UNITED STATES OF AMERICA

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DEPARTMENT OF TRANSPORTATION

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FEDERAL AVIATION AUTHORITY

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1ST ANNUAL FAA INTERNATIONAL AVIATION

SAFETY FORUM

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PANEL B

JEFFERSONIAN SALONS I, III & V

NEW TECHNOLOGIES ABOUND

IS THE REGULATOR A DETERRENT TO INNOVATION?

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THURSDAY

SEPTEMBER 23, 2004

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CHANTILLY, VIRGINIA

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The session was held at the Westfields

Marriott Conference Center, 14750 Conference Center

Drive, Chantilly, Virginia at 1:30 p.m.

MODERATOR:

ANDREW B. STEINBERG

Chief Counsel,

Federal Aviation Administration

PANEL MEMBERS:

JAMES C. MAY,

President and CEO, Air Transport Association

ROBERT A. STURGELL,

Deputy Administrator, Federal Aviation Administration

EDWARD M. BOLEN,

President, National Business Aviation Association, Inc.

JOHN W. DOUGLASS,

President and CEO, Aerospace Industries Association

DEBORAH MCELROY,

President, Regional Airline Association

MERLIN PREUSS,

Director General, Transport Canada

P-R-O-C-E-E-D-I-N-G-S

1:30 p.m.

MODERATOR STEINBERG: On the record. Good afternoon, everyone. If you
would take your seats, I would appreciate it. We\'re going to get
started now. A couple of our panelists have to leave on the dot at 3:00
p.m. So in the interest of having as much time for discussion as we can,
we\'ll get started. My name is Andrew Steinberg. I\'m the Chief Counsel
at the FAA. It\'s my pleasure to moderate a discussion about
technologies and whether regulators act as a deterrent to innovation and
in the safety area or whether we facilitate it or something in between.

Let me just quickly introduce our panelists. I\'ve been admonished that
I should only give their names and titles. So that\'s what I\'ll do. I
think you\'re familiar with many of them. First, and this is the order
in which we\'ll give some opening remarks, Jim May, right here to my
left, is the President and Chief Executive Officer of the Air Transport
Association.

Second, Bobby Sturgell, to my right, is the Deputy Administrator of the
FAA. John Douglass is the President and Chief Executive Officer of the
Aerospace Industry Association. Debbie McElroy, President of the
Regional Airline Association. Merlin Preuss, the Director General of
Civil Aviation from Transport Canada. And last but not least, Ed Bolen,
the newly appointed President and CEO of the National Business Aviation
Association (NBAA). So thanks so much everybody for joining us.

What we\'re going to do is I\'ll just set the stage and then we\'re
going to go around and get discussion going with some preliminary
comments. It seemed to me that much of the discussion this morning
focused on new technologies that we collectively think can get the
commercial aviation industry to this so-called \"promised next level of
safety.\" I think all of us were very inspired during the description at
lunch time about the coming evolution of the aviation industry.

That leads to the natural question and the question was raised at lunch,
\"What is the right role of the regulator, of the FAA, of Transport
Canada, etc. in this setting?\" How do we encourage safety innovation
without imposing unnecessary costs on an industry that obviously is
already burdened by high costs? Should we just get out of the way, so to
speak, and let the industry innovate and will they voluntarily introduce
safety innovations without regulatory pressure?

Now, of course, when we do regulations at the FAA, it\'s not done in a
vacuum, if you will. The Office of Management and Budget (OMB), part of
the White House, sets the process and standards by which we consider an
issue, new regulations.

As probably most of you know, we have a fairly structured process
beginning with a notice of proposed rulemaking or an advanced notice of
proposed rulemarking and on down through a final rule. Comments
generally are given to us in writing and although the industry has moved
toward more of a discussion format if you will for regulation coming up
with ideas for regulation, it is nevertheless a very structured process.

OMB tells us to look at and develop an economic analysis before we issue
a new rule by looking at three essential factors. The first is a cost
benefit assessment. The second, which I think is particularly applicable
to what we do in the aviation industry, is to consider the use of
performance standards, performance objectives, as opposed to
prescriptive regulations. Thirdly, and this has been very important
under the current Director of OIRA (Office of information and Regulatory
Affairs) at the Office of Management and Budget to focus on getting the
best and most accurate scientific or technical information before we
make a decision.

From my point of view, there are two ends of the spectrum here. On the
one hand, you can come up examples of where prescriptive regulations
arguably freeze innovations and I\'m sure we\'re going to get lots of
examples as we go around this panel.

One that occurred to me is our flight crew member duty period, flight
time and rest requirements, highly prescriptive, highly regulated, lots
and lots of very specific interpretations from out of my office on
exactly what the regulations mean. One could argue that the existence of
those regulations freezes research and certainly implementation of
innovative new approaches such as different ways of managing fatigue
that other countries, in fact, are now looking at.

The other end of the spectrum it seems to me, there are examples where
regulation is necessary for innovation. Those tend to be, I would argue,
more in the area of standard setting. So for example, this summer we
issued after many, many years of deliberation a series of regulations
known as the sport pilot rule, but they\'re regulations on light support
aircraft. Those regulations were important, I would submit, because they
set some standards by which manufacturers could come up with an aircraft
and we use consensus standards in that case.

I\'m going to quit in a second, but I think I can say that ten years ago
one wouldn\'t have predicted the need for this conference. That the
industry collectively would have gotten to such a point where we have to
figure out how to get to the next level of safety, how to continually
drive that accident rate down.

But here we are. So we\'re going to go around the panel and I\'d ask
each of the panelists as they give their remarks to also answer the
following question which is \"Have we achieved the current record of
safety as a result of regulation or in spite of it or maybe some
combination of both?\" With that, let me start with Jim May from Air
Transport Association.

PANELIST MAY: Andy, I think to answer your question as a first order of
business so that I don\'t forget to answer it, I think it\'s a
combination of the two concepts and I think it is a result of a great
cooperative effort between FAA and the industry and all of those in the
industry.

Maybe that leads then to one of my first points that you can\'t talk
about airline industry safety without talking about CAST \[Commercial
Aviation Safety Team\]. I think it is a classic example of something
that by its very nature it\'s innovative. Since its inception by the
industry with the cooperation and support of the FAA in the \`90s, I
think it\'s enabled us to get broad, collaboration on any number of
issues.

A second area that I think is important to make note of for the group
are ASAPs \[Aviation Safety Action Program\] which enable people to talk
in a confidential fashion, granting immunity to employees on inadvertent
safety violations. I think it\'s a large step forward. The voluntary
nature of that program, I think, is very positive.

You talked a little bit about prescriptive versus performance based
approaches. I think the impending rule on fuel tank flammability is a
great example because we expect that to call for some level of
flammability reduction without necessarily being so prescriptive that we
get into hard and fast specific solutions.

Maybe another good example of that is the aging rule notice where we\'re
really involving manufacturers in great part. We have implementation
windows that I think are going to be acceptable and workable and I think
it\'s yet another example of an important innovation by the FAA.

Innovation, I think, can be risky not from a safety perspective because
we certainly don\'t want to take risks on that front. But I think there
are examples over the years where we\'ve stepped out ahead of the pack
and embraced innovative technology. Maybe the flight data recorders
collecting additional parameters, etc. would be a good example of that.

We know that every now and again we may be forced to do things that we
don\'t necessarily agree with and I think that this could be a
particular problem in a time of extremely tight resources and that\'s
something that we have, this cooperative nature, that\'s going to be
very important to us. Let me stop there and use that as my opening.

MODERATOR STEINBERG: Great. Bobby, it seems to me that Jim is in some
way that collaboration voluntary disclosure, those kinds of approaches
are what we need to do. It feels to me like the antithesis of
regulation. What do you think? What is the right role of the regulator?

PANELIST STURGELL: Well, I think those programs, CAST, ASAP, all the
collaboration efforts, there\'s a definite role for that kind of regime
in the whole framework. They are new ways of doing business for us. I
expect we\'ll continue to do business in some areas in that way in the
future. I\'d throw in the ART process along with that.

I think as we look to the future obviously we don\'t want to be seen as
a deterrent to innovation and focusing on that specific question, we
need to continually improve. I think there\'s probably four specific
areas where as I look at innovation and new technologies and what we can
do to be better and to encourage innovation, I guess the first area
would be we need to find a better way to support innovation in its
infancy.

When new products come along and they are good products, we have to find
better processes to get those products into the marketplace quicker,
more efficiently, less costly. The longer it takes, the higher the cost,
the more deterrent to innovation. In a specific area, I would just point
to our experience as we wrestle with the whole aerospace industry and
specifically reusable launch vehicles and Burt Rutan and his crowd.

That\'s a new area for us. We\'re doing a lot of back and forth with
them as we move forward, but we\'re making progress. Again, it\'s a
matter of finding the right way to support that industry as it moves
forward and still maintain a great safety record in our role as the
regulator as we go there.

The second one is, I touched on a little bit, decreasing the length of
the certification process and the cost. Better process is definitely. We
should always be looking at ways to improve ourselves. Nick, John, Jim,
their team went down to Brazil just recently and came back and Nick
spoke to me yesterday about Embraer using virtual reality and it\'s
probably something that is available for us.

Maybe we should take a look at it and see if there\'s a role for virtual
reality in the mock-up process and again under the guise of we need to
continue and improve the processes we have in place. I do also think as
Jim pointed out, more and more of our rules should be performance based
rules which actually do encourage innovation.

Third, I think we can\'t continue to let regulations linger. It\'s one
thing for everybody to collaboration and discuss over years specific
problems, specific issues. It\'s a whole other issue to actually send
out a notice and to let that notice sit out there for five, seven, ten
years. I think we only have those problems in really the big, tough
issue areas, but it\'s still a problem. What it does, it causes people
to sit on the sidelines.

Andy mentioned the Sport Pilot Rule. Here\'s a case where the FAA brand
is valued and industry sits on the sideline waiting for the FAA to bring
out standards. I think it\'s a pretty innovation rule in itself, but
again when we put the rules on the street, people see things being
advanced and they\'re not going to act for fear that they\'re going to
take the wrong approach or their approach won\'t be accepted and those
kinds of issues.

We\'re having the same issues in the whole UAV \[ Unmanned Aviation
Vehicle\] area. Here\'s an area that\'s coming at us, I think, faster
than we expected. We\'re having to develop a framework that\'s going to
have to be able to accommodate those both operationally and with
certification issues.

The last point I would just make is I think to encourage innovation we
have to find ways to incentivize people to innovate. What I would point
out here is last year\'s Enhanced Vision System \[EVS\] Rule. We have to
look for ways to put out regulations, rulemaking activities, that
actually encourage people to bring products to the marketplace. I think
we did that with the EVS Rule.

There are other areas that I look forward where I\'d like to see if we
can\'t find a similar type of solution. It would be nice to get RNP
(Required Navigation Performance) out on the street. I know once it gets
there if we can just publish some approaches in the right places, it\'s
going to encourage the industry to innovate and make use of available
technology on board.

The other area is runway safety. We\'ve made tremendous strives in the
runway safety long before I got there in the Agency and the people that
have been working this issue need a lot of credit along with the
industry partners in this effort. But as I look at the different places,
there\'s a piece that still I think is a glaring gap in the whole issue
and that\'s the issue of technology or what\'s available to the pilot in
the cockpit.

We\'re trying to do some things with runway status lights and airport
marking and those kinds of issues, but we\'re not getting technology
into the cockpit, things like ADS-B \[Automatic Dependent
Surveillance-Broadcast\], things like the system Honeywell is working on
with the enhancements to the EGPWS. It would nice if we could find a way
to incentivize people to bring those kinds of technologies into the
airplane. So as I look at whether you\'re being a deterrent or promoter,
those are probably the four areas I would point to.

MODERATOR STEINBERG: Very well. John, what do you think from the point
of your manufacturers? Do you really need help from the Government or
we\'re the Government and we\'re here to help you innovate? Are some of
the things that Bobby mentioned in terms of reforming the certification
process, speeding up rulemaking, using performance based rules, will
those things help?

PANELIST DOUGLASS: In general, Andrew, I agree with what my colleagues
have said from their perspective on integration. What I represent on the
panel today is where the innovation tends to take place in terms of the
hardware, not the processes, but mostly the hardware. I\'ve spent my
life in that world not just in dealing with innovation in the civil
sector, but in the Department of Defense and space systems and in some
of the other regulatory places like at the White House and in the
Congress.

When I look at what are we talking about today in terms of civil
aviation and innovation and put it in the context of this conference,
what I heard Marion say today is she sees a huge growth in the
through-put that\'s needed for the system. We want to triple our
capacity of the system over a certain period of time.

But we want to continuously improve safety and I think some of the
panelists on the panels this morning sort of alluded to it, but there is
a fear that if we don\'t pay close attention to safety as we increase
through-put, we could see safety degenerate. Nobody wants that to
happen.

We know the current system that we have is not scalable. In other words,
we can\'t just pump more controllers or pump more airplanes. We can
scale it to a certain point, but when we look at the cost of the
scalability issues that we would have to pay to upscale it, they\'re
pretty high. All of this brings us to innovation everywhere whether
it\'s at Marion\'s level or up and down the whole system. People are
thinking we have to get more innovative.

There are a couple of key issues that have to do with innovation that
I\'ll just throw into the pot from the point of view of manufacturer.
The first one is that there is a relationship between investment and
innovation. Innovation normally doesn\'t come free. There\'s always I
suppose some margin of good ideas out there that are free, but generally
you have to do research.

One of the things that came out of the Commission on the future of the
aerospace industry was that there\'s a huge differential on our
government today about where we spend out research dollars. So we know
that we have a lot of technology in other departments of the government
like in NASA and the Department of Defense that could be drawn over to
the FAA to deal with the problems of the future that could be seen as
innovation.

But in the past, we haven\'t had good ways of doing that. Now the role
of drawing it over in the past, a lot of people have assumed that
industry can just do that internally. In other words, some guy out at
one of the companies talks to somebody at FAA and listens to their
problem and says, \"Gee, we worked on that over DOD\" and just logically
they could bring that idea in and FAA would look at it and say \"Isn\'t
this great? Let\'s do this.\" We all know it doesn\'t work that way.
There\'s not invented here.  There\'s a lot of issues there.

So the first point that I\'m making is that we have to have a team
approach and I think that\'s what my colleagues said. Innovative ideas
that don\'t fly with the regulator or don\'t fly with the operator are
never going to get off the ground. So we have to approach this. But I\'m
upbeat that we can solve this one if we continue to really hammer at how
we move this technology and I think the key to that is going to be do we
take advantage of the JDPO.

The second part of innovation here is there has to be some credibility.
There has to be credibility both in the industry that this new
technology is going to work, but there also has to be credibility that
the government can assimilate it properly and then there has to be some
credibility by the user that it\'s going to help them.

If you don\'t have that credibility there, again it isn\'t going to work
because our system of moving forward is such that if any of the three
partners, the designers, the users or the regulators go up to Congress
and say something bad about a new technology, it\'s never going to get
in. We all have to do this together.

Our credibility has not always been the best in the past. All of the
government agencies have gone through credibility slumps. Industry\'s
gone through credibility slumps, both the operators and the
manufacturers. So working on our credibility as we look at what are our
objectives as we build this new air traffic control system to me is one
of the most important aspects of this whole thing. In other words, we
shouldn\'t promise that we can do marvelous things for no cost or that
we can achieve things more rapidly than we think. We have to have a
credible plan and we have to work on selling it.

Then once you begin to implement this, Bobby, I think one of the issues
for the regulator is there\'s always the problem of do you have enough
people to do the rulemaking and the procedures and everything to really
get it implemented. That\'s not just a problem in FAA. It\'s a problem
in the Department of Defense. It\'s a problem at NASA \[National
Aeronautics and Space Administration\].

When you relate this to safety, it can get insidious at times. We all
have witnessed in the last few years the issues that NASA had. We deal
with them on the same issues just like we deal with the FAA. Everybody
takes the safety pledge. Nobody wants to see a bad thing happen to our
astronauts. But somehow on a day to day basis, small little increments
safety eroded to the point we had a catastrophic event.

A lot of that, when the Gaming Commission came in and looked back at it,
we looked at little budget cuts here and there and an engineer lost
there and a loss of talent there and it all added up to the point that
even though we\'d had a wonderful string of successful flights, we were
building ourselves a disaster. That\'s what we have to guard against
here. So I think there needs to be investment. There needs to be
teamwork and there needs to be internal vigilance on the regulator side
to make sure that we\'re all, all this team, is playing together.

I\'ll just close my comments by echoing what Jim said. I think the CAST
program, Jim, has been an outstanding success. This is a case where we
were doing things voluntarily. The key to it is we took a systems
approach. We have to maintain that systems view of security as we build
a new air traffic control system because if you lose the systems
approach, you\'re going to lose the bubble on this. That\'s my view from
the manufacturer.

MODERATOR STEINBERG: Debbie, what\'s your reaction? Should we be
pursuing more team-like approaches, working on credibility, trying to
get more resources so we can issue more meaningful regulations quickly
or should we just get out of the way?

PANELIST McELROY: I\'m going to fold in on the side of somewhat getting
out of the way. It\'s probably not a surprise. I think as most of you
know the regional carriers have grown significantly over the last ten
years and we\'ve added a lot of very sophisticated airplanes and we\'re
continually enhancing our safety systems. That\'s really what I\'m going
to focus on, systems and processes, because that\'s where we\'re doing a
lot of work with the FAA.

In reviewing the background materials for this session, one of the
articles struck me that historically most folks think that FAA\'s
primary motivational tool is fear, fear of violating the regulations.
But that seems to be changing. Certainly there is a more of a
collaborative spirit and a spirit that is emphasizing more positive
reinforcement.

Clearly recognizing an airline safety system in developing inspection
schedules and procedures that really recognize the work that the
carriers put into place was one of the driving forces behind ATOS. It
makes sense to all of us that carriers that have a documented
comprehensive safety system should see modifications and perhaps
reductions in the FAA inspections. I think this would also help FAA
address some of the problems they have with more limited resources and
being called upon to handle a lot of new areas.

Unfortunately, some of the early experiences with ATOS that the regional
carriers have had show that it\'s very complex and rather than reduce
the number of inspections what we\'re seeing is quite the opposite.
It\'s taking more FAA staff and more carrier staff. What\'s most
troubling however is that we\'re seeing more of a check-the-box process
which really isn\'t leaving enough room for alternative systems.

The complexity of the process also leads us to believe that the analysis
of the audit findings may take too long and really one of the messages
that came through very clear this morning is that we really need to
think about innovation. We need to think about precursors of accidents
in order to reduce our already remarkable safety record. We don\'t want
this to be the same as the old audits when it comes to building a safety
system program.

We recognize the need for regulations, but with this being a primary
focus for FAA personnel, this inhibits discussions about possible safety
innovations, new procedures or equipment. Right now, there\'s no place
for those discussions to occur without the fear of civil penalties. RAA
\[Regional Airline Association\] previously proposed that a position on
principal safety inspector be established so that the field staff would
have an equivalent counterpart to the air carrier safety director.

Now this person would not have enforcement responsibilities and would
keep their discussions with the carrier confidential unless there was an
imminent threat to public safety. We still believe this has merit
especially at a time where we\'re collecting and utilizing more ASAP and
FOQA \[Flight Operations Quality Assurance\] data. We need to have
better coordination between the FAA and industry.

In answer to one of Andy\'s previous questions, we strongly support
performance-based regulations where the standard is set, where
flexibility is recognized as being important and it\'s the outcome that
is measured, not measuring that it\'s a certain process in place. This
is really important going forward because we need to recognize we need
to harness the innovative capabilities of the performance-based
regulations.

Unfortunately, that\'s going to be a learning process for all of us.
There are many of us both in industry and in government who are whetted
to the old process and they would embrace greater uniformity over
innovation. Frankly given the technologies that greatly enhance training
and the learning process, this is one area where we think that the
carriers should be given more opportunity to innovate.

One of the things that RAA has taken a leadership role in is distance
education and distance education holds the promise of finding innovative
ways to raise the safety bar. This is an area where the industry
innovated, but FAA has been strongly facilitating that innovation to
their credit. This is going to provide all of us a novel means of
improving comprehension, efficiently allocating training resources and
improving quality of life for airline employees.

So I guess, Andy, to answer your question, I think we\'ve all gotten
here with a combination of both regulation and the very initial stages
of fostering innovation. I think all of us need to look hard at the
processes in place so that we can enhance that atmosphere that allows
carriers to innovate and allows them to develop processes that are
appropriate for their operation, for their aircraft and will help us all
to improve the safety record.

MODERATOR STEINBERG: Merlin, it sounds like a number of things that
Debbie is advocating are things that from my understanding you\'re
looking at or already doing in Canada. I\'m hoping you\'ll comment on
safety systems as opposed to prescriptive regulations. I\'m also curious
to know whether we in the United States can learn a little bit about how
to get to a regulatory process that\'s less onerous, less involved
because it sounds like a theme among all the panelist so far that we
need to be talking to each other constantly as opposed to a lot of what
we do in regulations sent documents back and forth. Then we read them
and 18 years later, we answer them. What\'s your view?

PANELIST PREUSS: You started off with a question about the role of
regulation and getting to the safety record that we have. Just to echo
what everybody else has basically said, the regulations alone haven\'t
created the record that we have. They\`ve played a role, but then so has
everybody else involved in the system.

What Andy is alluding to is a change, I guess, in our safety policy in
Canada. It certainly will depend for its success on innovation. I hope
that what we\'re setting will make innovation a key part of the changes
that we think are necessary. We\'ve heard Alan and others talk about now
for several years the business about increasing activity, more or less
stable accident rate causing an increase in the number of accidents,
reduction of public confidence. There goes with the financial viability
of the system. That\'s one of the targets of our new policy.

The second thing, it\'s been touched on again in terms of the FAA\'s or
any regulatory authority\'s ability to be resourced to the same level
ration wise as the increase in the system outside in terms of the
increase in activity, the increase in the number of carriers. So we in
Canada don\'t see it possible for us to continue to do things in the
same old way.

What the new policy in Canada says is we are going to regulate a risk
management system. In other words, we\'re going to tell every
certificate holder, and this is not airline operators alone, this is our
airports, this is our NAV system, this is our MROs \[Maintenance Repair
and Overhaul\] or AMOs \[Aviation Maintenance Organization\] or
engineering organizations and we\'re going to ask them to put a formal
risk management framework in place.

What that will do is it will change the role of our intervention. Today
virtually every regulatory authority in the world intervenes at the
operational level. We go in there and watch mechanics turn wrenches,
pilots pull pitch and all of those things that we love to do and become
used to doing.

In the perfect world of the future from my perspective, we won\'t be
going in and doing that unless it\'s absolutely necessary. We will be
going into the system to look at the systems that are in place to meet
those safety performance objectives which of course are part of this
risk management thing to set those objectives so you can measure your
progress.

Because the very nature of this new regulatory framework is performance
based, it will allow the certificate holders to decide on the best way
to meet those performance requirements, ergo innovation is key and
they\'ll be allowed to do that. We will hopefully respond in an
appropriate fashion.

The second general question asked here is well, is there a way that the
industry will voluntarily take this task on in terms of implementing new
technologies. When I talk about new technologies, I\'m not specifically
speaking about hardware. I\'m also talking about ways that you manage
risk.

Our pilot programs and the implementation of this new policy have
indicated that there is a clear safety benefit and an economic benefit
to taking this approach. So if that turns out to be universally true,
there is a way to show that innovation is going to be something that
impacts on the bottomline.

So we\'re well on our way to getting this going. I believe in the end
we\'re going to be able to reduce our dependence on the technical
people. That won\'t be available perhaps at any price in the future to
do it in the old way. I firmly believe that we will see a safety
performance increase by taking this approach as we\'ve seen in other
industries that have taken this approach.

MODERATOR STEINBERG: Great. Well, Ed, gosh it seems to me that your
segment of the market is growing about as fast as anyone else. One of
the things I\'m hearing is that we don\'t have enough resources to look
at all the safety issues that are out there now and maybe we\'d be
better off moving toward general performance standards with an overlay
of a safety management system making sure that each segment in our
industry has essentially a quality assurance kind of approach in place.
How do you see that applying to business aviation? Should we be getting
more resources so we can be issuing more regulations more quickly for
this fast-growing part of the economy?

PANELIST BOLEN: Well, I think when we look at what we\'ve talked about
during our entire day today, a couple of principles are beginning to
emerge and I think that they are principles that I heard Bobby
articulate as becoming real values for the FAA.

At the heart of that is a recognition that we are about an industry
safety. Safety matters to manufacturers. Safety matters to operators. It
matters to customers. It matters to investors. It matters to regulators.
I think what we\'re beginning to hear as we talk about the success
programs, CAST and all the other things is that when we get away from
the cops and robbers and start getting to collaboration and start
talking about identifying trends through CAST or through FOQA, we begin
to really move forward on safety.

So I think that collaboration needs to be a fundamental guiding
principle of the FAA going forward. I think some of the other
fundamentals are performance-based. We began this with a question on
whether the FAA facilitates or deters innovation and I would say it has
a track record of doing both. It\'s currently doing both. It probably
will continue to do both.

But I\'m beginning to see reasons that I think the trend is more towards
facilitation rather than deterrence and part of that is (1) a continuous
focus on certification process and improvement. Bobby talked about that.
If the certification process is long and it\'s byzantine and arbitrary,
you will stifle the flow of capital and intellectual ideas into the
marketplace.

Certification can continue to be comprehensive and continue to be
thorough. At the same time, it can be efficient and predictable and
understandable. As we continually try to improve certification and
ultimately move toward certified design organizations, I think that is
going to stimulate innovation in the technologies because there is some
certainty that it will reach the marketplace and it will reach it in a
timely fashion. So I think a principle that focuses on a certification
process that is continually improved to enhance safety and
predictability is very important.

We also talked about performance based regulations and I think that\'s
really critical. There have been so many numerous examples in the past
where sometimes we forget as regulators what you know as a human being.
I mean you sense something has to be safe but you\'re so busy trying to
prove that it meets the regulation you miss the big picture.

Bobby talked about one of the great success stories of the FAA being the
EVS and I agree that that\'s a phenomenal technology that can have a
tremendous improvement on safety, but we came pretty close to not
getting that.

We came close to getting it because there was something in the
regulation that talked about what you are able to see without aid. And
some of the regulators thought that \"No, this is too much technology.\"
You\'re seeing through weather but there\'s too much technology.\"

Finally, it took Nick Sabatini saying, \"Well some people wear glasses.
Some people use windshield wipers. Sometimes these are just improvements
to your vision.\" And we ultimately got Enhanced Vision, but that\'s an
example where we almost lost it because we were missing as regulators
what we should have known as human beings. It was only when Nick
actually flew the Enhanced Vision and saw it and knew intuitively that
it was going to be safe that we were able to see something.

I think the FAA still has a ways to go in terms of making a decision.
Bobby talked about how long rules are out there, but we still need to
make decisions to facilitate innovation.  We have to make decisions like
what are we going to use for a datalink before you\'re going to see a
lot of people putting a lot of money into it.

We also are going to need to see an FAA that is focused on getting the
true benefits into the marketplace rather than just certifying the
technology.  We just had an interesting panel about WAAS. We now have
the WAAS \[Wide Area Augmentation System\] signal and that is a great
success. But until we have procedures that are out there, there\'s going
to be very little reason for people to equip. They don\'t see the
benefit from it.

Even EVS as great as that is in terms of a safety enhancement because
you can see through the weather, making the business case for it is not
altogether simple because it doesn\'t give you any reduced minimums. So
I think the FAA still needs to focus in terms of what it takes to get
the true safety benefit out there and that means making decisions that
people can rely on and know that if they follow that path the benefits
are going to follow.

MODERATOR STEINBERG: Great. Well, let me kick off more of far-ranging
discussion. It sounds like one of the things a lot of you have said is
that we need to reform the certification process. I think this morning
even the administrator made the remark that sometimes in certification
the perfect is the enemy of the good and I know there are some examples
like that out there. What do the rest of the panelists think about
changing the certification process and how would you do that?

PANELIST STURGELL: Well, I guess philosophically the thing I would say
is that no organization should be satisfied with the status quo. I mean
people should be continually looking to improve processes and gain
efficiencies and do a better job no matter what. Broadly, that\'s kind
of the dilemma where the industry is today in terms of the safety
record. We\'re at a point where the safety record is at an all time
high. So as you look forward, how do you continue to improve on that
record?

One of the things I\'d like to hear from the industry folks is one of
the things you talk about is the regulator getting out of the way. I
think anecdotally what I hear sometimes is that without the regulators\'
involvement that nobody steps forward. Nobody wants to be the first one
out with the technology or whatever.

That kind of ties into the discussion this morning about is safety a
profit center. As we look at our accident rate and we look at what other
changes we can do to improve the safety record, the cost benefit is
becoming tougher and tougher and tougher to justify. So how do you move
forward from here in a regime that is doing so well? That is airlines in
tough situations look at it from a financial perspective.

Maybe the business case is harder to justify a safety improvement and
the FAA looks at it from a cost benefits perspective, knows there are
things that need to be addressed, but again cost benefit is not quite
there. So how do you keep moving forward? Is the answer complete
collaboration or are there other things that we can do together?

MODERATOR STEINBERG: What do the rest of you think? That\'s almost a way
of saying, Bobby, that we should move forward with regulation even if
what OMB has told us to do which is make sure the benefits outweigh the
costs. Even if that\'s not the case, should we do that?

PANELIST McELROY: See, I think we\'ve talked about the fact that if
you\'re issue regulations if you can make the case for it, that you need
to focus on performance-based regulations which again you state the
objective. But given the variation in operations and operating
environment and aircraft, it\'s important to let the airline or the
operator choose the procedure of the technology that is going to achieve
that objective but is not so prescriptive that it becomes cost
prohibitive to do that.

PANELIST DOUGLASS: Andrew, can I come in that?

MODERATOR STEINBERG: Please.

PANELIST DOUGLASS: If you look at classic innovation theory, they tend
to divide it into two categories. One is called technology pull. This is
when users or the regulators identify a need for new technology and they
tend to set the requirement and an industry goes out and does the
research, sometimes the industry in collaboration with the government,
occasionally industry on itself.

Then there\'s another kind called technology push. This is when
technologists invent new things to do or some person is out working on
problem A and they have a \"eureka.\" Man could we use this over on
problem B? Both of them work in our society today, but in a highly
regulated environment, technology push is very difficult if you don\'t
have a mechanism for your users and your regulators to be in sync and
for the market to be acceptable to that.

The problem or the construct that we have in civil aviation is somewhat
different than the rest of the government and the rest of the government
often there are only two players, the industry people who create the
technology and someone in the government who uses it. In the case of
civil aviation, you have industry often creating the technology. The
user is another part of industry and then you have the regulator in the
middle.

For technology to really flow efficiently and seamlessly, you have to
have a mechanism to have the three in sync in some way. I mean there are
occasional things that are so radical and so obvious to everyone. I
think maybe the way people started using GPS \[Global Positioning
System\] might kind of fall into that category where regulations and
other things had to catch up to it because people were just going to go
out there and use it anyway. It gave them a boost, but that tends to be
the exception rather than the rule in my view.

MODERATOR STEINBERG: So it\'s a three-legged stool with users,
manufacturers and regulators. But one question I have for you is we
talked a lot this morning about is there a bottomline element to safety.
Isn\'t there more competition over safety elements from the point of
view of manufacturers than there is from, say, the point of view of some
of the users?

PANELIST DOUGLASS: I don\'t know. I was thinking about that when I was
hearing some of this. The manufacturers often will look at safety in a
way the way that they look at reliability. When you have an accident,
you\'ve had a process failure. We really know how to do failure analysis
in equipment. If you look at hardware today, you can just look anywhere
in your life.

Where we used to have mechanic things that broke down, had to be
adjusted, had to be tuned, had to be taken back, that\'s almost gone out
of our society today.  So we know how to build things that are
enormously more reliable than we were in the past. We can look at safety
from that same point of view. But you get to a certain point in the
safety equation when you\'re turning your equipment over to someone else
and then it is the procedures that begin to dominate the equation.

I can\'t remember who it was this morning, it was one of the airline
chairmen pointed out that you have to be eternally diligent on that
procedures end of the mechanism because if all of your hardware and even
the process that you have is well-honed, people will make mistakes.

MODERATOR STEINBERG: Does vigilance mean that we need to tell the
airlines exactly and pilots exactly what procedures to use? I think
about when do you need prescriptive standards and when do you need
performance standards. I may ask folks to think about whether you could
have a performance standard in lieu of the following, just from our
regulations: \"No person may act as a crew member while having .04
percent by weight or more of alcohol in the blood.\" Would you have a
performance standard for that? What do you think, Jim?

PANELIST MAY: I seriously doubt you could have a performance standard
for that. I think there are going to be clearly areas and you\'re asking
the youngest member of the panel in the sense of newness to the
business. I would make a couple of observations from my brief experience
and they\'re really directed at examples.

I think the flammability issue is a classic example, as I mentioned
earlier, of where you can have if the FAA were at all interested in
reducing flammability, comes up with some performance standard. There
are a variety of different ways to accomplish a reduction in
flammability as opposed to simply mandating that every commercial
airplane in the United States has to have a special fuel tank and airing
systems for example or something of that sort. I think that\'s one area.

You ask about the manufacturing input. I think it was a security rather
than a safety, but I think it\'s also in play if the FAA mandates or if
Government more broadly mandates changes like installation of cockpit
doors and it takes some time for manufacturers to figure out how to
design those. We have to have flexibility in the regulation to take all
of that into account. So I think it is a collaborative effort.

I think there are certainly areas where prescriptive is going to be the
rule of the day. I\'m not an expert in these areas, but I can\'t imagine
that there aren\'t abundant examples where a prescription is
appropriate. But I think as we go forward in looking for ways to enhance
safety in an admitted by all, far more difficult economic environment,
there needs to be taken into account flexibility as to how we accomplish
the common goal.

Once upon a time, I worked in a different industry and we used to have
to worry about different states regulating the same issue in different
ways. We called it \"purposeless diversity.\" I think the Federal
Government can find itself guilty of purposeless diversity if it\'s not
careful.

MODERATOR STEINBERG: That\'s a good segue. I was going to ask Bobby and
Merlin about this issue of collaboration and is it politically real for
us to think that we could get out of the regulatory mode and be more
flexible, avoid purposeless diversity when it seems that every time
there is an incident or even a question, Congress is asking us to do
something about it and issue a prescriptive regulation.

PANELIST PREUSS: There\'s actually at least two parts to that question
in terms of collaboration. It speaks a bit to the example you gave on
the prescriptive regulation. My experience is often I\'ve had the
industry come to me and ask something to be prescribed to create an
economic level playing field.

One of the things we\'re finding now as we start to implement the new
policy I referred to a few minutes ago is now organized labor is scared
to death about not having prescriptive things to hang their hat on when
they start dealing with the industry. So the idea of collaboration now
is not just collaboration between industry per se, the leaders of the
industry and the government.

We now have to take, and certainly in our country, I don\'t know to what
extent it applies here, we certainly have to take into consideration
where organized labor sits because what they will do immediately if they
don\'t like something is they will go to the court of public opinion and
turn the public\'s ear and eyes towards what the government is doing by
way of moving from prescription to something less prescriptive. So
collaboration right now is the key absolutely and yes, we have the
opportunity to go forward but we must do that cautiously.

MODERATOR STEINBERG: Bobby, do you want to comment?

PANELIST STURGELL: Yeah, I would just say that I think there is always a
role for the FAA\'s regulatory regime, specifically prescriptive rules.
I think there\'s always going to be a role for the enforcement side of
the FAA. I don\'t see the FAA ever giving up those kinds of leadership
issues or areas is kind of the way I\'ll describe them.

I think you can point to areas in the past where it\'s taken the FAA
coming forward to \"force people to step up\" in whatever area. That
said when you look at the way we\'re doing business now, Merlin touched
on system safety approach, FAA\'s taken similar initiatives through its
organization in dealing with the carriers and it might not be as smooth
as we want, but we\'ll work it out eventually, the FOQA, the ASAP
programs, the collaborative efforts with CAST, I see all of these things
necessary as we move forward to continue to try and improve the safety
record. I see each one of them having a role. Maybe the disagreement is
exactly when you should use what tool in the toolbox.

MODERATOR STEINBERG: Ed, what\'s your view?

PANELIST BOLEN: I agree with Bobby. I think there are times when it\'s
important for the regulator to use the enforcement tool and there are
times when it does have to be prescriptive. But we start with a
foundation where we\'re all in it for safety.

You know you look at a general aviation pilot. They are betting their
life when they get on their plane. So they have some idea of what is
necessary to keep the plane safe. That has to be recognized. I think
we\'re beginning to see that and I think that\'s all going in the right
direction.

MODERATOR STEINBERG: Let me interrupt with a question. Will they always
make the right choices? In other words if that were true, one would
think that we would almost have the same safety record in general
aviation that we have in commercial aviation.

PANELIST BOLEN: Well, I think they\'re operating in different
environments. You know they\'re operating into thousands of different
airports, some that are improved airports, some of them that are not.
There\'s a wide variety of equipment. There are different skill levels
among the pilots, but I don\'t think anybody says, \"Gee, I want to
maintain my airplane improperly so there\'ll be a little more
excitement.\" That\'s not the way they operate. Everyone thinks they are
trying to operate in a safe manner and that\'s really where they are
trying to go.

PANELIST DOUGLASS: Andy, when he said that, it kind of made me laugh
because sometimes in the military when you look at young pilots,
sometimes they do like excitement. When you look at the way the military
approaches safety, it is a whole different approach than the FAA. But
clearly the military has learned over the years that you have to have
rules and regulations and you have to enforce them or you\'re going to
have a pretty high accident rate.

They operate their vehicles in a completely different environment and do
things that we would never want to do like fly really close together and
have to fly very close to the ground on dark nights and rely totally on
avionics for their survival.

But what is important, I think, over the long haul is for us to take
some of that technology that we have developed in the military for other
reasons and be able to move it across where we can see that it can be an
advantage to the system, not just do it to do it, but where it can be an
advantage.  We have radar systems that are enormously capable. They are
deployed algorithms that can do this navigation, Bobby, you know that we
were talking about this morning.

You know the Navy\'s had cooperative engagement capability deployed in
the fleet now for over 10 years where every ship knows all the sensors
in the whole fleet. So you have 30 different radar hits on anything
flying within a certain area and it\'s all integrated together so you
within fractions of a centimeter of where things are. That technology is
out there. We just need to figure out ways to move it in a cost
effective way so that it can be assimilated into this new system in the
future.

PANELIST STURGELL: Yeah, when you talk about transferring those
technologies, John, specifically the JPDO \[Joint Planning Development
Office\] and I see Charley Keegan\'s out there in the audience heading
that up for us, but I see that effort as really another step in the
whole collaboration process. I mean for the first time we\'ve gotten all
the major government players. We\'ve gotten industry. We\'ve gotten the
users.

We\'ve gotten everybody involved in how we move to the next system in
the future and what\'s the best way of doing that and how we can best
use the tax payer dollars and the government\'s knowledge to put the
next generation transportation system in place. I think that\'s a great
effort. I think that\'s a great example of again the next step in the
collaborative process here.

MODERATOR STEINBERG: Debbie.

PANELIST McELROY: We favor performance-based regulation, but we also
recognize that there is a role for prescriptive regulations. The one
that Andy mentioned clearly with the alcohol testing is one, but I think
it\'s interesting to note that that was one that the industry supported
and in fact since then they have urged FAA to innovate and we have
different testing devices. Even when we have prescriptive regulations,
it\'s important that there be an open process so the industry can come
back and improve the regulations that are in place.

I think Jim also touched on a really important point. In some cases,
there\'s a need for those prescriptive regulations because we are facing
50 different state regulations and that is a real inhibitor to carriers
having an efficient and effective operation and in fact, sometimes it
inhibits your ability to provide a consistent, safe operation. So again
we did recognize there\'s a need for prescriptive regulations, but even
in those cases, we need to open to continually improving them.

MODERATOR STEINBERG: Is collaboration though consistent with the current
regulatory process that we have? Are there things that we should look at
changing in the way we do regulations that would increase the amount of
collaboration?

PANELIST DOUGLASS: One of them I think that was talked about a little
bit today is where safety and security come together. Our government has
tended to divide some of the regulatory responsibilities there. You know
if you\'re just a person that gets on an airliner, the distinction
between safety and security is pretty damn thin because if you\'re
insecure, you\'re unsafe.

So the public doesn\'t look at safety as an FAA thing and security is a
Homeland Security thing and think \"I\'m real comfortable with this
group of guys over here dealing with this problem and that group of guys
dealing with that unless they get together and talk.\" So there is
another collaboratory issue here that we need to make sure that it is
working properly.

You mentioned performance specs. You know the Department of Defense
again has learned many years ago that it is dumb to overly prescribe
specifications for things like cockpit doors. You don\'t care what the
heck they\'re made out of. What you want is they have to keep somebody
out for a certain period of time. Bullets can\'t go through them.

You can make them out whatever you want if they meet those criteria. You
need to get away from saying they have to be this thick or they have to
have only this material or they have to be made by only this process.
You want a performance spec in a case like that.

PANELIST MAY: Let me just throw an idea out or a thought out, Andy, on
collaboration. We really have focused the discussion on individual
subjects of one sort or another. As we go forward, and Bobby mentioned
JPDO, I think that we\'re going to have some really extraordinary
challenges to making improvements in air traffic management for example,
modernizing, upgrading, putting those things in that are going to truly
enhance capacity and do it in a positive way.

I would disagree with him on one very minor front only and that is when
we say we have all these parties together to get behind a project the
government isn\'t all together yet because the biggest piece missing is
Congress. Probably the most difficult of all is Congress because each of
them has their own unique constituent interest that they are trying to
pursue which is one of the great problems that FAA faces is that they
get a budget and half of that budget is earmarked for some pet project
or another and it may or may not fit within the OEP or any other plan
that is going forward.

The point I\'m going to make is that I think collaboration is going to
be more important in the future that we come to an agreed upon strategy
or plan whether it\'s through JPDO or any other mechanism and that we
all stress our collaborative efforts to get to those goals. If we don\'t
improve our system of air traffic control, if we don\'t get more runways
built, if we don\'t find ways to improve capacity, a lot of these other
issues are going to become moot.

MODERATOR STEINBERG: But should collaboration be prescriptive on the FAA
in the sense that, let\'s take, CAST for an example? I don\'t think fuel
inerting was on the list, Bobby, but we\'ve moved out pretty forceful in
that direction. Why should we go forward with standards that we think
may be more important than industry work groups think?

PANELIST STURGELL: Well, you\'re right. It wasn\'t on the first set of
CAST initiatives and CAST still has a whole bunch of things to continue
to look at. I mean we just have the first six areas we\'re dealing with.
We\'re voluntarily implementing them. We need to see how the
implementation is going.

We need to incorporate the FOQA and the data programs to see if it\'s
really having the impact we want and to identify future areas as well
and then we need to move down the list and see what else was identified
as part of that whole process and whether we can address those or not.

MODERATOR STEINBERG: Okay. We\'re going to wrap up in a few minutes.  I
would like to give everybody a chance to think about whether we\'ve
reached consensus on any items. It sounds like there\'s a fair amount of
consensus about collaboration, about performance standards, but can
anyone offer us who are required to do regulations any concrete advice
as we think about getting to the next level of safety? We\'ll start with
John.

PANELIST DOUGLASS: Well, I just think that occasionally there has to be
a little bit of push-back from the agency, Bobby, from you and Marion,
with the OMB thought police on how the budgets work. We all know that
those of us that\'s been around Washington for a long time know that an
Administration, there is more or less tolerance with high level people
speaking out.

But I think that some years when we created an FAA that was supposed to
be at least to some point depolitized where it could address these
safety issues at some level above politics. You have to ever be vigilant
and I\'m not saying that you all aren\'t by any stretch of the
imagination, but it\'s just something to remind you about in this
regulatory way that this thing that Jim\'s brought up about Congress and
about being able to convince them to adequately fund these projects is
insidious.

We\'ve all been there. We all know you go up. You go to the hearing.
They\'re up there on the dias. You\'re down there on in the dumps like
they\'re the great majesty of the world and you\'re some peon. And it\'s
very difficult to show them that if they take your \$50 million or your
\$100 million that tomorrow the world is going to collapse.

But when that happens, many times in a row it does begin to have an
effect on the system. At some point, you have to put your foot down and
say, \"Look. The growth is there. We\'re not going to get from where we
are to there without a national investment. Some of that is already
being made in other departments, but some of it has to be made in our
department. It has to be collaborative thing. That\'s when industry has
to come in and back you all up and say they\'re right.\"

We have to have more here and move it forward because it is very, very
difficult to make that extra step that Jim brought out which is once
you\'ve achieved consensus within the government, the industry, the
operators, to convince Congress is really an issue here. It\'s amazing
that it is so hard in this particular area because every one of them
almost flies home every weekend and can certainly see the problems.

But we also all know that Jim\'s people don\'t treat them the same way
they treat John Q Citizen. If you have that little round thing on there,
you get up to First Class like that and everybody waits on you and so
on. So that\'s the way the world works and we all know that.

MODERATOR STEINBERG: Ed, what do you think? Any final advice for us?

PANELIST BOLEN: Well, I think the important thing is to continually ask
ourselves whatever we\'re doing why are we doing this. What\'s the
purpose? A lot of times you see a regulation becoming almost a
regulation as an end in itself and we get so wrapped up in nits and the
bits that we forget to say, \"Is it really accomplishing what we were
trying to do?\"

The FAA is a safety agency. At times following the regulation can lead
to a less safe end than something that they\'re trying to prevent with
the regulations. Focus on the purpose. Focus on the purpose and I think
if we can do that, then we can make sure that we don\'t just follow the
letter of the regulations, but we\'re capturing the intent and the
spirit of the regulations.

MODERATOR STEINBERG: So you stand up to Congress, focus on the purpose.
What do you want to add, Jim?

PANELIST MAY: Just call me, Andy.

MODERATOR STEINBERG: Okay. The ultimate in collaboration.

PANELIST MAY: I think we\'ve talk about that \"C\" word. It really means
that we ought to have continual discussions, communication. I think we
do have that. I compliment the FAA for a very high level of
accessibility at all levels. I mean Nick, yourself, the administrator,
Bobby, everybody through the chain. As long as we\'re able to
communicate with one another, as long as we try not to surprise one
another which maybe has happened from time to time, then I think we\'re
going to have a far more positive outlook than we otherwise would.

MODERATOR STEINBERG: So no surprises. Bobby, what do you think? Do we
surprise the industry some?

PANELIST STURGELL: We try not to. Jim\'s raised the fuel tank inerting a
couple of times. I think that\'s the classic example of the dilemma
we\'re facing as we move forward. We\'ve worked through this problem for
a number of years. We have the technology now at a point where we think
it\'s fairly affordable. So we have a known solution for a known
problem.

Now we\'re looking at how do you address the cost benefit as you move
forward in that area. That to me is a perfect example of the state of
where we are today in terms of we\'re at this safety level. How are we
going to drive it farther?

MODERATOR STEINBERG: Debbie, do you have any closing thoughts?

PANELIST McELROY: I agree with Jim about communication. I think that\'s
key. I think all of us up here have the opportunity to speak it to the
senior folks at FAA. But I think again that we have to recognize that in
the field whether it\'s the air carriers or the maintenance facilities
that there may not be that same level of transparency.

As I mentioned earlier, there\'s a focus on whether the regulations are
being fully complied with and the civil penalty and there are some
instances of \"gotcha\" out there. We need to focus on better
communication, communication about safety issues without the threat of
civil penalty and continued use of data whether it\'s collected through
FOQA or ASAP or just during conversations between the regulator and the
individuals operating the system.

MODERATOR STEINBERG: Thanks. Merlin, what\'s your perspective?

PANELIST PREUSS: I guess if we\'re going to get to the next level and
continue to see the accident rate reduce, we have to engage the industry
or we have to make the industry more responsible speaking as a regulator
and you know you have to trust and do the right thing from time to time.
That means stepping back a bit, looking at it from the systems level and
of course communicate, communicate, communicate.

MODERATOR STEINBERG: Well, I want to thank everybody for your time. I
did promise that we would finish right around 3:00 p.m. We\'re pretty
close. Thanks everybody for coming and for your attention. Off the
record.

(Whereupon, at 3:03 p.m., the above-entitled matter concluded.)