits: Noise and International Trade
May 8, 2000
John W. Fischer
Specialist in Transportation
Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

A^BSTRACT
The European Union (EU) has adopted regulations that severely limit the introduction of
“hushkit“ equipped aircraft into the European aviation market. These regulations primarily
affect U.S. aircraft and airlines, and are perceived to have caused U.S. interests significant
economic harm. The United States has filed for relief from these regulations with the
International Civil Aviation Organization (ICAO) which serves as the world’s aviation
regulatory and standardization authority. This report discusses the EU regulation, the U.S.
policy response, the congressional response, and identifies other issues that may play out as
a result of the EU initiative.

Aircraft Hushkits: Noise and International Trade
Summary
A common, but inaccurate, definition of a hushkit characterizes it as a jet engine
muffler. Instead, hushkitting, as the process is called, involves a combination of
strategies designed to reduce aircraft noise. These strategies can include new
technologies, redesigned engine enclosures, replacement engine components, entirely
new engines, or a combination of any of the above.
On May 4, 2000, the European Union (EU) adopted a new aircraft noise
regulation (number 99/925) that limits the future operation and/or ownership of
hushkitted commercial jet aircraft within the EU. The regulation restricts the
addition of hushkitted aircraft to EU airline fleet registry on the above date. And it
precludes the operation of non-EU hushkitted aircraft not already serving the EU on
the above date after 2002. As adopted, the vast majority of the aircraft affected by
this regulation are of U.S. manufacture. The United States opposes the EU regulation
on several grounds, but has nonetheless attempted to negotiate with the EU on the
issue for over a year. On March 14, 2000, the United States filed a complaint with
the International Civil Aviation Organization (ICAO) asking that this international
aviation safety and regulatory body take action against the EU as a result of its
regulation. Although discussions between the EU and the United States continue, it
now appears that the issue is at an impasse.
Implementation of the hushkit non-addition rule could result in congressional
action. In an earlier response to this issue the House considered legislation calling for
an end to British Air and Air France Concorde service to the United States. More
importantly, however, congressional action on hushkits might result in a much
stronger future role for the Legislative Branch on aircraft noise issues, which to this
point have been the primarily in the domain of the Executive Branch.
For the last 56 years the world aviation system has been remarkably stable in the
sense that international rules were known well in advance and airlines and other
players in the market place could plan for them. The hushkit standoff changes that.
If the EU can unilaterally decide what the standards are for aircraft noise, then other
aviation regulations could be opened up for unilateral review and revision. While the
hushkit situation might blow away over time, there are other equally important
aviation issues confronting the EU and the U.S., such as aircraft trade. With the
hushkit spat as a backdrop, each of these potential areas of dispute becomes more
potentially volatile. This report will be updated as warranted by events.

Contents
Aircraft Noise Regulation.........................................1
Chapter 4..................................................1
Hushkits: Why and Where.........................................2
The European Initiative...........................................3
The EU Hushkit Proposal.....................................4
Performance versus Design Standards............................5
Opposition within the EU......................................6
The U.S. Policy Response.........................................6
The United States Article 84 Filing..............................7
Economic Damage...........................................8
The Congressional Response.......................................9
Hushkits in the Context of U.S./EU Aircraft Trade......................9
Observations .................................................. 11

Aircraft Hushkits: Noise and International Trade
Aircraft noise became a major issue for much of the world with the introduction
of the first generation of commercial jet aircraft in the 1950s and 1960s. Early
commercial jets such as the Boeing 707 and Douglas DC-8, revolutionized airline
travel, but they did so at a decibel level that often made those living near airports wish
they hadn’t been invented. Responding to growing complaints, while taking
advantage of improving jet engine technology, the Department of Transportation,
Federal Aviation Administration (FAA) implemented its first noise regulations in 1969
(Federal Aviation Regulations, Part 36). The international body concerned with
aviation safety and regulation, the International Civil Aviation Organization (ICAO),
followed suit by adopting similar standards in 1971 (ICAO Annex 16).
Aircraft Noise Regulation
The international aircraft noise regulatory structure in place today is the result
of decisions reached through the ICAO process. These regulations adopted a set of
aircraft noise standards based on performance. The standards, referred to by the¹
relevant chapters in the ICAO Annex, are based on various takeoff, landing, and
other operating performance parameters using noise measurements expressed in
decibels. Chapter 1 aircraft included the earliest commercial jet aircraft mentioned in
the preceding paragraph. Chapter 2 standards were adopted by ICAO as part of its
1971 actions and include the second generation of commercial jet aircraft, most
notably the Boeing 727, Boeing 737, and Douglas DC-9. Taking advantage of further
improvements in aircraft and aircraft engine technology, Chapter 3 standards were
adopted by ICAO in 1977. In 1990, ICAO adopted regulations calling for a phase
out of all Chapter 2 aircraft by 2002. At almost the same time, the Airport Noise and
Capacity Act of 1990 (ANCA)(P.L. 101-508) called for a similar phase out in the
United States, but required that this occur by December 31, 1999. Aircraft serving the
United States are now all Chapter 3 compliant. The world fleet will become Chapter

3 compliant in 2002.

Chapter 4
At the time Chapter 3 regulations were adopted, they were viewed as the best
technically possible. Since then, however, technology has advanced to the point
where many specialists believe it would be possible to move to a Chapter 4 standard.

¹ In FAA regulations comparable definitions are referred to as “Stages.” Because this report
discusses an EU regulation it adopts the ICAO reference framework.

By way of example, several of the newest aircraft types in production are very quiet
relative to early Chapter 3 aircraft such as the McDonnell Douglas MD-80 series
aircraft. As a result, a significant number of individuals, airports, and governments
have expressed an interest in moving toward a new Chapter 4 standard of some sort
using the ICAO process.
Committees within the ICAO structure have been meeting for some time to
discuss the aircraft noise issue, but have not, as of yet, been able to reach consensus
as to what noise levels might be acceptable in a Chapter 4 requirement. Further, there
is even less agreement as to how a Chapter 4 regulation might be phased in. Airlines
heavily invested in recent vintage Chapter 3 aircraft are loath to move toward any new
noise regime that would jeopardize that investment. As will be discussed later in this
report, the hushkit dispute is directly related to the Chapter 4 process. And the
United States and the European Union (EU) are principal players in an ongoing ICAO
process that could address Chapter 4 requirements prior to the the scheduled
international phaseout of Chapter 2 aircraft in 2002. Congress has taken a position
on this international process. The Wendell H. Ford Aviation Investment and Reform
Act for the 21^st Century (FAIR21)(P.L. 106-513) provides specific guidance for U.S.
participation in the Chapter 4 implementation debate, by directing U.S. negotiators
to consider the competitive needs of United States airlines and aircraft manufacturers
and protect them from being disadvantaged by potential Chapter 4 regulations.²
Hushkits: Why and Where
A common, but incomplete, definition of a hushkit is to characterize it as a jet
engine muffler. Instead, hushkitting, as the process is called, involves a combination
of strategies designed to reduce aircraft noise. These strategies can include new
technologies, redesigned engine enclosures, replacement engine components, entirely
new engines, or a combination of any of the above.
The decision to buy hushkits is typically an economic one. Hushkits can be
acquired for a couple of million dollars or less, whereas new Chapter 3 aircraft would
likely cost in excess of $30 million, which is the entry price for the smallest 100 seat
commercial jet aircraft currently available. Commercial jet aircraft have an as yet
undetermined life span that can run into decades depending primarily on usage.
Chapter 2 aircraft, as mentioned earlier, were still in production into the 1980s, so a
significant number of Chapter 2 aircraft have still not completed their potential
economically useful lives.
In terms of noise, hushkitted aircraft meet Chapter 3 standards, but in some cases
their performance is near the bottom of the acceptable noise range allowed by Chapter

3 standards.

In the early 1990s, all airlines, but especially U.S. airlines faced with the phased
Chapter 2 phaseout requirements of ANCA, had to decide whether to buy new
aircraft or hushkit at least part of their existing fleets. At the time the airline industry

² P.L. 106-181. Title VII. Section 726.

was suffering record financial losses. For many carriers, especially in the United
States, the choice of hushkits over new aircraft was relatively easy. In addition, there
was some concern that even if the airlines had the funds, the aircraft manufacturing
industry was not in a position to supply all of the Chapter 3 aircraft needed before the
phaseout deadlines. Finally, the low fuel prices of the 1990s, played a role in tipping
the economic balance toward hushkitting and away from more fuel efficient new
aircraft.
For all practical purposes the majority of aircraft that will be hushkitted already
are. The vast majority of these are single aisle aircraft like the 727. According to
recent information, 1,634 single aisle aircraft have been hushkitted out of a total³
world fleet of 8,500 or so aircraft. Of these hushkitted aircraft 1,361 were in service
in North America, primarily in the United States, 186 were in service in Europe, and
the relatively small remainder were scattered throughout other parts of the world.
In the last few years several major U.S. airlines have ordered significant numbers
of new Chapter 3 aircraft. Some of these aircraft are for business growth, but a large
percentage are replacement aircraft for the hushkitted portions of the airlines’ fleets.
Hence there is an expectation that a significant number of hushkitted aircraft will be
available in the used aircraft market place in the next few years.
An exception to much of the discussion to this point is the air cargo industry.
Air cargo aircraft typically fly much less in an average year then their passenger-
carrying counterparts. As a result, cargo aircraft have a much longer nominal life
span. Used aircraft have been very popular with cargo carriers and the economics of
a hushkitted aircraft are very attractive to many cargo firms because they can buy
them for a fraction of the cost of a new aircraft and fly them for a long time. FedEx,
for example, was a major purchaser of used 727s, which were subsequently
hushkitted.
The European Initiative
Airport noise issue appears to be an issue of greater public concern in Europe
than in the United States. Airport noise in the European discussion is also bundled
into ongoing environmental policy discussions about emissions and greenhouse gases,
whereas in the United States, noise has been treated more or less as a separate issue.
European governments claim to be under considerable pressure from large
populations living near major airports to reduce both noise and emissions. By one⁴
estimate 15% of the EU’s population is impacted by aircraft noise. The environment
plays a much larger role in the politics of the EU then it does in the U.S. And
Environmental/Green political parties specifically concerned about noise and

³ Baker, Colin and George, Alan. The Next Chapter. Airline Business. March 2000. p. 57.
⁴ Commission of the European Communities. Air Transport and the Environment.
Communication from the Commission to the Council, The European Parliament, The
Economic and Social Committee and The Committee of the Regions. Brussels. December 1,

1999. p. 5.

emissions play a significant role in the governance of several European nations and
are well represented in the European Parliament.
The Chapter 2 phase out deadlines notwithstanding, the EU felt a need to further
demonstrate its ability to deal with the noise issue in the near term. The EU has been
pushing for adoption of Chapter 4 standards for a number of years through the ICAO
process and concluded that the U.S. was blocking its efforts.⁵ In the EU’s words:
In the European Community, noise around airports is at the heart of increasing
tensions: air transport activities are threatened by legitimate expectation of people
living around airports not wishing to be faced with a further deterioration of the
noise nuisance. The European Community considers it necessary to provide a
reasonable and short-term answer to legitimate environmental concerns in order
to prevent further proliferation of different local rules at individual airports and
thereby ensuring continued growth and a stable operating environment for all air
carriers flying into European airports.
.....The so-called hushkit EU-Regulation targets concerns in relation to aircraft
noise at and around Community airports. It foresees the interdiction for
Community member states to add aircraft to their registers which meet the
requirements of ICAO’s Chapter 3 only by virtue of re-certification. These
aircrafts are considerably noisier than genuine Chapter 3 aircraft and make,⁶
therefor, a disproportionate contribution to the noise climate at airports.
Europe, as mentioned above, has a very small number of hushkitted aircraft in
its domestic fleets and no domestic hushkit manufacturing industry. There also exists
a concern within Europe that a significant portion of the U.S. hushkitted fleet soon
to be made excess by new aircraft deliveries would be shipped to the European
market. Against this backdrop, hushkitted aircraft appear to have become the target
of opportunity for those within Europe seeking short term noise relief with limited EU
economic and political cost. It also appears that some European’s saw the hushkit
issue as a way to jumpstart the Chapter 4 process.
The EU Hushkit Proposal
In March 1998 the European Commission proposed that the European
Parliament adopt legislation that would ban the addition of hushkitted aircraft into
European airline fleets. This regulation proposed that these so called “non-addition”
regulations should become effective on April 1, 1999. For non-EU States, the non-
addition rule would take effect in 2002 and preclude the use of hushkitted aircraft not
already in their fleets as of the earlier date. Aircraft not complying with these non-
addition rules would be denied access to European airports at this time. The European
Parliament approved the ban in mid-February 1999.

⁵ European Union. Aircraft Noise: The Hushkits. Press Information Pack. Brussels. March

12, 1999. p. 1.

⁶ European Union. Actions against noise nuisance in the airports: the EU deeply regrets the
US decision to file Article 84 Action with ICAO. IP/00/26. Brussels. March 15, 2000.

Controversy over the proposal did not arise immediately. There seems to have
been a delay in understanding the potential implications of the EU’s action in the
United States and in U.S. industry. Toward the end of 1998, however, the issue
became very visible and U.S. interests responded angrily to the EU action which was
viewed as contrary to international aviation regulation. In early 1999 the United
States attempted to delay implementation of the regulation and at the same time
placate the EU’s noise concerns by suggesting further discussion on a Chapter 4
standard.
These efforts were successful at least in part. On March 29, 1999, the EU
extended the deadline to April 29, 1999, to allow the possibility of further discussion
with the United States. The European Parliament adopted the rule on April 29, 1999
(Council Regulation 99/925). Implementation of the rule was delayed, however, until
May 4, 2000, thereby providing for a temporary respite from the potential trade
problems engendered by the regulation.
Performance versus Design Standards
The EU regulation has a number of features, but seems to rest primarily on two
basic premises, both of which are controversial in the context of existing international
regulation. The first of these premises is that hushkitted aircraft are not true Chapter
3 aircraft in that they were originally certified as Chapter 2 aircraft. Hence, in this
view, these are re-certified aircraft, which is a classification that the EU contends does
not exist within the ICAO regulatory construct. That these aircraft meet the noise
performance measurement standards in the regulation does not, according to the EU,
mean that they have to accept them as Chapter 3 aircraft. This is irrespective of the
fact that the EU has at times acknowledged that these aircraft meet international
standards:
Although such retrofitted aircraft formally comply with the EU legislation
(directive 92/14/EEC) and the most stringent international noise standards
(Chapter 3), they produce, for comparable types of aircraft, much more noise than⁷
genuine Chapter 3 aircraft.
The second premise of the EU regulation is its applicability to hushkitted aircraft
having low bypass engines with a bypass ratio of less than 3.0. The EU believes that
these aircraft are inherently noisier then the more modern high bypass ratio engines
on “true” Chapter 3 aircraft. In addition, the EU views low bypass engines as
environmentally unfriendly because of their higher levels of emissions.
By using the bypass ratio standard the EU seems to be creating a noise regime
based on engine design standards rather then the performance standards detailed in
ICAO regulations. The EU does not appear to dispute this charge directly. Rather,

⁷ European Union. Commission takes action to combat aircraft noise. IP/98/251. Brussels.
March 13, 1998.

the EU contends that bypass ratio data is an effective tool for distinguishing noisier
hushkitted aircraft and that the data itself is scientifically sound.⁸
The EU further argues that use of bypass ratios does not discriminate against
U.S. manufactured aircraft and hushkits, but applies to certain EU produced aircraft
as well. Finally, the EU argues that while bypass ratios may not be specifically
mentioned in the ICAO regulations, they have been used elsewhere to identify noisier
aircraft. Regardless of the EU’s statements, however, a reading of its own documents
shows that most of the hushkitted aircraft with bypass ratios of less than 3.0 are of
U.S. manufacture.⁹
Opposition within the EU
Surprisingly, to some, Airbus does not support the EU regulation.¹⁰ Airbus is
concerned about how the regulation might disrupt the existing international aircraft
noise regime. It is concerned primarily that its airline customers want certainty, that
is, that they will be able to use their aircraft to their fullest economic potential,
without fear that the actions of one nation or a group of nations might interfere with
this goal.
Omega Air of Ireland is engaged in the installation of hushkits on Boeing 707
aircraft for the air freight market, and has been for some time. The EU regulation
would essentially end the firm’s ability to participate in this market. Omega has taken
legal action against the EU regulation and has received legal judgements in its favor
from both the Irish High Court and the English High Court. Both of these Courts
have found that the EU hushkit rule is inconsistent with ICAO regulations and that
provisions of the EU rule may be at odds with EU law. As a result, both national
courts have referred the case to the European Court of Justice for resolution.
The U.S. Policy Response
The United States believes that the EU is creating an aircraft noise regulatory
framework that is at odds with international rules on noise reduction agreed to by the
International Civil Aviation Organization (ICAO), and that the EU is rejecting the
provisions of the Chicago Convention that have governed international aviation since
1944. As written by the EU, its legislation applies almost exclusively to aircraft and
aircraft engines produced in the United States. As mentioned earlier, all major aircraft
engine hushkit producers are U.S. firms. All European Airbus aircraft are Chapter 3
certified. There are also no major European hushkit producers. As a result, the

⁸ European Union. Aircraft Noise: The Hushkits. Press Information Pack. Brussels. March

12, 1999. p. 3.

⁹ Ibid. p. 9.
¹⁰ Washington Letter on Transportation. In Brief... Hushkits: Nowhere Fast Again. February

28, 2000. p.4.

United States believes the legislation is discriminatory and could cause serious
economic damage to U.S. firms.
In the period since April 1999, the United States and EU met often to try to find
some common ground on the hushkit issue. In March 2000 it was rumored that the
EU and United States were in fact close to a settlement, the details of which, were not
specifically known. For whatever reason, these negotiations foundered.
Throughout 1999 and into 2000, U.S. aviation interests sought a formal filing
by the United States to ICAO seeking relief from the EU actions. As long as the
United States felt that it could achieve a resolution through negotiation, it held back
from this filing. On March 14, 2000, believing negotiations were going nowhere, the
United States filed a disagreement under ICAO Article 84 provisions.
The EU has reacted to this filing with “regret.” The EU has more or less stated
that it cannot reach any accommodation with the United States unless the United
States withdraws its ICAO action. The United States has countered that it is
unwilling to drop the filing without some firm action on the part of the EU. The
result of this situation is the current stalemate in which the U.S. ICAO filing has gone¹¹
forward and the EU has implemented its regulation.
The United States Article 84 Filing
On March 14, 2000, the United States filed a motion with ICAO under Article

84 of the Convention on International Civil Aviation (better known as the Chicago¹²

Convention) seeking relief from the EU’s regulation. The U.S. case is based on
several specific premises including, but not limited to: that the EU has adopted a noise
standard that does not comply with ICAO regulations; that the EU has adopted a
policy that discriminates against aircraft on the basis of nationality of registry; and that
the impact of the EU regulation has a “disparate impact on U.S. interests.”
Specifically, the United States contends that the EU’s adoption of a design
standard for noise regulation is completely at odds with the performance standards
called for in ICAO regulations. The United States in its filing, contends that some of
the elements in the hushkit regulations are inconsistent. For example, there are new
Chapter 3 aircraft in service with the same bypass ratio precluded by the regulation
that are not subject to it.
The United States believes that the EU regulation clearly discriminates on the
basis of the national registry of an aircraft, to wit: hushkitted aircraft already in service

¹¹ European Union, United States at Impasse over Hushkits. World Airport Week. April 13,

2000.

¹² United States Department of State. Memorial of the United States of America:
Disagreement Arising under the Convention on International Civil Aviation done at
Chicago on December 7, 1944. Before the Council of the International Civil Aviation
Organization (ICAO) Under the ICAO Rules for the Settlement of Differences (Doc. 7782/2).
March 14, 2000. 17 p.

as part of an EU-owned airline fleet are not subject to the regulation; and foreign
aircraft subject to the non-addition rules are also clearly identified. In effect the EU
has created a system that can deny access to its markets without regard to the
performance of the aircraft. Such a system, in the U.S. view, clearly conflicts with the
Chicago Convention provisions that countries not create regulations for noise, or
other aviation activities, that discriminate on the basis of nationality.
Finally, as discussed in the next section, the EU regulation is written in such a
way that almost all of its adverse economic consequences will fall on U.S. firms.
From the U.S. perspective the selection of a design standard on a product not
produced in the EU is unfair in its distribution of economic harm and benefit. For
example, the value of a hushkitted aircraft that cannot be sold or flown into the
European market is likely reduced. At the same time a hushkitted aircraft with legal
access to the European market will at least hold its value and could, under some
circumstances, become more valuable.
The ICAO investigation is supposed to last 90 days. At the end of that period
the United States hopes that ICAO will provide it with some remedy to the EU
regulations. A potential complication for the U.S. filing, however, is that the EU itself
is not a member of ICAO. All ICAO members are countries, hence any redress that
might be granted to the United States would apply to the ICAO member nations of
the EU. There is also therefore some question about how the ICAO mechanism can
be used to deal with an EU rulemaking.
Economic Damage
The U.S. aerospace industry has consistently estimated that the EU’s regulations
have cost U.S. industry approximately $2 billion. The majority of this sum is for lost
hushkit sales to Chapter 2 aircraft. A smaller but nonetheless significant component
of this estimate is the decrease in value of already hushkitted aircraft restricted from
the EU market by the non-addition rule. The EU and others in the hushkit debate
believe that this estimate is overblown and U.S. industry has provided few specifics
as to how the $2 billion figure was derived. Nonetheless it would be difficult to
believe that the EU regulation is not capable of inflicting significant economic harm
to an industry that has been unexpectedly deprived of access to a potentially important
market.
There are many factors that influence the value of used aircraft including, age,
use, condition, original cost, and fuel efficiency. The EU hushkit regulation in and of
itself may not be the reason that a particular aircraft might or might not be sold in the
world market. The fact is that the used aircraft market is already devaluing older
commercial jet aircraft and a restricted EU market place cannot but reduce the options
of those seeking to sell their aircraft:
Owners of older Stage 2 or hushkitted aircraft need to consider this carefully. As
operating airworthy aircraft B727s, B737s, and DC-9s are worth $2 million to $3
million, but as candidates for disassembly the same aircraft falls below $1 million
– chiefly the salvage value of the engines. In the next several years’ owners who

are retiring their remaining B727s, B737s, and DC-9s are going to have to face
this fact. Most of the older aircraft will have no value except for parts.¹³
The Congressional Response
There is significant congressional support for the U.S. position on this issue.
Several Members of Congress have indicated their desire for the Administration to
take an even stronger position on the dispute. For example, several Members
supported an ICAO Article 84 submission well before the Administration decided to
submit it.
Although Congress has yet to complete any specific legislative action on
hushkits, it has created a framework for further action. The House acted first on the
issue when it passed H.R. 661, a bill “to direct the Secretary of Transportation to
prohibit the commercial operation of supersonic transport category aircraft that do
not comply with stage 3 noise levels if the European Union adopts certain aircraft
noise regulations” on March 3, 1999. The only aircraft that fits this definition is the
Concorde, and its only regularly scheduled routes are between New York and
London, and New York and Paris. The bill is viewed by its supporters as a way to
retaliate for the EU regulations if they are implemented. A similar bill, S. 405, was
introduced in the Senate but not considered.
On September 27, 1999, the House passed a resolution (H.Con.Res. 187) that
calls on the Clinton Administration to use “all reasonable means” to preclude EU
implementation of its hushkit ban. The Senate had approved a similar resolution as
part of its version of the FY2000 Commerce, Justice, and State Appropriation (S.
1217, Section 212). The resolution is supported by the U.S. Aerospace Industries
Association (AIA), but was opposed at that time by the Clinton Administration, which
hoped to ameliorate the situation through further negotiations.
In addition, the Aviation Subcommittee of the House Committee on
Transportation and Infrastructure held a Hearing on the issue on September 9, 1999.
Witness testimony and the statements of Members overwhelmingly opposed the
European position.
Hushkits in the Context of U.S./EU Aircraft Trade
For some Members of Congress, the Administration, and some in the U.S.
aviation industry, the dispute about hushkits is part of a much larger debate about
how the EU appears to support and promote its commercial aircraft industry, and
more specifically its large aircraft manufacturer Airbus Industrie. In this view, the EU
hushkit regulations are an element of a broader EU policy to give its aircraft industry
a leg up in the world market. Or, in the words of an executive of a U.S. aircraft
engine manufacturer:

¹³ A Time to Face Reality. MBA Aviation Oracle. January 2000. p. 19.

The EU non-addition rule is nothing more than a protectionist measure¹⁴
masquerading as an environmental initiative.
In March 2000, the United Kingdom announced that it was willing to provide
the equivalent of $837 million in low interest loans for a new very large transport
aircraft, the Airbus A3XX.¹⁵ This 500 - 800 seat aircraft is specifically designed to
compete directly with, and at the same time, leapfrog the reigning luminary of the
large aircraft market, the Boeing 747. Airbus’ directors gave the go-ahead to market
the aircraft to prospective customers in December 1999. Development of this aircraft
could require an investment of $12 billion or more. Airbus expects that its member
firms will contribute 60% of this sum, with the remaining 40% coming from
subcontractors. State-aid, which is limited to one-third of the project’s total cost, by
bilateral agreement, would be used to assist the Airbus partner firms. Boeing does not
perceive that an adequate market exists to develop an aircraft of this size and is
instead studying possible stretches of its 747 aircraft.
Airbus has not yet officially launched the A3XX, but is expected to do so later
this year. Some observers believe that the level of state-aid needed for this project
would likely violate a 1992 Agreement on Government Support for Civil Aircraft
between the United States and the EU.
In addition to the hushkit and new aircraft disputes, there has also been trade
friction between the United States and the EU on issues such as aircraft certification,
especially regarding long-range over-water operation of two engine jet aircraft.
Representative William Lipinski, Ranking Minority Member of the House
Aviation Subcommittee of the Committee on Transportation and Infrastructure, has
taken a lead role in promoting the view that Europe has more on its mind than airport
noise in bringing up the hushkit issue at this time:
The evidence is clear. Europe is engaged in a concerted effort to protect and
promote its aviation industry at the expense of the U.S. aviation industry....
....the U.S. government must send a clear message that the United States is serious
about protecting its aviation industry against unfair, unilateral trade actions. To
begin with, it is critical that the U.S. government enforces its rights under
international trade agreements. We must use all the tools provided by GATT,
WTO, ICAO, and other international forums to fight unfair European actions such
as unilateral trade restrictions and illegal subsidization practices. The U.S. must
act quickly and decisively when faced with such intolerable action.

¹⁴ Comments attributed to Ruth Harkin, Senior Vice President, United Technologies. As
quoted in: Norris, Guy. USA cries foul play. Flight International. April 18 - 24, 2000. p. 32.
¹⁵ Sparaco, Pierre. U.K.’s A3xx Aid Stirs Transatlantic Dispute. Aviation Week & Space
Technology. March 20, 2000. p. 47.

Observations
Implementation of the hushkit non-addition rule may very well result in
Congressional action. Congress could follow through on legislation already passed
in the House and put an end to British Air and Air France Concorde service to the
United States. This would deprive the Concorde of its only regularly scheduled
markets and relegate the aircraft to an unknown long-term fate. More importantly,
however, congressional action on hushkits might result in a much stronger future role
for the Legislative Branch on aircraft noise issues, which to this point have been the
domain of the Executive Branch.
The EU has pushed much harder for a Chapter 4 determination in the last half
decade than has the United States. There are some individuals who perceive the EU’s
hushkit regulations as partial payback for what they view as U.S. obstructionism on
adopting a Chapter 4 standard.¹⁶ There has been some speculation that the EU
hushkit initiative was actually an attempt to jumpstart the Chapter 4 process. The
continued presence of the hushkit debate, however, may be having a negative effect
on the EU’s goal of a near-term Chapter 4 decision. There is a growing U.S. view
that it will be hard to separate the two issues as part of the ICAO process.¹⁷
The Airport Noise and Capacity Act of 1990 (ANCA) mentioned earlier in this
report as the basis for U.S. phaseout of Chapter 3 aircraft, also contained a
prohibition on new airport noise regulations affecting specific aircraft noise
restrictions in exchange for a date certain move to an all Chapter 3 U.S. fleet. The
EU hushkit regulation contains no similar provision. European airports already
impose a host of differing operating restrictions on hushkitted aircraft, such as
curfews and European airports also impose differential landing charges on noisier
aircraft, a practice that is not permitted in the U.S. Airports, even in the U.S., are not
enamored with hushkitted aircraft, and put pressure on governments to limit their
operation. It appears that European airport operators have played a significant role
in formulating the EU hushkit regulation. It would also appear that these same
airports are well positioned to take action on their own to possibly price hushkitted
aircraft out of their respective markets regardless of the long term outcome of the
hushkit dispute.
It should be pointed out that not everyone views the hushkit dispute as an
important issue. Morten Byer & Agnew, a firm that specializes in the valuation of
commercial jet aircraft, believes that the market for hushkitted aircraft, especially at
the moment, is quite small.¹⁸ They also believe that the EU’s fear that a large number
of hushkitted aircraft would be added to the EU, or non-EU fleets, serving European
markets is overblown. With large numbers of Chapter 3 aircraft on order world-wide
it seems unrealistic to expect that the demand for hushkitted aircraft would increase
significantly at the same time.

¹⁶ Feldman, Joan M. Stalling for time. Air Transport World. April 2000. p. 47.
¹⁷ EU Hushkit Ban Could Impede Stage 4 Discussions, FAA says. Aviation Daily. April 20,

2000. p. 1.

¹⁸ The MBA Aviation Oracle. Much Ado About Not Much. March 2000. p. 5.

In the spring of 2000, the United States and the EU are essentially locked into
their respective positions by national political considerations. Given the current
environment, it seems unlikely that either side is in a position to make the first move
to reach a settlement on the issue. The ICAO process seems likely, therefore, to run
its course. If the United States wins its filing it is unclear as to how ICAO could
provide a suitable remedy for a hushkit industry that has already sustained noticeable
economic damage. If the EU prevails, it is quite possible that the actual road to
Chapter 4, as mentioned above, will become more tedious as each side cautiously
considers its long term political and economic needs.
For the last 56 years the world aviation system has been remarkably stable.
International rules were known well in advance and airlines and other players in the
market place could plan for them. Now, the EU may have opened Pandora’s box, if
just a little, with its hushkit regulation. If the EU can unilaterally decide what the
standards are for aircraft noise, then it isn’t a far stretch to consider other aviation
regulations that could be subject to the whims of national political expediency. While
the hushkit situation might quiet down over time, there are other equally important
aviation issues confronting the EU and the United States such as aircraft trade. With
the hushkit spat as a backdrop, these areas of dispute become potentially more
volatile.