The United States has long been the global leader in aviation. With the world's most efficient, most competitive, and most innovative airlines, U.S. aviation has been a prime mover in shrinking the globe. 

No less than the Internet or modern telecommunications, we have been the infrastructure of globalization.  With networks connecting every continent, the U.S. airlines  the "legacy carriers"  have been instrumental in creating today's "flatter" world.

 U.S. civil aviation leadership has played an important role in the security and stability of the nation and the world.  From the Berlin Airlift to Operation Iraqi Freedom, our industry has supported national defense and the cause of freedom.  That is an important part of our legacy at United, and in that sense... we are proud to be a "legacy carrier."

Today, however, the U.S. airlines no longer lead.  In fact, U.S. network carriers are falling further behind our leading international competitors. 

I would like to offer some thoughts on the current and the future reality of the airline industry; why it matters to our country and why it should matter to each of us. And, at the risk of giving away the punch line, l will also offer thoughts on why removing outdated regulatory restrictions on our growth and operations, as has been done in the energy, communications and other business sectors, is necessary for U.S. passenger airlines to adapt and succeed in the new global market place.

This industry has gone through five years of economic retrenchment, geopolitical shocks, and undisciplined overcapacity that has sent three of the five major U.S. international airlines into bankruptcy.  During that time, U.S. airlines together generated $58 billion in net losses.

In this state of financial fragility, the U.S. network carriers have been unable to make investments in new aircraft fleets, new technologies, and in product and service improvements  all of which are offered by our international competitors.
 
No U.S. passenger carrier has ordered the new A380, and U.S. carriers have ordered only a handful of the new-technology Boeing 787.  Without such investment, we cannot realistically hope to regain leadership, nor stay competitive in a "flatter" global market. 

While our financial situation is improving, we face a mature domestic market and a very tough international competitive environment.  U.S. network carriers face ever-stronger competition, both domestically and internationally.

In the growing global marketplace, our international competitors are strengthening their position and benefiting from scope and scale efficiencies through consolidation and other business transactions. They have the financial ability to invest in new fleets, enhance services, and expand networks. 

Today, the most successful, profitable international passenger airlines are all outside of the U.S. In 2005, not one U.S. passenger carrier was on the list of the world's 20 most profitable international airlines. After its successful merger, Air France-KLM leads, along with airlines such as British Airways, Lufthansa and Japan Airlines.

Other carriers such as Emirates Airlines and several new Indian and Chinese carriers are making multi-billion dollar investments in new, long-haul fleets and services that will compete with other airlines investing in the fastest-growing markets of Asia and the Middle East. 

Added to this international landscape is the new reality of economic terrorism.  As those in the defense world know all too well, we face a "new normal" in today's environment where geopolitical and "shocks to the system" must be routinely anticipated.

How we adapt to these new realities and challenges will determine whether U.S. carriers can halt the current decline in global competitiveness, much less regain world leadership in aviation.  

The U.S. network carriers have individually undertaken dramatic steps in restructuring  though there is much heavy lifting still to do.

At United, over the last four years, we have undertaken a $23 billion restructuring, cut costs dramatically and raised productivity. Our focus is on improving our operations and implementing our business plan, and on a commitment to ongoing and continuous improvement. 

We are not in denial about the evolving competitive environment, nor what it will take to succeed.  We know what we need to do to compete today and that we must meet a whole new set of challenges tomorrow.  We know that transformation and improvement must be a continuous, ongoing, never-finished commitment.

As we work our way toward greater efficiency and financial strength, improving our products and service, we will continue to focus on achieving the right balance of the needs of our customers, shareholders, and our employees.

 We know that to succeed in the global business environment, we need to aggressively pursue fundamental change. This includes structural change which enables us to become strong, global competitors.

Today, the route to global competitiveness is blocked for U.S. network carriers by strict prohibitions on international investment and commercial control; and by an outdated regulatory approach and application of antitrust laws and policies domestically that continue to promote fragmentation of the U.S. airline industry. 

European regulators have taken a very different view in their efforts to integrate the European Union, encouraging consolidation and integration among the European airlines.  Asian carriers are also consolidating, as in the case of Cathay Pacific and Dragonair.

U.S. regulatory opposition to industry consolidation and the promotion of industry fragmentation undermines our ability to adapt and restructure to meet this new global competitive reality.

Whatever relevance this approach may have had in a bygone era, it makes NO sense in a world in which our major international competitors are large and growing mega carriers outside of the U.S., and in which the domestic market competition is, to put it mildly, vigorous and robust. 

These unique restrictions in the U.S. are only imposed on the aviation industry.

• They foreclose U.S. airlines from tapping significant sources of potential investment capital. 
• They preclude U.S. airlines from growing through our own acquisitions or mergers, and achieving scope and scale efficiencies... exceptions are "death bed" deals, too little too late. 
• They impede our ability to create a more stable and internationally-competitive U.S. industry, to the benefit of our customers, investors and our employees.
  

The prosperity of the U.S. network carriers is not just a matter of our commercial self-interest. As I said at the beginning of my remarks, our industry plays a unique role in facilitating U.S. participation in the global economy, and our success is closely aligned with the nation's economic strength. 

A key element to removing the regulatory barriers that impede our ability to compete globally is the elimination of restrictions that prevent us from investing in carriers outside of the U.S., and which in turn limits international investment in U.S. carriers.

Opponents of reforms that involve increased international investment say it would compromise U.S. security or defense interests.  But the fact is that DOT's regulatory proposal has been carefully reviewed by the Department of Defense for any national security concerns. 

The Defense Department and the Transportation Department have even gone so far as to develop a Memorandum of Understanding that provides procedures for DOD to participate in reviewing airline citizenship matters, in the context of fitness reviews, that raise any risks to CRAF commitment. 

The interests of our national security are best served by making sure that the U.S. has access, when needed, to the very best transoceanic transportation assets, craft and flight crews, of financially sound U.S. airlines.
 
In an environment where U.S. network airlines remain fragile and under competitive pressure by more profitable carriers around the globe, adherence to "legacy regulation" is unjustified and harmful.

We, at United, are doing our part to rebuild and succeed with a commitment to continuously improve and raise the bar on our performance. Our government should not handicap us, or others, in that effort.

Our financial stability also supports our longstanding and active commitment to the national defense through the Civil Reserve Air Fleet Program.

United has had the honor to transport the men and women needed to accomplish the defense mission around the world moving tens of thousands of U.S. troops. Through CRAF, we and other U.S., airlines have put more than a thousand civilian aircraft (and trained crews) at the Defense Department's disposal in case of need.

Because CRAF requires the continuing availability of numerous high-capacity aircraft, the mission can only be handled by U.S. international carriers  those with the required equipment and pilots with international flying capability and experience.

The foundation of the U.S. network airline industry has always been providing critical service and connectivity for passengers and cargo across the U.S.  We provide the linkage across America and we provide the linkage to the global economy. By maintaining broad networks linked to large hubs, we serve you in hundreds of small communities and we take you to the capitals of the world. 

We enable global commerce and bring together people, ideas, and cultures, face-to-face, in a way that no form of remote communication can. 

As we emerge from a difficult five years, it is time for us to begin to seize new opportunities. United fully intends to expand our global reach to compete in the world's fastest-growing markets.

Federal Express, here today, and the air cargo sector, have succeeded and prospered while robust competition is preserved. Both FedEx and UPS have been able to compete successfully with international giant DHL in a business environment that works. These companies operate ever-expanding global networks enabled by the most modern technologies, and depend on worldwide integration, economies of scope and scale, and cross-border relationships.

Do we want the same opportunity for our U.S. network carriers?

We need to make a fundamental decision:  "Do we want a world-leading airline industry in America, or do we not?" 

If we do not want one, if we do not believe that civil aviation plays a critical role in both the economic development and the security of our country, we can simply leave things as they are. 

The airlines outside of the U.S. will continue to dominate the growing international markets and U.S. network carriers will find it harder and harder to compete. 

If we do believe in the significant impact and opportunity that comes with a world-leading airline industry, then we have to face the challenge, change our mindset and policies and give our airlines the opportunity to compete globally... and allow airlines to play by the same rules as other global industries. 
 
The rules of the marketplace... Simple rules, those who compete most effectively for the customer, win.

This is a challenge and opportunity we want. I'm proud of what we've been able to accomplish at United in the last four years. What I know -- what everyone at United now knows -- is that on a level playing field, we will be able to go head to head with any airline.

My message today is "Let us compete."

The United States, our customers, investors and our employees will be the beneficiaries of what happens next.

Thank you.

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