U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

28–274 PDF 2006

KEEPING U.S. AVIATION

MANUFACTURING COMPETITIVE

(109–59)

FIELD HEARING

BEFORE THE

SUBCOMMITTEE ON

AVIATION

OF THE

COMMITTEE ON

TRANSPORTATION AND

INFRASTRUCTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

MARCH 22, 2006 (WITCHITA, KANSAS)

Printed for the use of the

Committee on Transportation and Infrastructure

(
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-Chair

SHERWOOD L. BOEHLERT, New York

HOWARD COBLE, North Carolina

JOHN J. DUNCAN, JR., Tennessee

WAYNE T. GILCHREST, Maryland

JOHN L. MICA, Florida

PETER HOEKSTRA, Michigan

VERNON J. EHLERS, Michigan

SPENCER BACHUS, Alabama

STEVEN C. LATOURETTE, Ohio

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

ROBERT W. NEY, Ohio

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

GARY G. MILLER, California

ROBIN HAYES, North Carolina

ROB SIMMONS, Connecticut

HENRY E. BROWN, JR., South Carolina

TIMOTHY V. JOHNSON, Illinois

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

BILL SHUSTER, Pennsylvania

JOHN BOOZMAN, Arkansas

JIM GERLACH, Pennsylvania

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

TOM OSBORNE, Nebraska

KENNY MARCHANT, Texas

MICHAEL E. SODREL, Indiana

CHARLES W. DENT, Pennsylvania

TED POE, Texas

DAVID G. REICHERT, Washington

CONNIE MACK, Florida

JOHN R. ‘RANDY’ KUHL, JR., New York

LUIS G. FORTUN ̃ O, Puerto Rico

LYNN A. WESTMORELAND, Georgia

CHARLES W. BOUSTANY, JR., Louisiana

JEAN SCHMIDT, Ohio

JAMES L. OBERSTAR, Minnesota

NICK J. RAHALL, II, West Virginia

PETER A. DEFAZIO, Oregon

JERRY F. COSTELLO, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JERROLD NADLER, New York

CORRINE BROWN, Florida

BOB FILNER, California

EDDIE BERNICE JOHNSON, Texas

GENE TAYLOR, Mississippi

JUANITA MILLENDER-MCDONALD,

California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

LEONARD L. BOSWELL, Iowa

TIM HOLDEN, Pennsylvania

BRIAN BAIRD, Washington

SHELLEY BERKLEY, Nevada

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

JULIA CARSON, Indiana

TIMOTHY H. BISHOP, New York

MICHAEL H. MICHAUD, Maine

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

BRIAN HIGGINS, New York

RUSS CARNAHAN, Missouri

ALLYSON Y. SCHWARTZ, Pennsylvania

JOHN T. SALAZAR, Colorado

JOHN BARROW, Georgia

(II)
SUBCOMMITTEE ON AVIATION

JOHN L. MICA, Florida, Chairman

THOMAS E. PETRI, Wisconsin

HOWARD COBLE, North Carolina

JOHN J. DUNCAN, JR., Tennessee

VERNON J. EHLERS, Michigan

SPENCER BACHUS, Alabama

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

ROBERT W. NEY, Ohio

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

ROBIN HAYES, North Carolina

HENRY E. BROWN, JR., South Carolina

TIMOTHY V. JOHNSON, Illinois

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

JOHN BOOZMAN, Arkansas

JIM GERLACH, Pennsylvania

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

CHARLES W. DENT, Pennsylvania

TED POE, Texas

JOHN R. ‘RANDY’ KUHL, JR., New York,

Vice-Chair

LYNN A. WESTMORELAND, Georgia

DON YOUNG, Alaska

(Ex Officio)

JERRY F. COSTELLO, Illinois

LEONARD L. BOSWELL, Iowa

PETER A. DEFAZIO, Oregon

ELEANOR HOLMES NORTON, District of

Columbia

CORRINE BROWN, Florida

EDDIE BERNICE JOHNSON, Texas

JUANITA MILLENDER-MCDONALD,

California

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

TIM HOLDEN, Pennsylvania

SHELLEY BERKLEY, Nevada

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

BEN CHANDLER, Kentucky

RUSS CARNAHAN, Missouri

JOHN T. SALAZAR, Colorado

NICK J. RAHALL II, West Virginia

BOB FILNER, California

JAMES L. OBERSTAR, Minnesota

(Ex Officio)

(III)

(V)

CONTENTS

TESTIMONY

Page

Bunce, Peter J., President & CEO, General Aviation Manufacturers Association ........................................................................................................................ 7

Greer, William W., Vice President and General Manager, Airbus North America Engineering, Inc. ............................................................................................ 26

Harrah, Janet, Director, Center for Economic Development and Business

Research, Wichita State University .................................................................... 6

Hawley, Kevin, President, Aerospace Systems and Technologies, Inc. ............... 26

Mullins, Craig S., General Manager, Lyons Manufacturing ................................ 26

Pelton, Jack J., President, Cessna Aircraft Company .......................................... 7

Schuster, James E., Chairman & CEO, Raytheon Aircraft Company ................ 7

Turner, Jeffrey L., President and CEO, Spirit Aerosystems, Ins. ....................... 26

PREPARED STATEMENTS SUBMITTED BY WITNESSES

Bunce, Peter J. ......................................................................................................... 42

Greer, William W ..................................................................................................... 50

Harrah, Janet ........................................................................................................... 57

Hawley, Kevin .......................................................................................................... 62

Mullins, Craig S ....................................................................................................... 66

Pelton, Jack J ........................................................................................................... 69

Schuster, James E ................................................................................................... 75

Turner, Jeffrey L ..................................................................................................... 82

(1)

KEEPING U.S. AVIATION MANUFACTURING

COMPETITIVE

Wednesday, March 22, 2006

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON AVIATION, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, WASHINGTON, D.C.

The subcommittee met, pursuant to call, at 10:00 a.m., at the

National Institute for Aviation Research, Wichita State University,

1845 Fairmount, NIAR Room 307-309, Wichita, Kansas, Hon. John

L. Mica [chairman of the subcommittee] Presiding.

Mr. MICA. Good morning. I would like to welcome you to the

hearing of the House Aviation Subcommittee. This is an appeal

hearing of the Committee on Transportation and Infrastructure of

the United States Congress, and we are pleased to be here in Wichita, Kansas, and also at Wichita State. It may be one of their first

congressional hearings to be held here, so somewhat of a historical

occasion, and on a very important topic, and the title of today’s

hearing is ′′Keeping the United States Aviation Manufacturing

Competitive.′′

I am Congressman John Mica from Florida. I am pleased to chair

this subcommittee, and also pleased to have with us today my colleagues on the Transportation and Infrastructure Committee of

Congress, and we are fortunate to be in the district of a very good

friend, also a committee member, someone who takes American

competitiveness very seriously, and also a member of the powerful

House of Appropriations Committee, Todd Tiahrt. So thank you for

hosting us today.

Then I thought Jerry Moran was right around the corner across

the river. Little did I know that Hays, I guess it is, is a 3-hourplus drive from here. But we are delighted to also be in his State,

and not too close, but fairly close to his district, I guess, as far as

the crow flies in Kansas.

Jerry Moran, who I think many of you know, is not only on the

T&I committee, but very active on the Agriculture Committee and

the Veterans Affairs Committee, really a senior of the members

that we have.

Then probably one of the most distinguished, at least from an intellectual and science standpoint, also age, Vern Ehlers from Michigan with us. He is, of course, on the T&I Committee, a leader on

the Science Committee, and he now—I am privileged to serve with

him, and he has taken over as Chair, challenging time for the Congress and the country, of House Administration. So we are delighted to have these distinguished members, and I will yield to

them in just a minute.
2

The order of business and proceeding today is going to be, first,

opening statements by members. I will give my opening statement

in just a moment. Then we have two—we have assembled two expert panels of witnesses. We will hear from them. And I would

also—I will also entertain and pass a motion without—without objection and unanimous consent that the record be left open for a

period of 2 weeks.

Now, it is impossible in this proceeding to have everyone participate who is from the aviation community here in Kansas or across

the country to testify on this important issue. But we certainly welcome—and any request through the Chair or any of the members

of the panel here, submission of additional testimony which will be

made part of the official record of our proceedings today. So, without objection, for 2 weeks the record will be open to entertain and

include those comments and testimony.

With that, I think what we will do is go ahead, start right off.

I have got some comments to open with, and then I will yield to

other members.

Again, I want to thank not only Wichita State University, but

also the National Institute for Aviation Research for hosting this

meeting of the House Aviation Subcommittee. We had a few minutes this morning to also tour some of the facilities and look at

some of the programs here at the Institute for Aviation Research—

it is very impressive—and I am sure this community, the State,

and country can be proud of their work. So we thank you for your

efforts and also, again, Wichita State for hosting us today.

This is, in fact, a very important hearing, not only for Congress,

but it is also an opportunity for all of us to come together that are

interested in keeping the United States aviation manufacturing industry competitive, to come together, discuss some very important

issues and how we stay ahead of the curve.

After the difficult period of 2001 and the terrorist attack on our

Nation’s aviation system, America’s aviation sector fortunately

today is on the rebound, and sometimes I have some bad news to

report, but actually, there is some good news today. In 2005, shipments of large civil aircraft by the U.S. civil aviation industry increased both in number and also in value. Despite a slight increase

in commercial jetliner production, 290 aircraft, an increase of just

seven from 2004, transport revenues did increase 7 percent to $22

billion. General aviation aircraft shipments—and it was good news

for this part of the country—soared with 604 more deliveries to a

record $8.5 billion, and civil helicopter sales surged from $515 million to a record $750 million. Taken together, U.S. civil aviation

aircraft sales, which also include engines and parts, increased some

20 percent in 2005 to $39 billion. The U.S. aviation industry is

forecasting—and that’s a very optimistic forecast—but an even

stronger year for 2006 with commercial jetliner sales increasing

from 290 to somewhere around 400.

Our aviation industry has the highest net trade surplus of all of

our manufactured goods and has consistently recorded trade surpluses even as the overall U.S. trade balance and manufactured

project has widened. Last year when the United States experienced

a record trade deficit, the aviation industry recorded a trading sur-
3

plus of some $37 billion. U.S. aviation exports sustained over

600,000 high-wage, high-tech jobs in the United States.

Export sales help support not only the airplane manufacturers

themselves, but many other companies, including small- and medium-sized enterprises. And we saw many of them as I drove in.

You can see an array of medium- and small-sized businesses here

in Wichita, Kansas.

To continue growth in the aviation manufacturing sector, our

Federal Government must have—must adopt both policies and support programs that allow American aviation industry to compete in

an increasingly competitive and expanding global market, and that

is going to be part of our discussion today, how we do that. Access

to foreign markets is crucial for United States manufacturers of

civil aviation and parts of civil aircraft, including engine manufacturers. This is the largest segment of the U.S. aerospace manufacturing industry accounting for about one-third of the total aerospace shipments measured by value. About two-thirds of all the

large civil aircraft produced in the United States are shipped to

customers.

Now, what I think is very important today, and I look forward

to some testimony on some of these issues: tax policy, product certification, competitive trade negotiations and finance opportunities,

all that give the United States—that will give the United States’

aviation manufacturers a level playing field. And we know that

these are some of the most important challenges that we face, at

least as our Federal responsibility.

One of the most important responsibilities of—also of this subcommittee, is to maintain fair international marketplace and competition for United States companies and their employees who

manufacture aircraft and aviation industry parts. I know the Bush

administration and other Members of Congress, from both sides of

the aisle, share my views on this issue.

Today I hope to hear from leaders in American aviation, in the

very heart of our Nation’s aviation manufacturing capital, and I

hope to hear from this capital here in the Midwest recommendations that we can take back to America’s political capital in Washington and hopefully act upon. So I very much look forward to the

proceedings today and hearing from these witnesses and others

who will submit commentary and recommendations to the subcommittee. And we look forward to see how we can further expand

this very critical sector of our Nation’s economy.

With those opening comments, again, I am pleased to be here.

Let me—we won’t do this necessarily in order of seniority, but I

want to yield, first, to the gentlemen who is hosting U.S. today, Mr.

Tiahrt. You are recognized.

Mr. TIAHRT. Thank you, Mr. Chairman, and thank you for being

here. I can’t tell if this thing is on or not. I guess it is. Can you

hear me in the back? Okay.

First of all, let me thank you for coming to the air capital of the

world. This is a great honor to have the chairman of the Aviation

Subcommittee here and members of the Transportation Committee,

and the chairman of the Government Reform Committee, Vern

Ehlers, also a leading scientist in Congress—the leading scientist

in Congress. You know, if you look up at the makeup of the people
4

who are serving in the United States House of Representatives, I

think there are only a couple of them that come from the scientific

ranks like Vern Ehlers. So to have him here as part of this hearing

process, I think, is invaluable. He brings a lot to the table, a lot

of unique perspective.

This is an industry that has a great advantage for the United

States economy in that it is a trade plus as far as the surplus is

concerned—as was pointed out by the chairman’s opening statements, $37 billion net last year. When you look at a $7 trillion

trade deficit, we have to have more industries function as the aviation industry does, producing solid products from solid people, and

making a big advance in our economy and our trade around the

world.

Yet, this is a vulnerable industry. It is vulnerable to outside economic influence like the terrorist attacks we saw on September 11,

2001. Shortly following that, 25,000 aviation workers were laid off.

We are very vulnerable to glimpse our economy. We are also vulnerable to tax policy. This industry is vulnerable to tax policy in

that if we have positive adjustments in the Tax Code like accelerated depreciation, we can take an industry out of a slump and give

it a good start to get back on its feet.

But yet, if we change the dynamics of how people account for

costs in the industry, for example, having to account for passengers

on a corporate jet, and an inordinate amount of regulation that

goes along with that, we can have a devastating effect on sales. So

it is vulnerable in that respect.

And in trade policy it is also vulnerable, and I think every time

we develop new trade policy and get another trade agreement like

we did with DR CAFTA or with NAFTA, we open up markets for

the aviation industry. And it gives them an advantage.

If you look at other countries like Brazil that make Embry Air—

where Embry Air is located, if they have a trade agreement with

a country that America does not have a trade disagreement with,

it can make as much as 15 percent difference in the bottom line

or on the bid for an aircraft. So it is a huge advantage when we

have effective trade policy that we not only get in writing, but also

enforce. So I think when we look at our economy, we look specifically at the aircraft industry, we need to take into account the

vulnerabilities so that we can have a strong footing to be a big part

of our future economy.

One last thing I would like to bring up before we go into our

questioning, Mr. Chairman, is that the government regulatory policy can also have a big impact on this industry. We have a representative here from FAA certification, and when that agency is

underfunded, it can delay the response time to get new products

in the market. When we have an over-regulation burden, perhaps

the way we collect revenues for the Federal Government, we can

also have a big impact on this fragile—somewhat fragile industry.

So as we move forward to prepare for the next economy, I hope

we look not only at the great advantage that we bring through employing people and through providing wonderful products, but we

also look at how the Federal Government can be at a disadvantage

for this industry that, at times, has been very fragile.
5

So, once again, thank you for being here. I thank Mr. Moran for

being here as well, coming on a long drive this morning, and I am

looking forward to the testimony and the questions.

Thank you, Mr. Chairman.

Mr. MICA. Thank you. And again, we appreciate your hospitality.

We are also in the backyard or pretty close to the backyard of

the other member from Kansas, who is an outstanding member,

and I want to recognize him at this time, Jerry Moran.

Mr. MORAN. Mr. Chairman, thank you very much. Talk about a

long distance, it may be 3 hours to my home, but the district is

about 10 minutes from here, so we cover a good portion, and we

are delighted to have you here—the district surrounds Wichita to

the east, north, and the west. So we are delighted to have you here,

and Mr. Ehlers here.

Congressman Tiahrt, obviously, these are issues that matter

greatly to him and the people of his district, and he is a member

of the Transportation Subcommittee of the Appropriations Committee and has been an advocate on aviation issues for as long as I

have known Todd; and it is a real honor to be in his district with

him. And he and I welcome you and Mr. Ehlers to Wichita.

This subcommittee was in Wichita, at my request, several years

ago looking at several issues related to Mid-Continent Airport and

airline service, and we are delighted to have you back.

I am delighted to be on the campus of Wichita State University

and to see the National Institute of Aviation Research, which we

know is world renowned, but delighted also to be here in a week

in which Wichita State University is—the Shockers are playing in

the Sweet 16. It is an exciting moment not only for this campus,

but for all of us in Kansas, and we wish them well.

I have, with your permission, invited businesses in the First Congressional District of Kansas, the one I represent, to join us today,

and we will hear how important aviation manufacturing is to small

businesses in Hutchinson and Salina as well as Lyons, Kansas, and

also would point out the important role that Mr. Schuster’s company, Raytheon, plays in Salina, Kansas, a significant employer in

my district.

So we look forward to working with you. I look forward to hearing the testimony.

Kansas is clearly the aviation State. There is no State in which

these jobs matter more. Forty-five thousand jobs in Kansas are related directly to this industry, a $417 million payroll. So we appreciate your interest in the competitiveness of this industry, and

know that it matters greatly to people of our State. We are delighted to welcome you to Kansas and to Wichita.

Thank you, Mr. Chairman.

Mr. MICA. Thank you. And now we will recognize, waiting patiently, the gentleman from Michigan, Mr. Ehlers.

Mr. EHLERS. Thank you, Mr. Chairman. It is a pleasure to be

here, and I certainly enjoy Wichita. It was good to come in last

night, even though the hotel and people spoke English without an

accent. I was born not too far from here, so it is good to encounter

Midwestern people again, hard-working and honest as the day is

long. They are well concerned about the name of the basketball

team. I had to explain to an Easterner this morning that they were
6

Shockers, not because they played in New York or something like

that, but it had something to do with wheat.

At any rate, as I think Todd mentioned, the air capital of the

world, and it is certainly better to be in the air capital of the world

than the hot air capital of the world in which we spend most of our

time. I do love aviation. I always have since I was a child. I love

airplanes. I love pilots. I love the whole business, which sometimes

complicates my judgment on these issues. But I think it is an essential industry, and the problems, as I see it, of the industry—and

I will be very interested in whatever testimony you have to offer

because I am sure I don’t have as good a picture as you do, but

I think competitiveness is a major aspect.

I think Todd mentioned trade agreements. That is a very important part of it. Another very important part I have been working

on very hard is improving our educational system, particularly in

science education so that we will have an adequate supply of scientists and engineers for the future, because we are certainly not

doing a good job of that now.

Money is a problem, money or sufficient funds to run the FAA.

They are being slowly starved in the government ranks. The airlines are starving, to a certain extent starving themselves, but they

are also a victim of circumstance. And just the general financial

problems, particularly in manufacturing as well. It is a tough business out there. And I worry about the future, some aspects of the

industry from that standpoint.

Capacity is a huge problem in developing; it is going to be tougher and tougher to find anyplace to build airports, but that is only

a small part of it. A major capacity problem, I think, comes from

the increase in the number of airplanes in the future, particularly

if we get—if all the predictions about air taxis come true. We are

going to have capacity problems at airports, but even more importantly, capacity problems in aerospace and in air traffic control,

and we have got a lot of work to do there. If we keep on starving

the FAA, they are not going to have the money to do the research

and develop the kind of air traffic control system we are going to

need.

Another issue facing us is fuel cost. That is not going to return—

you are not going to get to low-cost fuel again, and the aviation industry is the only industry that does not have an alternative. They

have to burn petroleum-based products because that is the only energy source, at this point, that has the energy density you need for

air travel, something low weight, but with high energy content.

Whereas we can build hybrid cars, none of that is going to work

for airplanes.

So we have to—I think it is very important for this Nation to get

off the petroleum kick; otherwise, 15 years from now there will—

the prices will be so outrageous for petroleum that no one will be

able to fly anymore.

And the final problem you have is liability. I was very pleased

the first year I got to Congress to participate in changing the liability law regarding aircraft. I fought very hard to get it reduced to

9 years; the most we could do is get it reduced to a few years below

what had been proposed. But it is still a major issue and, I think,

unreasonable standards largely because the public does not under-
7

stand aviation, does not understand the aircraft and the huge

awards that were given for things, which I thought were clearly

pilot error instead of mechanical failure.

We solved part of the problem. At least we have the industry

going again. But I still think it is far too long and leaves you in

far too much danger. I think we have to address that as well or

else develop tort reform which will limit punitive damages, et

cetera.

So thank you very much, Mr. Chairman. I appreciate your having the hearing here. I was very pleased to be able to come to the

center of certainly small- and mid-sized manufacturing in the country, and I look forward to touring the facility afterwards as well.

Thank you.

Mr. MICA. I thank the gentleman from Michigan, and the gentlemen from Kansas for their opening comments, and also for their

participation in the hearing today.

And now we will pay our attention to the two panels of witnesses

that we have before us. And the first panel consists of Janet

Harrah, Director of the Center for Economic Development and

Business Research at Wichita State University; Jack Pelton, who

is Chairman, President and CEO of Cessna Aircraft; James

Schuster, Chairman and CEO of Raytheon Aircraft Company; and

Peter Bunce, President and CEO of the General Aviation Manufacturers Association. I would like to welcome our witnesses.

As is customary—well, we are not going to run a clock today, but

we ask you to—to summarize your remarks, and if you have any

additional testimony, data, information you would like to have

made part of today’s record and proceeding, request that through

the Chair.

TESTIMONY OF JANET HARRAH, DIRECTOR, CENTER FOR

ECONOMIC DEVELOPMENT AND BUSINESS RESEARCH,

WICHITA STATE UNIVERSITY; JACK J. PELTON, PRESIDENT,

CESSNA AIRCRAFT COMPANY; JAMES E. SCHUSTER, CHAIRMAN & CEO, RAYTHEON AIRCRAFT COMPANY; AND PETER J.

BUNCE, PRESIDENT & CEO, GENERAL AVIATION MANUFACTURERS ASSOCIATION

Mr. MICA. So, with that, we will turn our attention to our first

witness, and I shouldn’t welcome you because we are here at your

university, but Janet Harrah, Director of Center for Economic Development and Business Research, welcome and you are recognized.

Ms. HARRAH. Mr. Chairman and members of the subcommittee,

it is a pleasure to have you here at Wichita State University. I

have been asked to talk about the economic importance of aviation

manufacturing to the overall U.S. economy.

Is that better?

Mr. MICA. Better.

Ms. HARRAH. Okay.

Aviation manufacturing is a vital sector of the U.S. economy. It

consists of companies engaged in the manufacture of aircraft, aircraft parts and engines as well as guided missile and space vehicles. It also includes the overhaul and rebuilding and conversion

aircraft.
8

Aircraft produced in the United States are very diverse, ranging

from fixed-wing planes and helicopters to business jets and commercial airliners. The industry has a wide footprint as well. While

States such as California, Washington, Texas, Kansas, and Arizona

account for the largest number of aerospace jobs, nearly every

State has employment in the aviation manufacturing sector.

When you look at the overall competitive environment, it is indeed fierce. A few large companies dominate certain sectors such

as the manufacture of engines. For example, together, General

Electric and Pratt & Whitney account for about 80 percent of engine revenues. On the other hand, there are a large number of companies producing aircraft parts.

Profitability depends on efficient and timely production. Small

companies typically compete by specializing in high-end, low-volume parts or high production of low-priced commodity parts. Large

companies having economies of scale in production leverage their

volume in negotiating with suppliers and also leverage their leeway

pricing to customers. Consequently, revenues per employee are

usually higher for large companies compared to smaller companies.

The size of the industry is impressive as well. In 2004 the value added for the industry totaled $95 billion. The value of shipments

totaled 165 billion, and the exports for the industry totaled 57 billion or nearly 7 percent of total U.S. exports.

In 2005 more than 606,000 Americans were employed in the

aviation manufacturing industry directly. Companies engaged in

the manufacture and assembly of complete aircraft accounted for

the largest percentage of jobs, followed by primarily engaging in

manufacturing search and detection systems. Employment projections indicate that aircraft and aircraft parts manufacturing employment will increase about 8 percent over the next decade, adding more than 36,000 jobs. Total employment for all industries is

expected to increase about 15 percent during the same 10-year period.

The drop in air travel and severe financial problems of many

U.S. airlines following 9/11 led to drastic reductions in commercial

aircraft orders. This, in turn, resulted in significant employment

reductions in the manufacturing sector in recent years. However,

rising orders are expected over the next decade due to increases in

air traffic and the need to replace aging aircraft.

The outlook for the military aircraft and missiles portion of the

industry is also better. Concern for the Nation’s security has increased the need for military aircraft and military aerospace equipment.

A growing concern for the industry is the rising need to have to

hire replacement workers. Many engineers who entered the industry in the 1960s are nearing retirement. The same is true for production workers. For example, at many of our local plants here in

Wichita, 50 is a median age of our production workers.

In 2004, the industry employed 45,000 engineers. Training and

attracting skilled replacements will be critical to maintaining the

industry’s worldwide competitiveness in the coming decades.

The aviation manufacturing sector includes many workers, but in

a relatively few number of establishments. Nationally there are, on

average, about 13 workers per establishment. In the aviation man-
9

ufacturing sector there are 161 workers per establishment. This reflects a large scale of many of the facilities in the industry. The industry payroll exceeds $45 million annually. In 2004, the average wage for the industry was $73,000 or 86 percent higher

than the overall average of $39,000 for all private sector jobs.

These above-average earnings reflect the high skills—high level of

skills required by the industry. In 2004, 17 percent of all workers

in the aerospace industry were union members or covered by union

contracts. This compares with about 14 percent for all workers

throughout private industry.

The economic numbers for the aviation manufacturing industry

are impressive. More than 600,000 employees, 45 million in annual

payroll, 165 billion in annual shipments and more than 3,700 establishments. However, these direct numbers tell only part of the

story. The aviation manufacturing industry is an enormous one

that has a cascading effect on other industries in the United

States. The industry has a large supplier base. Companies engaged

in aviation manufacturing also purchase large volumes of goods

and services from a wide variety of other industries. In 2004, the

cost of materials for the aviation manufacturing industry totaled

$68 billion.

To conclude, the economic activity linked to the aviation manu- facturing industry totals $142 billion in annual payroll, and 2.8

million employees in the U.S. as a direct or indirect result of the

industry. Thank you.

Mr. MICA. Thank you for your testimony, and we will withhold

questions until we have heard from all of the panels.

The next one we will recognize is Jack Pelton, Chairman and

President, CEO of Cessna Aircraft. Welcome, and you are recognized.

Mr. PELTON. Thank you. Mr. Chairman and members of the subcommittee, my name is Jack Pelton, and I am Chairman, President, and CEO of Cessna Aircraft Company.

I am proud to say that Cessna is the largest general aviation

manufacturer in the entire world. Since our inception in 1927, we

have delivered more than 187,000 airplanes to virtually every country in the world. Last year, we delivered more than 1,150 jet and

piston airplanes, and this year we expect to significantly improve

those numbers.

As you may know, Wichita is the global center of general aviation. But that leadership role is not a divine right. We have worked

hard to attain it, and we have had an unwavering support of government, both nationally and locally.

But make no mistake, our role in global aviation in the marketplace is tenuous at best. We are beset from outside of our borders

by rivals who have technical skills, industrial capacity, and government support to challenge U.S., and even within our borders by

others who wish to take undue advantage of growth of general

aviation as a remedy for their own business issues.

Today the financial and competitive advantages of business jet

travel are widely accepted by shareholders and CFOs. What was

once thought as an extravagant perk is now rightly regarded as a

valuable business tool that enhances productivity, competitiveness,

and efficiency. The small businessman also relies on general avia-
10

tion as a resource essential to expansion. In both instances, general

aviation is a catalyst that helps strengthen our Nation’s competitive position globally.

Cessna is one of the many companies in Wichita dedicated to

power flight. With more than 10,000 employees in Wichita and another 2,200 across the U.S., Cessna is the largest of these general

aviation companies. But we are part of the community, nonetheless, a community of some 48,000 people.

In terms of spending power, the aerospace industry in Wichita

represents a powerful economic engine for this region with more

than $2.6 billion in total annual payroll alone. When a standard

economic multiplier is multiplied to that number, we find another

$2 billion in direct economic benefit to the Wichita area alone. Last

year, Cessna accounted for sales of $3.5 billion. In doing so, we

spent almost 1.5 billion with our suppliers and our partners.

In addition to over 400 direct and indirect suppliers in Wichita,

we also have 900 suppliers in other parts of Kansas, and a total

of 4,500 across America. In fact, we had suppliers in each of the

50 States, and this is just Cessna. Our fellow original equipment

manufacturers had very similar supply chains.

The state of the industry is very healthy right now. There are

more than 320,000 general aviation aircraft worldwide, 218,000 of

those here in the U.S. In total, general aviation in America directly

contributes more than $41 billion to the economy every year.

General aviation plays an increasingly important role in our Nation’s trade balance. Last year, 19 percent of general aviation manufactured planes that were manufactured in the U.S. were exported. In 2005, that number of general aviation airplanes exported

from the U.S. rose 67 percent over 2004, while export billings rose

82 percent.

At Cessna, we added about 1,000 employees in 2005, and we expect similar growth in our employment numbers this year. These

jobs range from sheet metal mechanics to specialty engineers. This

is a growing industry—for now. But we face threats from all directions. From international competitors, the threats are coming from

Europe, from Russia, from Brazil, from Asia. We still maintain the

advantage, but the gap is closing.

We do not fear competition. Like all Americans, competition

drives us to excel.

Cessna, like other American aerospace companies, is focused on

transforming our business and how we produce airplanes. We are

fully committed to lean manufacturing with programs such as Six

Sigma. We are exploiting technologies to form a virtual enterprise

with our customers and our suppliers. We are making significant

investments in research and development to continue to raise the

bar on safety and ensure a full pipeline of new products that our

customers tell us they want.

And we are investing in our people and in our communities. Last

year, we delivered more than 375,000 hours of training to our employees, and spent 1.5 million in tuition aid to our employees.

Cessna, last year, provided more than $2.75 million in charitable

contributions.

We are confident that as long as the global playing field remains

level, we will maintain our leadership position and continue to im-
11

prove the quality of life for our employees, their families, our customers, our communities and society.

But while we are doing all we can do to face the external threats,

we also face internal threats over which we have little control,

threats that will negatively impact our customers and our industries. Regulatory changes that put an undue financial burden on

general aviation, inconsistencies in rural interpretations, and illogical regulatory priorities will eventually cripple our industry or torpedo our global leadership position.

A leading concern for us right now is the issue of FAA certification. Bringing new aircraft to the global market is a culmination

of years of private investment in research and development, and

testing by manufacturers in cooperation with thousands of suppliers. The FAA could delegate much of that work, certification work,

to us under the Design Option Authorization program; and that is

being advocated by the FAA leadership.

I have included details of the new burdens of FAA certification

in my written testimony. This is just one example of the internal

regulatory issues we face in general aviation manufacturing. These

burdens will severely cripple our industry’s ability to bring new

products and technologies to the marketplace. The U.S. Government should enable the growth and development of aircraft manufacturing, not inhibit it.

We strongly believe that continued congressional oversight of the

general aviation industry is critical to its survival in the everchanging global environment, and that oversight comes only

through direct involvement such as funding, and through hearings

as this.

The point is, general aviation is an important contributor to the

continued growth of our economy, both as a business tool and as

a high-technology industry, an industry where America still leads

the world. General aviation is a true national resource.

We must learn from the mistakes of other countries, mistakes

made in funding decisions, regulation adoption, air space management, resource allocation, and general accessibility.

It is imperative that Congress takes the necessary steps to ensure that general aviation remains a formidable contributor to our

national well-being, that you continue to take a key driver of our

Nation’s economy and trade balance and continue to provide an important productivity tool for our businesses.

We believe it is in the best interest of our Nation that our Federal Government encourages, not inhibits, general aviation’s

growth and vitality. It is just good business sense.

Thank you.

Mr. MICA. Thank you for your testimony.

We will now hear from Mr. James Schuster, who is Chairman

and CEO of Raytheon Aircraft Company. Welcome and you are recognized.

Mr. SCHUSTER. Thank you, Mr. Chairman and members of the

subcommittee. My name is Jim Schuster. I am Chairman and CEO

of Raytheon Aircraft Company here in Wichita, Kansas. Raytheon

Aircraft Company is a business unit of Raytheon Company, one of

the world’s largest defense companies that had sales in 2005 of

nearly $22 billion and has 80,000 employees world-wide.
12

On behalf of the 6,500 Kansas-based employees, welcome, again,

to the air capital of the world. It is an honor for me to appear before you today.

I am going to use my time today to tell you about our company

and to discuss the international market.

Raytheon Aircraft Company designs, develops, manufactures and

supports business jets, turboprops and piston-powered aircraft for

the world’s commercial and military aircraft markets. Last year,

Raytheon Aircraft Company had net sales of nearly $3 billion and

delivered 416 aircraft.

Headquartered in Wichita, we have a very proud heritage here.

Aviation pioneers Walter and Olive Ann Beech founded the company in 1932, and over the years Beechcrafters, as our employees

like to be known around the world, have built more than 54,000

aircraft. Some 36,000 are still flying today.

Raytheon Aircraft Company is the third largest employer in the

city, and the fifth largest employer in the State of Kansas. While

our total annual payroll for Wichita alone is approximately $360

million, our economic impact goes far beyond the city limits or even

the State’s borders.

We also have company-owned service centers in the U.S., Mexico,

and in the United Kingdom. Our total global employee base is just

over 8,000.

Raytheon Aircraft Company has over 450 suppliers in the State

of Kansas alone, and more than 1,800 across the United States. We

spent $1.4 billion with our U.S. suppliers and partners in 2005. We

also spent $300 million with 400 international partners and suppliers located in 20 different countries worldwide.

The general aviation industry today is truly international in nature. Not only do our airplanes travel to every corner of the world,

our customers are based in virtually every country in the world.

In 2005, the number of general aviation airplanes exported from

the U.S. surged about 67 percent over 2004, with 557 aircraft,

while export billing rose 82 percent to $2.6 billion. Of the 2,857

general aviation aircraft manufactured in the U.S. in 2005, 19 percent of those aircraft were exported around the world. As the

worldwide economy expands and becomes ever more interdependent, it becomes increasingly important for the U.S. Government to

support the development of those markets to ensure our Nation’s

position as a global leader in aviation.

Currently, the FAA, under the leadership of Transportation Secretary Norman Mineta and FAA Administrator Marion Blakey, recognizes this. More time and energy have been spent by our government to foster overseas markets, provide leadership and safety, and

promote our industry.

For example, the FAA is adding resources and staff to assist with

aviation issues in China and India, two of the largest potential

markets for general aviation over the next decade. These efforts

will pay large dividends for the entire U.S. aerospace industry, and

we are thankful that the U.S. transportation leaders are paying

more attention to international markets and related issues.

As other markets develop, it is important to ensure that the FAA

and other Federal agencies continue to support aviation expansion

into emerging markets. After China we see India and Eastern Eu-
13

rope as markets with the greatest opportunity to general aviation

and aerospace growth.

The aerospace industry works constantly with both Congress and

the Executive Branch to ensure foreign markets are open to U.S.

products. Working to break down trade barriers is critical to continue the dramatic increase we are seeing in U.S. exports of aerospace products and services.

Congress can help maintain U.S. leadership in aviation by ensuring that the FAA receives the resources it needs to carry out its

functions, including the certification of new aviation products.

Jack Pelton has already discussed certification funding this

morning, but let me just emphasize how important this is for ensuring continued U.S. global leadership in aviation. Our competitors around the world, particularly in Europe, are working to impose their model of regulation in emerging markets. With the creation of the European Aviation Safety Agency, known as the EASA,

the European Union now has a powerful, single, FAA-like institution certifying new aviation products.

Let me be very clear: If the certification of new aviation products

becomes onerous or subject to delays in the U.S., Raytheon Aircraft

Company and the rest of the U.S. general aviation industry will be

severely disadvantaged in the global marketplace. The result will

be a loss of our technological leadership, international competitiveness and, ultimately, jobs.

While Raytheon Aircraft Company and our industry are going

well today, I must reemphasize that this is an industry vulnerable

to subtle changes in laws, regulation, and the economy. We need

Congress to continue to carefully consider the issues of FAA funding and resource allocation as well as other regulatory changes.

The future of the Raytheon Aircraft Company and the general aviation industry, in many ways, depends on you.

Raytheon Aircraft Company firmly believes there is a solid domestic market for aircraft, but we look to the international market

for growth opportunities. I urge Members of Congress to assist in

promoting general aviation and assert the continued congressional

oversight that is critical to the success of our industry, both domestically and internationally.

Mr. Chairman, I would like to thank you and the subcommittee

for taking the time to travel to Wichita today to listen to our comments and concerns about U.S. aviation manufacturing and keeping us competitive. In closing, I would like to extend, on behalf of

the entire general aviation industry, our personal appreciation to

Congressman Tiahrt for the strong and tireless support he provides

to the aviation industry. Thank you.

Mr. MICA. Thank you for your testimony.

And our final witness on this panel is Peter Bunce, who is President and CEO of the General Aviation Manufacturers Association.

Welcome, and you are recognized.

Mr. BUNCE. Mr. Chairman and members of the subcommittee, it

is very exciting to have you here in Wichita. And just to put it in

a little bit of perspective, 80 percent of the world’s general aviation

aircraft are produced in the United States, and over half of those

are produced here in Wichita. So it is truly exciting for you to be

here.
14

GAMA represents 55 of the world’s leading aviation manufacturers, and that deals not only with airframe manufacturing of engines, avionics and also those that supply parts for the aviation aircraft.

As you mentioned before, we had a good year last year. Our shipments were up 21 percent, and our billings were up about 27 percent, and we are very optimistic about 2006 and 2007, based on our

orders. But as Congressman Tiahrt pointed out, our industry is

fragile, and we are concerned about several things.

One of those is that our actual flight hours last year decreased,

according to the FAA, by about 2 percent. When you couple that

with the fact that over 64 percent of the flight hours that are flown

in this country are flown for business purposes, it really emphasizes the fact that business is facilitated by general aviation, and

we need not do anything that will impact the ability of folks to be

able to use the aircraft for business purposes.

When you look at—is this still working? Test. I will just speak

loudly.

Over the last 25 years, we feel very proud that general aviation

manufacturers in training within the community has been able to

drop the accident rate by 54 percent for general aviation and fatal

fatalities by over half. But we all know that any aviation accident

is one too many. And so our general aviation manufacturers are

committed to be able to get products out to the field that makes

supplying easier and makes flying safer; and that is particularly in

the realm of giving them systems within the aircraft to tell them

where they are, and give them what we call situational awareness

to be able to fly safer. That is why it is so imperative that we have

the certification services available through the FAA to be able to

get that technology into the cockpit quickly.

But coupled very closely with that, as Congressman Ehlers pointed out, is building capacity within the system. And what we are

very, very firm on is to be able to have this subcommittee, in particular, be able to keep pushing the FAA and other executive

branch agencies to push to give you a coherent modernization plan;

and that plan not only needs to contain the types of technologies

that the FAA wants to incorporate to build to capacity in the system, but give you a time-phased plan that tells you how much it

is going to cost to modernize and what savings are ultimately

achieved on the back end.

We are not inventing new technology. The technology is out there

primarily produced by military. But we are giving you a plan. Before we go and change mechanisms of how we collect money, it is

absolutely imperative to be able to push the ball forward and get

to the goal line of building the product capacity in this system.

Now, Mr. Ehlers also touched on that capacity when we talk

about the introduction of very light jets. This year, we are going

to start the certification for those jets, but there has been a lot of

rhetoric out there about how these jets are going to, quote, ′′darken

the skies with the onslaught of these microjets.′′ we want to put

this in perspective.

This Nation has put a lot of investment and a lot of taxpayers’

dollars, and put concrete out in smaller cities in rural America that

are not serviced by airplanes. And we see this new market in the
15

very light jets, and very quiet jets sometimes—folks are starting to

refer to them as ′′whisper jets′′—to be able to give service to those

smaller communities that have runways less than 3,000 feet that

can’t be serviced by commercial airlines. We see this as not competing for the airspace or the airports where the commercial aircraft

have their hub, but by diffusing traffic and providing folks an opportunity to use air transportation for their businesses and actually

diffuse that traffic and get them off of, mainly, the highways.

So we are very concerned that a lot of the rhetoric being used

about this new generation of aircraft is being used for false purposes and not emphasizing the capability that this will give and

the business that it will facilitate for our Nation.

Also, as you touched on, helping us get out of the slump that we

were in after 9/11. You did a lot for us with bonus depreciation;

however, Federal tax policy can also have a significant unforeseen

negative impact. The same legislation that provided GA manufacturers with bonus depreciation also changed the business deductibility of entertainment-related flights.

I want to be very clear. No one in our industry wants—says it

is not just to tax fringe benefits, and we are not seeking to repeal

this provision. The problem lies not with Congress, but with the

IRS interpretation of the methodology and allocation of entertainment use flights. The untold effect of this tax policy is that it is

making folks that use business aviation account for seats differently than any other mode of transportation.

When you look at this Nation today, we have 165,000 piston aircraft flying in the system, and over half of the flying time that we

fly every year is used for business. It is an onerous system, and not

only do you have to count seats, you no longer can take your spouse

with you on a business trip because you suffer a significant tax

penalty for that. And they are treating general aviation totally differently than we treat, like, a company car. And that type of singling out of aviation for a different type of treatment is already

having an effect on folks that are flying aircraft, and will eventually have an effect on sales.

In addition to the tax policy, we also are concerned about some

of the export control restrictions that are placed on general aviation. No one wants products that are used in general aviation that

migrate into military aircraft to be used by nations or people that

can harm us, but it is significant to note that as the military uses

more and more commercial off-the-shelf technology, that it is becoming very difficult to differentiate between commercial and military. And as we go—and it is even simple technology; you are talking about rivets, rings, and very basic things like that—we are

finding that if it migrates its way into military technology, all of

a sudden it makes it very difficult for our aviation manufacturers

in the U.S. to export those products. And also it makes those foreign manufacturers of aircraft reluctant to want to use suppliers in

the U.S. for that export control. So we hope to be able to work

closely with Congress and be able to attack some of those issues

with both the State Department and Commerce.

The last issue is tort reform. As you all have noted, it is very important with what you gave us in the General Aviation Recovery

Act to be able to help revitalize our industry. But what we are see-
16

ing are attacks on GARA all the time around the back sides of it.

We have a lot of lawyers out there that will go ahead and sue every

component manufacturer any time there is an aviation accident,

hoping that most of those will settle out of court, and we can consider that a form of extortion out there in all practicality; and any

kind of tort reform you can give to this industry in general, tort

reform that we can start to be able to get a handle on, that will

help suppliers.

The significant effect of that is, we have some of our suppliers

that actually are not bringing products to market, such as the

flight control systems that give you better fuel efficiency and better

immersion controls, just because they worry about the liability that

they will have in that arena.

I will submit the rest of my comments for the record. I look forward to your questions.

Mr. MICA. Thank you. We will submit additional statements.

We will turn to questions for our panel, and I have a couple. We

will start with Janet Harrah.

You mentioned that the aging—the aging population of the workforce, which was interesting. The President has put forth a proposal to increase emphasis and programs in math and science.

What do you think we should do? Now we have got an average

age of 50. That gives us maybe 10 years to sort of get our act together. Is what is being proposed adequate? And what do you see

as far as our responsibility at the Federal level in providing the

folks to replace this aging workforce?

Ms. HARRAH. Well, from a local and State standpoint, obviously

you have to have adequate training, infrastructure to train the

number of folks to replace them, whether you are talking about

welders and—or you are talking about aerospace engineers.

I think one of the things is that—if you look at the national policy, is the immigration policy. The ability to bring in students—it

becomes very difficult for American universities to bring in students from overseas because—as a result of the impact of 9/11, but

that is more difficult—

Mr. MICA. That is interesting because people have said, well, we

replace those who are aging or we don’t have with foreign imports,

basically students, but then we are finding now an interesting phenomenon where not as many stay as they go back because they

have more opportunities in their own country. So we end up educating them to not compete with us, but to go back into their own

respective industries.

Ms. HARRAH. That is always going to occur. That is as true at

the international level as it was at the local level. But from the

supply side standpoint, more will stay than will leave, and in the

short term, we have such a short window of opportunity for some

of these companies, we have to start filling them with existing engineers that work overseas now and have the ability to do the program to bring them over here so they can work. We have a limited

number of slots of foreign workers to work in this country.

Mr. MICA. But what would attract more students or individuals

to math, science, or maybe we don’t—maybe we don’t need to do

that. I mean, do you see anything at the Federal level that we can

do in that regard?
17

Ms. HARRAH. You are asking something that is not in my area

of expertise. I am an educator, so —

Mr. MICA. At least you are honest about it. I appreciate it. Let

me go to Mr. Pelton.

You talked some about the regulatory process and certification.

We have known that we have a backlog and people to provide certification in FAA. We provided some additional dollars, I think,

some $4 million. I want to ask a two-part question.

Have you seen any effects from the additional resources we are

providing, and is FAA, doing that either having just difficulty finding people to fill those positions?

And two, you mentioned delegation on the certification. Maybe

you could elaborate a little bit more on how we can—how Congress

can move that forward.

Mr. PELTON. Mr. Chairman, actually, your two questions are

linked together.

We went back and testified last year relative to getting appropriations for the FAA’s certification branch. We really applauded

and appreciated your support of those dollars being allocated. My

understanding, to the best of my knowledge, is that the actual

money did not go into the certification offices, that, in fact, that

money went other places. And so unfortunately, the FAA has not

staffed and manned up to the needs of the industry as we see it

today.

The reason I say that the question is also interlinked is that it

requires those near-term resources to be able to move industry to

a position where delegation can, in fact, occur. I think if you listen

to the FAA, they will tell you that you need to migrate from today’s

processes to a delegation environment which does require oversight

of technical experts within the FAA. If there is a shortage today,

that is only going to slow down and inhibit the process of moving

to the delegation faster.

So it is really complicated in the sense that we do need the FAA

to step up and get the staffing that they need today to handle the

near-term—near-term demands that industry is placing on them,

while they change their business model and their role in the future

of being oversight for delegation with industry.

What we would like to see Congress do is to continue to encourage the FAA to move faster in the form of delegation, but also hold

them accountable for the moneys that were sent to them to hire the

appropriate positions that they need in the certification offices

today.

Mr. MICA. Well, these field hearings are nice, but sometimes we

should have some positive, concrete results. I am glad that you put

those comments on the record, very frankly; and I think one of the

things that could be helpful, and I will ask my colleagues to join

me, is that as we send Ms. Blakey and Secretary Mineta a letter

of our concern about the diversion or lack of use of those funds appropriated by Congress for a specific purpose. And then also encouraging this delegation authority and expediting that to assist

the industry.

So maybe I could get—I think I have got three that will join me

here. An affirmative nod from Mr. Ehlers, too. So we can do that

from this hearing.
18

Mr. Schuster, you cited one of the concerns we have about the

new regulatory regime, at least in the European Union; and I have

a quick, two-part question. One, have you seen any of the regulatory shenanigans or maneuvering, or is it too early for that?

And then, two, how do we counter a block like the European

Union with the new regulatory regime from proceeding unfairly

and using the regulatory process to a competitive disadvantage to

the U.S.?

Mr. SCHUSTER. Your two-part question, you answered the first

part, I think, correctly; and it is probably a little too early to draw

conclusions as to exactly how that is going to work. Speaking from

Raytheon Aircraft’s perspective, I would say it is too early. My compares here may have a different view.

I think the first part of the answer to the second question is back

here on our own soil—and it comes back to the same discussion we

just had about the certification process and the FAA funding and

so on in making absolutely certain that we don’t create a system,

a set of processes, here in the United States that are not—that

don’t facilitate the introduction, development, and launching of new

aircraft; and making sure we have a—a system that is at least on

par with what European manufacturers are capable of doing.

You couple that with the fact that the industry is going through

some pretty profound change with the emergence of companies like

Embry Air. The competitive landscape is changing dramatically,

and as lower-cost international players come into the game, the

Cessnas, the Raytheon Aircrafts, the Gulfstreams, the Pipers and

so on in the United States are going to—we are finding ourselves,

particularly from a cost perspective, competitively disadvantaged in

many situations. And one of the outcomes of that, unfortunately,

is that when you have to compete in the international marketplace,

in some cases on the basis of cost, or you are competing against a

certification processes, I say that works better or faster and there

are lower costs, you end up having to move American jobs.

I think one of the realities that we all have to face is that when

you put all these factors together, if you slow down the certifications in the United States, if there are barriers put in place at

some of the international regions and other regions of the world,

cumulatively the effect on this industry is going to be American

jobs.

And the real answer, I think, is how we solve that in Europe, but

I think it is still in front of us. I don’t think we have a solution

today. I think that it starts—my focus is right back here on the

FAA and making sure we get our planes certified.

Mr. MICA. Thank you.

Mr. Bunce, a final question for you. You talked about export controls and how they do impede—sometimes impede our competitiveness.

How do you set up a regime that will determine, you know,

whether dual-use items, what is available on the market because

I know that we are put at a disadvantage. I have seen specific instances where we have delay in getting approval where someone

else can get another product from another country with basically

the same technology, and that sale is gone.
19

How do you speed up the process? How do you deal with creating

a level playing field?

Mr. BUNCE. Well, Mr. Chairman, I think if we take a look at the

working groups that exist between Commerce and State, and also

within State with the economic side of State, and then the military

side of the State Department that actually have to wrestle with

this, that is what we are all in, in trying to get people to talk together with industry. And actually at the State Department, the

folks that are tasked with being able to go ahead and sort through

this whole process are tremendously undermanned to be able to

keep up with all the requests that are coming in to them. So they

have told us, and we have tried to work very closely with the State

Department that they want us to self-identify and self-regulate the

items that we have that are both for military and commercial aircraft.

The problem with that is that you lay a lot on the line when you

do that. And if there—if there was a more formalized process

where we could go in and look at the ITAR restrictions that are out

there and be able to go ahead and say, okay, is this really technologically something we don’t want to go to people that are unfriendly to us, or is this just basic—just basic, like rivets and rings

and the things that I spoke of, that really are something that

American manufacturers can make no differently than another foreign manufacturer, but we ought not put U.S. companies at a disadvantage.

So I think it is working an emphasis from the Congress that

Commerce and State work with industry to be able to have the

mechanisms to be able to classify these products that could help us.

Mr. MICA. Thank you.

Mr. Ehlers.

Mr. EHLERS. Thank you, Mr. Chairman. Most of the questions I

had planned on asking you he has already asked, so I will—I appreciate the opportunity to be brief.

Mr. Bunce, on the tax policy issue that you mentioned, I was not

aware of that, and I think we should try to address that. It is—

as you know, tax issues take a long time to change and resolve.

But I wasn’t even aware of that, but we can certainly sympathize

with that because we face the same problems in Congress, as you

know, modern taxation.

And it comes up from an attitude of the public that somehow an

airplane is special and a car isn’t. So if I have to give a speech out

of town and a friend offers to drive me there in a car, that is fine.

I don’t have to report it. If someone takes me there in an airplane,

I have to pay them first-class—equivalent first-class airfare. I have

to report it to the Federal Government, not once but twice. We

have to get away from the idea in this country that somehow airplanes are to be treated differently.

We have the same thing in accidents. The public accepts with

great equanimity 42,000 deaths a year from cars. And you have a

crash of an airplane, two people killed, one injured, it is headlines

for days.

We somehow have to try to educate the public about that issue,

that they should be treated equivalently and considered equiva-
20

lently. And I would certainly be happy to work on the tax issue

with some of my friends on Ways and Means.

The export restrictions are a real bug to me, and again, I don’t

understand the mentality, but I recall when I first got into office

there were export restrictions on encryption products for

cybersecurity because the attitude was, we have it in America, we

don’t want to weaken our stance with our enemies abroad by having them get the same encryption abilities. So there are restrictions

in place.

The military persuaded enough Members of Congress, this is important. I fought that. I did not win. I said the other—the rest of

the world will develop these encryption standards and manufacture

them and sell them, and that is what happened. The Israelis and

some other companies did it. We lost a whole industry right there

just because of stupid export restriction laws.

And if that affects you, it is going to have the same impact. You

are going to lose business abroad because restrictions keep your

suppliers from selling abroad.

On tort reform and suppliers, I would be happy to try to do what

I can with that, too. That is, as you know, the toughest one to

change. But that, again, gets ridiculous and costs you a lot of

money, drives your suppliers out of business. It is just no way to

run a country, frankly. So I will work on those two.

So no questions. I just wanted to give you some encouragement.

Mr. MICA. Thank you, Mr. Ehlers.

Mr. Moran.

Mr. MORAN. Mr. Chairman, thank you very much. I would point

out, Ms. Harrah, that Congress has passed and the President

signed a new student grant program for disadvantaged students

who are pursuing issues—education in the area of engineering,

math, and science.

The Board of Education is now developing the rules and regulations, and I am hopeful that it does create additional opportunity

for students who might not otherwise have that opportunity, although I have discovered that it still remains very difficult to get

some of our best and brightest interested in math and science.

Somehow, perhaps even at younger ages than high school, we have

got to raise the awareness, create excitement within that area.

If you have any suggestions, I would be glad to—I have two teenage daughters. I would be glad to have your advice on my personal

family as well.

The FAA certification, Mr. Pelton, my question was going to be

really to you and to Mr. Schuster and Mr. Bunce as well.

Is there one area of effort, one area of regulatory reform that we

ought to be pursuing? And I guess you have answered that question. It really does—it is always difficult for me to address these

issues when my constituents complain about bureaucracy. That is

an age-old battle that we continue to fight.

But if there are specific examples of where that bureaucracy creates a handicap, a hindrance to economic activity, we are better

able to attack them one at a time; and I just would ask, is the priority, the reform that you mentioned, is that where we ought to

focus our attention on certification?
21

Mr. PELTON. I think the concern we have as an industry is that

for us to be successful, it is all about time to market. It is being

able to get our products to the market when the economy is up,

which means you have to have a certification system that is responsive to the speed of the industry. And currently, with the staffing shortfalls and the inability to move as quickly as we would like

to delegation, we are being hindered in getting product to market

as fast as we would like; and that is showing up today when you

make a submittal for a new model certification. You get a letter

saying, get in line and we will prioritize based on the resources we

have within the FAA.

We have to break that roadblock, and I am convinced that breaking the roadblock is going to be industry and the government collaborating, both on the funding side of it with the government

along with the delegation side to industry. It can’t be just push it

all onto the FAA. We have to take some of that responsibility ourselves.

Mr. MORAN. What is the average length of time, some number

that we can compare certification here in the United States versus

certification elsewhere in the world? Do those statistics exist?

Mr. PELTON. They don’t because it is very confusing as to size,

type of certification, and complexity of certification. But I think it

is fair to characterize today that if you want to certify anything

new, if you are starting a new model, it is going to be delayed in

getting into the prioritization system within the FAA, because they

just don’t have the resources to support all of industry’s needs and

demands in this robust economy that we have right now.

Mr. SCHUSTER. I will relate a meeting that I was involved in

where you have a group of people sitting around a table talking

about measuring the rate at which you can invest research and development dollars based on the negating factor of moving projects

through the FAA certification process; and we think about the second and third order of effects of reducing research and development

in an industry like this.

It goes way beyond—people think about the loss of industrial

jobs, factory jobs and so on, but it really does potentially slow the

rate at which this industry continues to reinvest. So I have to believe those same meetings are taking place across the industry.

And at the same time we are looking to Congress and to the FAA

for solutions to that so we don’t find ourselves literally slowing at

a rate at which we are investing in an industry that is so important to this country. But those meetings are beginning to take

place.

Mr. MORAN. Is the primary reason for the delay related to resources, dollars?

Mr. SCHUSTER. Honestly, Congressman Moran, I think it is all

about the money in the end. I really think that is the issue. It is,

if the FAA has the financial resources, support that it needs to do

what the industry would ask them to do, I think many of these

problems go by the wayside.

Mr. MORAN. Thank you very much .

Mr. BUNCE. If I could just add, you all were very kind to get the additional $4 million for us. All we ask is that certification be

brought back to 2004 levels. That was in report numbers. Now we
22

are halfway through this fiscal year, and the problem is that we

don’t see that is where the money is being spent.

The FAA had a large rescission, and that is where some of those

dollars went. It looks like the budget request that the FAA came

in with for 2007 will get us back close to the numbers that we

asked for. So if they do get their full appropriations this year for

the certification branch, we are hopeful that will bring it back. But

we are asking the Appropriations Committee to be able to put that

mandate for the bodies in a bill in which we can actually say, this

is what Congress intended.

Do this. Help industry with that certification.

Mr. MORAN. I will yield to Mr. Ehlers.

Mr. EHLERS. I thank the gentleman for yielding. I wanted to get

briefly a comment from Ms. Harrah about the issues you raised.

I have spent over 30 years trying to improve math and science

education in this country, K-12, and since I got in the Congress,

I have spent 12 years there working on it. It is really a tough issue,

but we are losing out to other countries. We have been for a long

time. And what makes it so crucial for your industry is not just

producing engineers and technicians, but it is producing pilots, and

particularly what you might call ′′lay pilots,′′ people that enjoy flying, want to learn, and they just get intimidated because if they

didn’t have the right math or science in school, they have to understand vectors and things of this sort, it—they’ll throw up their

hands and say, well, I will just drive.

I think it is a crucial problem, and I have—as I say, I have

worked on it for many years, spoken in a lot of schools, and I

found—I am starting to get credibility with the high school students by simply telling them, the courses they choose in high

school are very important because if they aren’t nerds, they are

going to end up working for a nerd. That sort of intimidates them,

and so they start looking at nerds more kindly. Then I say, we even

have nerds in Congress, which they refuse to believe. I say, I can

prove that I am a nerd. Of course, they don’t believe that. I say,

look, plastic pocket protectors; it is still there.

But we have to change the attitudes of kids at school, and particularly young girls. This is the only major country in the world

that somehow has the culture that girls can’t do math and science,

and I don’t know where this comes from. But we should have far

more young girls interested in math and science.

Thank you.

Mr. MICA. Okay.

Mr. Tiahrt waiting patiently. Thank you.

Mr. TIAHRT. Thank you, Mr. Chairman. I would like to sort of

start this off with a conversation that I had with Mr. Schuster

shortly after September 11, 2001, about a wire harness job that

ended up going to Mexico, I believe. And I was sitting down with

him talking about, you know, the possibilities of outsourcing in

Wichita with people that do wire harnesses, and Jim made a comment to me, and I would like to repeat—I am going to paraphrase

what he said.

He said, basically, even if the wages were zero, I would have to

consider shipping these jobs outside. And it dawned on me then

that there were costs beyond the control of the private sector that
23

impact the decisions on where the jobs are going to be, whether

they are in America or overseas. And following that discussion I

started looking at costs that the industry faces, and part of it goes

back to my years at Boeing where I was a proposal manager, and

we had thumbnail guesses—WAGS, what we called them, wild-ass

guesses—about prices, and we had a set rate of about $150 an hour

for manufacturing. This was over 10 years ago. But in that wage was only about $17 or $18, and the rest of it

was cost beyond just simply wages. And I realized that the problem

in America is not wages, it is all these other costs. So I went

through and started making a list of them, costs that cannot be

controlled by the companies, by the CEOs. It was health care policy, bureaucratic red tape, it is education policy, trade policy, tax

policy, energy policy, how we apply our research and development

dollars, and lawsuit abuse. And these are all costs that companies

confront and pay for, but have no control over.

If you look at the origins of those costs, they came from Congress

over the last generation, starting mostly in the 1960s. And I think

it is up to this generation of people who are in Congress to eliminate those barriers or certainly reduce them. So as I see some of

these barriers come up, I would like to highlight some of them in

this—in my questions.

The first one I want to address, and to me it is kind of this—

the huge elephant in the room we haven’t really talked about

much, and that is user fees; and it is a very controversial item because it is, in effect, a cost shift from one segment of the industry

to the other. And, you know, when people ask me, who are you for

on this certain policy, sometimes I have friends on both sides of the

issue, and I say, I am for my friends. But the truth here is that

this is a—there are vulnerabilities in this industry that I want to

point out.

Historically, user fees have a detrimental effect on the sale of

aircraft. And a good example of that is the European Union which

has user fees. If you look at general aviation and see the number

of aircraft per 100,000 people in the European Union versus in

America, a big difference. Part of that is because of user fees. If you

try to divide general aviation, normally general aviation is explained as nonmilitary, noncommercial carrier. General aviation,

now they are trying to put another segment in here of business jets

versus general aviation. I think that is a bad thing to do. But even

if you look at general aviation, less single-engine aircraft per

100,000, significantly less in the European Union. Part of that is

user fees.

Also, the concept of user fees creates a new bureaucracy within

the government. We don’t have a bureaucracy to do that now. See,

here we are, once again, adding to the cost of American taxpayers

in the form of a heavier bureaucracy.

But I think the third thing is that the justification for this, I

think, is inaccurate. If you look at the required air traffic control

at, for example, DCA, Reagan National Airport, we shut down general aviation following September 11, 2001, and even today it is not

back up and running to a large degree. I think it is about 30 flights

a day come in. There was no reduction in the cost for air traffic

control during that time when there was no GA.
24

On the flip side, if you look at Nashville and Charlotte, North

Carolina, Nashville, Tennessee, where they were getting ready to

make those hubs, they ramped up, but the air traffic control never

ramped down following when one of those hubs pulled out. So I

think the overall basis is not—is not justifiable.

So now I have addressed these issues I wanted to bring up here,

Mr. Chairman, and I think it is detrimental to think of user fees.

So going on to my questions very briefly, because I know we are

pressed for time, and I have only taken up 5 minutes so far, I want

to address trade policy because I think Cessna has had a significant gain in Central America following DR-CAFTA.

Jack, would you just comment on that briefly?

Mr. PELTON. As a result of the trade policy, you are right, Congressman Tiahrt, we have grown significantly in other international deliveries. What is probably the biggest pressing issue

that Congress could help on is, if you look at the growing markets

that we see, we shifted from what was classically about a 30 percent export in general aviation to an order book this year that was

over 40 percent potential export. So the growth in our industry is

clearly outside of our own borders, and we have to make sure that

our policies continue to support that growth externally.

Some of those policies not only have to deal with export policies,

but also get all the way back into regulatory policies and bilateral

agreements with other countries. The ITAR control and the export

control policies that are necessary to help facilitate that growth

outside of our own borders, it is huge. Clearly the legislation that

Congress put into place some time ago opened a significant market

in South America for us, and we thank you for that and encourage

you to continue to look at, as the world continues to flatten, how

we can get products into other parts of the world.

Mr. TIAHRT. Thank you, Mr. Pelton.

Mr. Schuster, I would like you to talk a little bit about the biggest barrier that you face now as far as increasing costs and the

policies that surround that.

Mr. SCHUSTER. Well, I think you touched on it. The first one that

comes to mind is the cost of health care.

If you—if you were to poll the aircraft manufacturers around the

country, I think that would show up at the top of every list. In a

3-year period, beginning in 2002, the annual health care costs at

Raytheon Aircraft went up $60 million. That is $60 million of additional costs that you have to take out of the business or find in

prices or deal with in other ways across the business.

And, you know, I can tell you that across—in boardrooms across

the country, this is an issue that we are all facing when it comes

to making decisions about where we invest, how we invest. And the

comment I made about wire harnesses, literally looking at the zero

wage cost when you add the cost for health care and other benefits,

especially with an aging workforce where you have increasing pension liabilities and so forth, you have to weigh very carefully where

you are going to invest the precious dollars in capital equipment

and facilities and so on. And that is—you know, that is an issue

that we are all struggling with that you add to the mix.

The fact that—I am being a little repetitive—but the emergence

of companies like Embry Air, the cost structure—the manufactur-
25

ing cost structure that is somewhere south of 50 percent of what

we pay in Wichita, Kansas, for the hourly workers and for the engineers, this issue of cost becomes an enormous problem for all of us.

And when I was making notes as we were talking here, when

you think about the international emergence of these low-cost manufacturers, a potential slowing of research and development into

this industry because we have a certification process that is constrained—and we can argue about why and what the solutions are,

but I don’t think we would argue it is constrained—the potential

repercussions of problems like user fees, and all the friction that

we are placing on these markets, you can’t point to just one and

say, that is going to bring us down. But when you have to live with

those things cumulatively every day, and you think about the impact on this industry, together those issues can, in fact, bring general aviation down.

In the light of a strong economy, I think our fears and our concerns tend to maybe get pushed aside a little bit. I think the discussions and the conversations that we all have would be very,

very different under different economic circumstances, and those

circumstances will arise. They will come to be—one day we will be

facing an economy that is not as strong some day through the natural cycles, and we have to get prepared for that day.

Mr. TIAHRT. Ms. Harrah, as an educator, what incentive do you

think we could provide to attract young men and women into technical fields like engineering?

Ms. HARRAH. Well, Mr. Ehlers is quite correct. A lot of this, you

have to capture them quite young. I think probably grade school

and junior high is where you really need to capture their imagination, and science and math is an area that I am interested in, and

I want to pursue long term.

But I think certainly at the university level, any kind of Federal

scholarship help for those students—similar to what we have if you

want to become a doctor; there is money available if you want to

go and serve in rural areas. Likewise, if there are critical needs for

science and engineering, if you provide some scholarship dollars for

students that want to go into those fields and stay in the country

and work here, I think that would be very helpful as well.

Mr. TIAHRT. Thank you. Because I think we need to figure out

a way to do both, reach them when they are younger and also provide an incentive when they approach their college and undergraduate degrees.

My last question, Mr. Bunce, is it true still—one time it was, I

know—that if there is a parts supplier in the European Union that

can provide a part for an aircraft that is flying in the European

Union and one that can—may have originally been made in America, can you—are we allowed to compete with that parts supplier

in the European Union? Or do they have to buy from that European Union parts supplier when there is a need in an aircraft?

Am I clear about my question.

Mr. BUNCE. Sir, I think you are clear about the question, but I

am not familiar with what the restrictions are. My colleagues here

might be, but —

Mr. TIAHRT. I am sorry.

Mr. SCHUSTER. It is probably military.
26

Mr. TIAHRT. I am sorry.

Mr. SCHUSTER. It may be just applying to military.

Mr. TIAHRT. It may be just applying to military.

At one time I heard testimony that if you are a supplier of aircraft parts in the European Union, you are isolated from competing

with American parts suppliers. They have to take you first.

But I would like to check that out, if—

Mr. BUNCE. We will get back to you, sir, on that.

Mr. TIAHRT. All right. Thank you, Mr. Chairman.

Mr. MICA. Well, thank you, and I want to thank each of our panelists for participating today. We look forward to working with you.

I think this hearing is only the beginning of our new effort to—in

Congress to make sure we keep U.S. aviation manufacturing competitive. So we will excuse you at this time, and as I said, we are

going to keep the record open for a period of 2 weeks.

Let me call the second panel of witnesses. We have five individuals on that panel: Mr. Jeffrey Turner, CEO of Spirit AeroSystems;

we have Mr. William Greer, Vice President and General Manager

of Airbus North America Engineering; we have Greg Mullins, General Manager of Lyons Manufacturing; we have Kevin Hawley,

President of Aerospace Systems and Technologies; and we have

Finley Nevin, President of Global Engineering and Technologies,

Incorporated.

So we will welcome all of those witnesses. If they would come up

and take their respective seats .

I welcome our second panel of witnesses today. Maybe you heard

me before. If you have a lengthy statement or additional information you would like to have made part of the record, you can do

so through a request of the Chair.

TESTIMONY OF JEFFREY L. TURNER, PRESIDENT AND CEO,

SPIRIT AEROSYSTEMS, INC.; WILLIAM W. GREER, VICE

PRESIDENT AND GENERAL MANAGER, AIRBUS NORTH

AMERICA ENGINEERING, INC.; CRAIG S. MULLINS, GENERAL

MANAGER, LYONS MANUFACTURING; AND KEVIN HAWLEY,

PRESIDENT, AEROSPACE SYSTEMS AND TECHNOLOGIES,

INC.

Mr. MICA. We will go right ahead and, I will first recognize Jeffrey Turner, CEO of Spirit AeroSystems, Inc.

Welcome, sir, and you are recognized today.

Mr. TURNER. Thank you, Mr. Chairman. Mr. Chairman and honorable subcommittee members, I want to thank you for this opportunity to address this important topic of ′′Keeping U.S. Aviation

Manufacturing Competitive.′′ this subject is of supreme interest to

my company and to all of our industry.

I am Jeff Turner, the President and CEO of a relatively new

company, but one with a deep history of aviation manufacturing.

Spirit AeroSystems is the world’s largest independent tier-one supplier of aerostructures. Until June of 2005, we were a supplier division of Boeing Company.

With headquarters here in Wichita, Kansas, and operations in

Tulsa and McAlester, Oklahoma, we have 10 million square feet of

facilities, and about 10,000 employees, about 8,500 of whom are
27

here in Wichita. We have been engaged in aviation and aerospace

manufacturing for over 75 years

Our future is dependent on our ability to remain competitive

globally. We strive to become the preferred partner to the aircraft

industry supplying top quality fuselage and propulsion structures,

wing components, and tooling services to original equipment manufacturers, the OEMs. In addition, we offer spare parts and aftermarket support to airline operators worldwide.

We continue to be the largest supplier to the Boeing commercial

product lines, and are actively marketing our skills and capabilities

to other aerospace companies throughout the world. Our pending

purchase of BAE Systems Aerostructures operations in Scotland

and England is a prime opportunity for Spirit to diversify our revenue base, our geographic base, and grow as a world leader in our

various capabilities.

I do not believe our position on competitiveness is significantly

different from that of other aviation manufacturers. Simply put, we

want a level playing field upon which to compete in the global competition. Several factors can help or hinder our participation.

The first is the funding for aviation research such as that here

at Wichita State University’s National Institute of Aviation Research. NIAR houses an FAA Center of Excellence for Advanced

Materials and the NASA National Center for Advanced Materials

Performance, and all three have helped us specifically compete

with non-U.S. manufacturers.

Second, the need for technical training continues to be essential

to securing, sustaining, and retaining the skilled workforce needed

to expand our business over the next decades. Projections for our

community indicate that five major aviation companies in Wichita

may need as many as 4,150 trained workers just this year alone.

Third, attention must be given to developing U.S. engineering

talent. Aerospace engineers are the source of future innovation that

will provide American aviation manufacturers a competitive edge.

Yet the supply is exceeded by the demand. At Spirit AeroSystems

we hope to hire about 550 engineers over the next 5 years.

Fourth, capital is needed for product development, new process

planning, and new equipment. It is a challenge for Spirit to compete against companies that seem to have an unlimited flow of public assistance to build facilities and fill them with equipment and

trained people. This is especially true in developing economies that

have targeted the aviation market.

Fifth, health care is the number one rising cost for Spirit and

other companies. Health insurance premiums jumped 75 percent—

73 percent over the last 5 years. Such escalation continues to be

not only a source of competitive disadvantage for U.S. manufacturers in our industry, but also a considerable source of employee/company friction and overall employee concern for the future.

Sixth, and finally, while protecting the national security, we

must be able to compete internationally in an open and collaborative way. Appropriate import/export regulation measures are important, but they must be implemented reasonably with full understanding of their cost and their benefits.

In conclusion, thank you again for the opportunity to speak

today. This is a critical topic for Spirit AeroSystems. Our customers
28

and our competitors are global and so must we be. The technology

utilized in our products also is global, and our ability to work effectively throughout the world with both customers and partners is

essential. To remain competitive, our U.S. industry must be supported with world-class research capability, engineering and technical training, and continuous investment in product, process, and

equipment.

Thank you.

Mr. MICA. Thank you.

We will now hear from Mr. William Greer, VP and General Manager of Airbus North America Engineering. Welcome, sir, and you

are recognized.

Mr. GREER. Mr. Chairman, thank you for affording me the opportunity to testify this morning, and also thank you for having this

hearing in our town. My name is Bill Greer. I am the Vice President and General Manager of Airbus North America Engineering,

which includes our facility here in Wichita and a new engineering

center in Mobile, Alabama that will open its doors in early 2007.

I have been involved in the industry for a lot of years, more than

I would like to say, really. I joined McDonnell Aircraft in 1963 as

a junior engineer working on the F4 fighter. Since then I have

worked or consulted for a number of companies, including Learjet

which first brought me to Wichita in 1972.

If I may, I would like to address three key topics with you today:

What I see as the current state of U.S. aerospace, the factors currently driving American innovation, and lastly, what I see as the

wisest course for the future. First, the current state of the industry.

Mr. Chairman, I believe the experience Airbus has had in the

United States and especially here in Wichita is quite relevant to

the subcommittee’s efforts to understand how to keep U.S. aerospace strong. I emphasize keep it strong because, in general, the

current state of the aerospace manufacturing industry is good. And

we at Airbus know this to be the case from firsthand experience.

When Airbus looks for suppliers and business partners, it looks

around the globe for the best quality, price, service, ongoing support and more than anywhere else Airbus finds these best suppliers, best supplier companies in the United States.

Last year, Airbus spent $8.5 billion with our suppliers here in

the U.S. for parts, components and systems and such items as rivets, wing panels and parts, hydraulic systems, landing gears, evacuation slides and engines, and that is just a short list. This number, $8.5 billion, represents about 46 percent of Airbus’s entire procurement budget for aircraft manufacturing. In fact, Mr. Chairman,

more of Airbus procurement budget is spent here in the United

States than any country in the world, including Europe. And as a

result, Airbus has become the number one export customer of the

U.S. aerospace industry.

Our contracts with American industry in more than 40 States

support 170,000 American jobs - the kind of jobs that are the backbone of the U.S. industry and U.S. economy. But this is only part

of the story. That brings me to my second point.

Airbus’ partnerships with U.S. companies are also helping to

drive innovation in the United States and sustain America’s manufacturing competitiveness. I am going to give you one example. At
29

our wing manufacturing plant in the North Wales town of

Broughton, one name is displayed almost as prominently as Airbus,

and that name is Electroimpact, a company from the Seattle area

whose business originated with Airbus. And developing a wing that

could lift the world’s largest commercial aircraft, Airbus relied on

Electroimpact’s innovative engineers to design, perhaps, the most

sophisticated tooling equipment the aerospace industry has ever

seen. And the American engineers from this small company in

Washington State rose to the challenge.

Today, Electroimpact provides virtually all the tooling for the

Airbus A380 wing. In addition to making this high-tech equipment

here in the United States, Electroimpact employees from the U.S.

worked side by side with the Airbus team members in North

Wales, and thanks to its partnership with Airbus, Electroimpact is

now a world leader in the field of high-tech tooling equipment.

This story is especially relevant to this hearing. It is important

to understand that what brought Airbus to Electroimpact was not

cheap labor. What brought this company to Airbus was its engineering powers and its manufacturing excellence.

Electroimpact is but one example of how our partnerships with

United States industry produce cutting edge aerospace technology

and equipment, which is a lifeblood of American competitiveness in

this industry. And in my submitted testimony I have got several

other examples as well.

In sum, Airbus has gone from merely recognizing the competitiveness of U.S. aerospace technology through our purchases, to

now sustaining this competitiveness through our partnerships.

I am going to return to the theme of engineering prowess, Mr.

Chairman. It was American know-how, again, that led Airbus to

the United States. The Airbus North America Engineering Center

was first opened here in Wichita in 2002 to help design the wings

of the super-jumbo Airbus A380.

Congressman Tiahrt—you may remember, he participated in our

opening ceremonies and may remember that the facility was

planned for only about 40 engineers of a certain type—I am delighted to report that things have changed since then. We now employ more than 200 engineers and we are moving to expand that

very rapidly from that point, and we are working on all the Airbus

products, the large airplanes anyway. We do the A380 passenger,

the A380 freighter, and the A340 and the A350.

Now, Airbus Wichita would like to hire more engineers, including

recent college graduates, but we are finding that supply is limited.

This is a big concern for us, and I know it must be a big concern

for the subcommittee as well. Several of the witnesses testifying

have mentioned that already.

In particular, the aging of the U.S. engineering community will

result in an even more severe shortage of engineers within a decade or so, if the current trend continues. Unfortunately, the upand-down cycles of our industry have taught young people that careers in aviation are risky. And who is to blame them when they

are the very ones who lose their jobs in a down cycle?

By the end of 2007, I will need more than 450 engineers at our

Wichita and Mobile, Alabama, facilities. If I can’t meet the expected demand with high quality experienced engineering talent
30

available here in the United States, then I will not be able to continue to grow this company and maintain our competitive advantage in the global market.

Now my third and final point, Mr. Chairman: the best way to secure American aerospace for the future. You see, I believe the key

to remaining competitive is innovation, and one of the keys to innovation is to generate a large community of highly motivated engineers and scientists. From my vantage point here in Wichita, one

thing is crystal clear. We must make this a national priority.

I do understand that the President and Members of Congress

have put forth several initiatives to address this issue, and as an

engineer myself, and a manager of many others, I would offer some

additional ideas I believe are worth considering.

First as I mentioned, the key to remaining competitive is constant innovation. Once the process or a technology is matured, it

will migrate to the lowest cost supplier. Consequently, American

aerospace must identify the core competencies and continually upgrade them through the application of advanced technology. This

subcommittee can help in that regard by spearheading incentives

to continually train and retrain employees to produce complex assemblies through advanced technology.

Second, the base of engineering talent must be increased through

programs that encourage middle school and high school students to

consider science and engineering as a desirable career choice. In

addition, since over half the workforce are women and minorities,

and traditionally these groups do not enter the engineering fields,

special programs should be put in place to encourage their participation in engineering careers. Dean Toro-Ramos, of Wichita State

University, has proposed such a program and one that I fully support.

And lastly, funding for scholarships should be increased to allow

any qualified student to have access to a technical education.

This last idea is very important to me. Just before I graduated

from high school, the Soviet Union launched the first Sputnik and

our leaders responded to this challenge by putting scholarship programs in place to encourage more young people to enter the technical professions. I personally received a full scholarship from the

State of Illinois for my engineering education which was based on

ACT test results, and I would not have been able to attend university and wouldn’t be talking to you today without that program.

So, Mr. Chairman, I must ask that if the driver of competitiveness is innovation, then the key to innovation is competition itself,

and in this or any industry, competition drives companies to develop products that are better, faster, stronger or more sophisticated than others. For the U.S. and aerospace industry competition

results in greater fuel efficiency, more passenger comfort, increased

ability to transport freight longer distances, and higher safety

standards. And we have seen all these improvements over the

course of years driven on large part by the helpful, beneficial competition between Airbus and Boeing in the marketplace.

Competition-driven innovation led to the original Airbus A300,

which drove Boeing to develop the 767. Then Airbus responded

with the A330, while Boeing responded in turn with the 777 and

now the 787. Now Airbus is creating our A350 as well as the A380
31

that I mentioned earlier. Competition drives innovation which

drives competitiveness. This principle applies not just to the final

product that Airbus and Boeing roll off the assembly line, but to

nearly every piece of equipment that goes into these aircraft.

This leads me back to where I started: keeping U.S. companies

competitive with the rest of the world, and keeping companies such

as Airbus and Boeing reliant on American manufacturing, will require America to remain focused on the fundamentals—investment

in education, encouragement of innovative technologies, and support for robust competition in a global industry that thrives on innovation. With strong support from you and the members of this

committee aerospace will continue to lead. Thank you very much.

Mr. MICA. Thank you for your testimony, Mr. Greer.

We will now hear from Craig Mullins, General Manager of Lyons

Manufacturing. Welcome, and you are recognized.

Mr. MULLINS. Thank you, Mr. Chairman. Good morning. I am

Craig Mullins, General Manager of Lyons Manufacturing, and it is

an honor to be here today to give my testimony on keeping—helping to keep U.S. aviation manufacturing competitive.

Founded in ’39, 1939, Lyons Manufacturing is a small company

independently owned manufacturing machines—aircraft parts for

commercial airplanes. We employ between 30 and 40 people and

one—we are one of the larger employers in the small town of

Lyons, Kansas.

I have worked at Lyons for more than 16 years and seen many

changes take place in the aviation industry. My testimony today

will cover some issues I feel hinders small businesses like ours.

The first one, of course, has already been discussed is health care

cost. In order to stay competitive with other employers in our area,

we offer health care benefits to our employees. Over the years this

has become more and more difficult due to the rising cost of offering this type of benefit. In the year 2000, our average annual premium for health care coverage for one individual was almost

$5,000. In 2005, that price increased to $11,000 annually. This is

120 percent increase over the 5-year period.

Needless to say, this is an expense that we pass on to our customers in the form of labor costs. Small companies like Lyons cannot continue to pay the increasing cost and stay competitive. Many

small companies like ours are starting to drop health care coverage

or pass the expense on to the employees. Every year there is a

question of whether or not we should continue to offer health care

benefits. The problem is I know that health care coverage is an important factor and a necessity to the employees. And I would lose

many good people if that benefit would not be offered to them.

The second factor is utilities. As in many manufacturing industries, utility usage is a main cost of producing goods. Over the last

5 years it has become an increase in expense for our company, and

I don’t see any—anything getting better in the near future. In year

2000, our expenditures for utilities was roughly 56,000. In the year

2005, it was roughly $76,000. This equates to about a 36 percent

increase over 5 years.

The third issue is labor. Aero structure suppliers like us are increasingly being forced to assume greater responsibility for supply

chain management. If the knowledge and experience we possess
32

are not adequate to undergo this kind of task, it is easy to fall

short of our goals or our professional expectations.

One of the biggest challenges will be in the education and training of our employees. One of the biggest challenges—excuse me.

Well-trained, educated people will make better and faster decisions

based on unprecedented flow of data, information, and knowledge.

Only trained and educated people will be able to separate useful

information from useless information. Small towns like Lyons suffer from young adults leaving for college and never returning. Some

young adults decide to stay, but never continue their education.

Without an educated labor force, we will be left behind or unable

to seize new growth opportunities.

When I decided to continue my education at one of the local colleges here in Wichita, I found myself in a classroom of students

working in the aviation industry. Practically all my classmates

were receiving 100 percent tuition reimbursement from their employers. I remember being angry because my company could not afford to help me, and I had to pay to better my education for the

benefit of the company. I am not saying I disagree with these companies providing education for their employees, but it is a problem

for small companies to offer the same type of benefit.

I would like to see Federal and State funding become more available for small companies to allow them to educate their employees.

This would help us stay competitive in business and attract key

employees.

The fourth issue is material pricing and shortages. During the

last year and a half, we have seen problems with availability of

raw material and substantial price increases. Availability of aluminum and steel has created scheduling problems, production overtime, searching for other material suppliers and missed deliveries.

Since we are a small company, we are unable to buy large quantities of raw material for better pricing, so we have seen price

gouging due to shortages of this aluminum and steel plating.

These are just a few topics that we are faced with in today’s competitive industry. Even though we are a small company, we are one

of thousands in this country, and I am sure companies small and

large are facing these same issues.

Again, I appreciate this opportunity to testify before this subcommittee.

Mr. MICA. Thank you, Mr. Mullins.

And we will now hear from Kevin Hawley, President of Aerospace Systems & Technologies. Welcome and you are recognized,

sir.

Mr. HAWLEY. Chairman Mica and members of the subcommittee,

again, my name is Kevin Hawley. I am President of Aerospace Systems & Technologies, Inc., an aviation products company located in

Salina, Kansas, 90 miles north of here. I wanted to thank you for

this opportunity allowing me to testify and discuss topics, as I see

it, for aviation business and maintaining our competitive edge.

Our company is best described as a supplier to the aviation community, both to end users and original equipment manufacturers.

We market ice protection systems to the general aviation field,

from high performance piston powered aircraft to business jets.

Our TKS ice protection system has become the standard for general
33

aviation aircraft and we are realizing a tremendous growth in our

business because of that product.

Our company is a wholly owned subsidiary of CAV Aerospace,

Ltd., of the United Kingdom. A majority of the components of the

ice protection system are manufactured in the UK; however, a vast

majority of the produced product, in terms of ice protection, is sold

here in the United States, and our company acts as the focal point

for that commerce.

Our office here in Kansas is involved with TKS in four principal

areas. First, design and engineering, certification, distribution,

sales and marketing, and customer support.

Maintaining business success and competitiveness in the aviation

marketplace requires the fulfillment of a number of factors. Our location and infrastructure requirements are met exceedingly well by

the Salina Airport Authority and the community of Salina. Most of

our personnel needs are likewise met from within the community,

both in staff and technical fields. As an example, Kansas State

University in Salina has supplied many of our trade and technical

personnel in terms of engineers and mechanics and will continue

to be a resource for top notch recruits.

There are, however, specific areas of concern relative to the success of our company and our product line. I would like to share

those concerns with the committee and examples. There are three:

first, certification and regulation, which you have heard much testimony about today; second, again, product liability; and third, recruitment of technical resource.

As you can see, it is obviously a topic of almost everybody that

has testified today, and I am just echoing that. I see certification

as a potential log jam with future developments of our products.

We have a good working relationship with our cognizant FAA representatives and appreciate the efforts they direct to our projects.

We see, however, that the workload of the FAA continues to grow

while staff size remains dormant or decreases.

The overall effect is not a difficult concept to grasp. Program

schedules can become more indeterminate as the FAA struggles to

address programs. Program selection becomes more prioritized relative to FAA resources, potentially delaying response to our

projects. Certification workload is transferred to companies via delegation increasing the demands on the company’s resources from

both a personnel and financial standpoint.

I also find that the regulations are becoming more restrictive,

but not necessarily to the benefit of the general public. Much, if not

all, of the modifications and embellishments of the Federal aviation

regulations have been accomplished with safety in mind. Pursuant

of regulatory safety is the noblest of goals and an absolute requirement for aviation products, but not at the expense of introduction

of safety products to the market.

General aviation continues to evolve as a serious and realistic alternative to commercial airline travel. As they evolve, the aircraft

must be equipped to address the many environments and conditions that commercial airline aircraft witness. General aviation is

assuming the same responsibility as airlines by delivering occupants or passengers to a specific location at a specific time.
34

Our ice protection products address one of those needs and rests

on the fundamental principle of safety. TKS ice protection allows

aircraft to safely exit or transition in flight ice encounters. Our

product is born out of safety, yet its availability to the general public is often encumbered with the veil of regulatory safety. Our product is safe, reliable, and proven beyond any reasonable doubt, yet

it is becoming more and more difficult and expensive to gain approval of our systems for the market.

My next area of concern is a topic likely shared and as testified

to today with all aviation businesses: Product liability. When

queried about potential lawsuits, the reply is nearly unanimous. It

is not a question of ever being sued; it is a question of when. It

is a dark cloud that shades all of aviation businesses and threatens

competitiveness by additional financial burden.

Like most businesses, our company stands by its product and assumes responsibility for that product. Our responsibility quickly becomes warped and often exaggerated when litigation occurs. From

my perspective, a majority of the burden is moved to the defendants with little responsibility placed on the plaintiffs. A company

can be sued by anybody and those people allowed to fish for any

evidence without overwhelmingly compelling evidence to support

their position.

My experience also indicates that the aviation industry is often

treated unfairly by the litigation world. The concept of trial by

peers is virtually non-existent because the court cases are often

very technical when aircraft are involved.

I do not advocate absolution of our responsibilities to the public

and to our customers. I do, however, ask for a reasonable chance,

within the legal system, to have a fair trial on unbiased terms. As

an example, pre-trial arbitration may be one form of relief that

could potentially weigh the true merit of a case. Likewise, the allowance of countersuit for damages may be another means of deterring frivolous lawsuits.

General aviation has found relief with aged fleet of aircraft, but

growth of new aircraft, new products and new innovation could be

severely restricted by product liability.

My final area of concern is, again, a common theme here today,

and that centers around the most fundamental resource of any

company: Its employees. Specifically, the recruitment of new employees. Earlier in my testimony I indicated that our location in Salina affords us a good source of local people for labor, both trade

and technical. Our difficulty arises when we must recruit people

from disciplines not available to us through the local educational

resources.

Our basic problem arises with recruitment of engineers. It is

common knowledge and you have heard many times today that engineers are a shrinking commodity. We suffer from that every day.

Aerospace/aviation business is good. As a matter of fact, it is great.

But fewer and fewer kids are pursuing technical degrees within the

United States. The end result is one that all the companies will

suffer from, but particularly the small companies. A shortage of engineers will inflate the wage basis making it extremely difficult for

small companies like ours to compete with large companies for a

limited labor pool. Though it is contrary to the desire of most
35

Americans, it is not difficult to understand why companies are

outsourcing technical work. It is difficult to find the engineers to

do the work.

The concept, though, can be reversed for the benefit of companies, but roadblocks still exist. Thousands of foreign students come

to the United States to obtain higher education. Many of those students would like to remain in the U.S. after earning their degrees,

but are hampered by immigration policy. It will be extremely beneficial to all technical companies if immigration quotas were expanded for foreigners with technical degrees, particularly around

the month of May. As an example, our company could recruit new

foreign aerospace or aeronautical engineers from our own Regents’

schools such as Wichita State and the University of Kansas.

The answers to recruitment issues are not easy. As I indicated,

modification of immigration policy would certainly help in the short

term. For a long term solution, it is my hope that more young people can be encouraged to enter technical fields and pursue a technical career, and many examples of motivational techniques have

been offered today. It is paramount that our technology base survives and assures our competitiveness in all fields.

I thank you for having me here for the day. I will be happy to

answer any questions when the time comes.

Mr. MICA. Thank you.

And we will first hear from our last witness waiting patiently,

Mr. Finley Nevin, who is President of Global Engineering and

Technology.

Welcome, sir, and you are recognized.

Mr. NEVIN. Thank you, Mr. Chairman and I thank all the members of the subcommittee, especially Congressman Moran, for inviting me to be here today. I apologize for not having an outline or

anything. I didn’t do too well at that.

My wife and I founded Global Engineering in 1991, to supply interior components, mainly cabinetry items to the local aircraft industry. We are now the—kind of the trickle-down effect of the—

how the industry does here locally. If the local industries here do

well, we do well. If they falter, we falter.

We suffer many of the same pains that everybody else at the

table has discussed so far: rising insurance costs that you have to

debate whether to pass on to the employees or to keep offering it

in order to be competitive, and draw the employment that we need

to sustain growth.

Many of the things that we have talked about here, the problems

and issues that I have seen in my 30 years of being—35 years of

being in aircraft, center around a vast variety of things. One thing

that is near and dear to my heart is the issue brought up earlier

about the FAA. We participate in a STC program that we started

almost 2 years ago for one of the local companies to get an STC

for the aircraft. Through the problems with the manning of the

local FAA, because of the short help, this project took entirely too

long, slowed delivery and therefore affected jobs and everybody

else.

Insurance is an issue, as we heard, that everybody shares, and

we are concerned with that. I am glad to be a part of this industry

and watch the growth of it and see where we go. I don’t have much
36

to add past that. You have heard everything that I was going to

talk about—thought about earlier, but I do appreciate being here.

If I can answer any questions or anything, with what we do, I

will be glad to do that.

Mr. MICA. Thank you, Mr. Nevin. You are the only one that did

it right. You summarized, and they all read their statements. So

even though we tried to ignore you with no name plate, and took

your working life away from you, you succeeded. Thank you.

We will go into questions now and I am going to yield in reverse

order to Mr. Tiahrt first.

Mr. TIAHRT. Thank you, Mr. Chairman. I am noticing a common

theme. It was in the first panel as well as this one. Health care

costs are driving a lot of the burden that is on manufacturers, and

it is something you really can’t control, other than, Mr. Nevin, you

called it insurance and I assume you meant health care insurance.

Mr. NEVIN. Health care. Workmen’s comp, that is also increasing.

Mr. TIAHRT. Which I put in a different category. We need to do

lawsuit reform to keep your liability insurance costs down as well

as health care reform to keep your health insurance costs down. So

I think that common theme is important for us to make a mental

note of because it is a huge problem. It is 15 percent of our economy today.

Health care is 15 percent of the economy. It is the fastest growing segment of our economy. That is good in the job perspective;

it is bad from the cost perspective. It is one of the things that

makes us less competitive.

You mentioned, Mr. Nevin, as well as Mr. Hawley, and I think

almost everybody, the FAA problems as far as getting—being

undermanned. Could you tell me how you—Mr. Hawley, let me

start with you.

Could you tell me how you interface with the FAA and what

their funding shortfall—how those problems have affected you dayto-day.

Mr. HAWLEY. It is very similar to what you heard earlier, except

us being a small company, and I am an engineer by training and

I still do a fair amount of engineering work. That is the benefit of

a small company, wearing many, many different hats.

I would say the biggest downfall is just the time factor. I mean,

quite frankly, like I said, we have a great relationship with our

local aircraft certification office. Nowadays you come in the door

with a program, and in the old days pretty quickly, you know, you

would get a reply letter with what the project number is.

Nowadays standard order of operation is they give you a letter

that tells you within 30 days, they’ll tell you if they can do the

project or not. Now, imagine trying to plan any kind of business operation around that to start with, an additional product, so it is—

Mr. TIAHRT. Are you saying that it is feasible that you could

come up with an innovative product, but because of their lack of

funding, which is not—they are good, quality people. It is not anybody here’s responsibility. They just can’t get to it. You had a new

product that could not make it to market because they couldn’t certify it.

Mr. HAWLEY. Absolutely. I think about it often, what life would

be like now if I was starting over what we did 20 years ago, and
37

I don’t think we could pull it off because quite frankly, like all

small companies, we were pretty ignorant on the subject and knew

what we were doing, but in those days, you know, the FAA helped

us along, guided us in the right direction, and now we have evolved

over 20 years.

If somebody is trying to come into the market now with an innovative product, you know, they better have a big wad of cash in

their pocket to go hire the help because they won’t be able to do

it on their own like we did then. So it is quite feasible that people

and even existing companies can run into a substantial roadblock

and not get their product out there. Just—a lot of it just depends

on what the visibility of your company is, what the visibility of the

product is, and what the visibility of the issue is. So that is the distinct problem we have.

Now, there is also—there was a lot of talk, particularly from

Cessna, on delegation. Delegation is good and it is bad also. It is

tough for small companies—there are lots of companies that have

brought products to market and certified them that didn’t have the

technical basis and the FAA actually fulfilled that role.

Early on we were that way. Now, we have delegations in our

company and will continue to go that route, but it is kind of a

two—a double-edged sword, depending on the size of the company

and what you are trying to do. It does help us out on a day-to-day

basis. We can get a lot of things done. But still, even in a delegation process, you never quite know if the oversight is going to come

in and put the hammer down on you or not. Will they accept what

you—what you said was good and certifiable or will they throw it

back at you?

So it is—I don’t know. I don’t know quite what the answer is,

other than the fact that they do need more manpower. Our local

ACO staff virtually dropped, I would say, 50 percent in size from

the last few years by staffing in another office, but yet nobody was

brought in to fill those gaps. So it is just a timing thing, and it directly applies in the different projects in streaming them out .

Thank you, Mr. Chairman. I know I have some other questions,

but in deference to time, I know that Mr. Moran has to get on, so

I am going to stop.

Mr. MICA. I would yield now to Mr. Moran.

Mr. MORAN. Thank you.

Mr. Chairman, Mr. Ehlers and Mr. Tiahrt would know this, but

Mr. Hawley and Mr. Nevin come from my urban areas of my district, populations of between 40- and 50,000 in their communities.

Mr. Mullins would come from a more typical-sized community, the

First District of Kansas, 2,500 to 3,000 people.

And I guess one of the things that I would—I think what I have

heard today, and especially from you, Mr. Hawley, what you just

said in response to Mr. Tiahrt is that small business has an even

more extraordinary hurdle with certification, with regulatory issues

because of the inability to have the expertise, the personnel, the

ongoing relationship, I suppose, with the FAA. And in the process,

as a result of that, I assume that that means it is less likely. You

say about—let me finish that sentence. It is less likely to have

entry into aviation manufacturing that we will not see as we saw

here historically in Kansas, especially here in Wichita, the start-up
38

of aviation companies because of the impediments, the hurtles. And

we all can complain about how business keeps getting larger and

larger, and yet I assume that that regulatory burden is one of the

factors that makes that occur.

Is that an accurate assessment?

Mr. HAWLEY. Yes, it is.

It is—I testified to that earlier. It is becoming more and more difficult because the regulations themselves continue to evolve. There

is more burden from that, plus from our perspective as a small

company, again, it is the delegation, like you said, pushing more

and more of this requirement into our company; and we aren’t a

huge company by any means.

We are capable of dealing with parts that I, myself—I am the

resident designated engineering representative, and I can handle

certain disciplines of it, but there are other disciplines that aren’t

elements within our programs that we can’t possibly afford to have

a full-time person, and we have to contract that out. And that kind

of—that kind of almost demanded outsourcing becomes more and

more expensive for us all the time. And I just have a difficult time

imagining, you know, new companies coming into it.

Quite frankly, every aviation company in Kansas, in one fashion

or another, was a mom-and-pop operation somewhere along the

line, and it is just not possible to do that.

Mr. MORAN. Mr. Mullins, the employment history at Lyons Manufacturing, is it up and down? Are you historically good or high or

low levels, and what percentage of your employment is related to

aviation manufacturing?

Mr. MULLINS. Of course, we are 100 percent aviation manufacturing. Definitely after 9/11 we sustained a 30 percent drop in our

employment level. So the 40 range is more of a general area that

we employ during peak times. Of course, during aviation—I mean,

we are all prone to the history of the ups and downs, just like anybody else is, so—

Mr. MORAN. Let me ask a broader question. What concerns me—

maybe this is Mr. Greer or Mr. Turner, but any of you, we all know

what happened to the aviation industry post 9/11, and testimony

today has been that the aviation industry is in good shape. Things

are much improved than they were during that period of time. But

what concerns me is that I don’t think we made any changes in our

policies. That we have not made any structural changes in the industry. It is just that the general economy improved and therefore,

the testimony that you all provide today is extremely different than

it would have been three years ago, but yet I don’t know that we

learned anything from 9/11.

And my question is, are there things beyond what has already

been said that we should learn today, and action that we should

take so that when the difficult times return, the aviation industry

is better capable of weathering the storm?

Mr. TURNER. I would like to—first of all, Congressman, I think

that is a very perceptive point, and we have talked about several

things that drive our costs which are not sensitive to the cycle, like

health care, but I do believe we have all talked about—Janet

Harrah talked about the fact that we have an aging workforce. We

talked about technical training. We talked about—we talked about
39

engineering, education, and now you brought up this point about

the cycle. I think the fact is that we exist in an industry that is

cyclical. We exist in an economy that is cyclical, and the longer

term view is extremely important, I believe. The south central Kansas area is working very hard collaboratively, State, local, the industry, to create a technical training, a center of technical training

excellence, which I think is essential for economic development. I

believe economic development is driven by the technical training

and education systems.

I think there is a policy opportunity here because our industry

will cycle again, and when it cycles again, we will have two choices.

One is to operate like we always have, which is businesses layoff

people or scale back. Government scrambles for what they should

do with the down-turned economy, and we all come up with good

ideas that are implemented about the time that the industry comes

back and the cycle begins to rebound, and we no longer need it. So

I think there is a policy opportunity here to get ahead of the cycle.

We will have another down-turn. We don’t know when it is. We

have the opportunity if we will—if we will create a world-class

technical training capability here in south-central Kansas for our

cluster. When the downturn comes, we have the opportunity to

switch policy and work together, government and industry, to retrain our people during the down-turn and have them available on

the up-turn again.

So that is not something that I—that I have heard proposed or

heard talked about, but I think it is an opportunity to use, both

public and private resources and a long-term view to be prepared

for both the downside and the upside.

Mr. GREER. I will add a couple points to that. I agree with everything he said, but the thrust of the matter is just that the up cycle

always returns, and the best time to prepare for that is during the

down cycle, and the things that Mr. Turner mentioned are good.

Also, perhaps, making it a little easier for our customers to purchase capital equipment through tax policy would encourage at

least a flow of product during those down-times. That might be a

good idea.

Mr. MORAN. I thank you all for your testimony, and I thank the

Chairman and Mr. Ehlers for coming to join Mr. Tiahrt and me in

Kansas, and I thank Mr. Hawley and Mr. Mullins and Mr. Nevin

for coming to Wichita today and presenting your testimony.

I have a funeral to attend today, and I am going to depart, but

I will make certain that I know what further questions and answers there were. Again, this is such an important issue to us, and

I appreciate the testimony that I have heard today.

Mr. MICA. Thank you, again, Mr. Moran, and thank you for your

hospitality.

We will now recognize Mr. Ehlers.

Mr. EHLERS. Thank you, Mr. Chairman.

And, Mr. Moran, before you leave, I just want you to know, I

grew up—spent the first 14 years in a town of 800, then moved to

a town of 250 for my high school years. I have a great appreciation

for your district. I find some of the most innovative people in America living in these small communities because they have to make
40

do. And you pointed out, as an engineer you had to do everything.

A lot of people have to do that. It is a real strength for our country.

Mr. MORAN. I appreciate, Mr. Ehlers, you have that respect. I

was also going to suggest particularly to Mr. Greer and Mr. Turner, they might network with Mr. Hawley and Mr. Nevin about potential contracts. We would love to see that business.

Mr. EHLERS. All right. Thank you.

On the regulatory delay issue, I have sort of a rule of thumb, if

you have to wait for something you are probably dealing with the

government and—because in the private sector—I have actually

switched banks because I had to wait too long in line at the bank.

I switched to another bank that kept the line shorter. The same

thing at supermarkets.

I have always valued time. I hate to stand in line. If I have to

wait in line at the supermarket, I start going to another one. We

don’t have that choice with the government.

Now, we have dealt with that in an unusual way with passports

because some people wanted to travel and they applied for the

passport too late to wait two months for a passport. We charge an

extra fee so you can get expedited service. And in a day or two you

can get a passport, if you pay the extra fee.

I hesitate to recommend that we start that with the FAA because

I am afraid the fee would get higher and higher, but frankly, given

the situation as it is, it would be economically better for you to pay

a fee and get it in a month rather than not pay a fee and have to

wait 2 years. It is a problem we have to address, and I certainly

don’t want to take that route, but it is ridiculous that you have to

wait on the government and lose money because we are not appropriating enough money for the FAA to do what they are supposed

to do, and I will certainly be happy to join with any interested

Congresspersons in trying to change that.

Mr. Turner and Mr. Greer and, in fact, most of you talked about

either need for more engineers or need for better education. I have

devoted my life to that. It is extremely frustrating. I wish all of my

colleagues in the Congress could have heard your testimony because most just don’t realize the need. They hear about it, but they

don’t feel it the way you do. And so I urge you to, through your

national associations, really impress the need to Congress.

I have mentioned getting bills passed of doing much of what you

want, but when it comes to the appropriations, the appropriators

don’t put the money into the programs, and we just have to hear

more from you in Congress so that we do that.

The other thing, Mr. Hawley, I was interested in your comments

about is the lack of engineers. Believe it or not, we have a surplus

of engineers in some areas that are not working, and maybe one

of the quickest ways to meet your needs is through a retraining

program.

And I am fascinated with Mr. Turner’s suggestion of during a recession, take advantage of that time to train engineers, perhaps

even to switch them from civil engineering to mechanical engineering or in some way meet the needs of the market better. It is crazy

to have a shortage of engineering and have unemployed engineers

at the same time. So you have given me a lot of things to think

about and I really appreciate the testimony.
41

I really don’t have any questions because your testimony is crystal clear and the message was the same from all of you, and I appreciate you coming here to say it. Thank you.

With that, I will yield back.

Mr. MICA. I thank you, Mr. Ehlers.

Also, again, I want to express my appreciation to Mr. Tiahrt for

hosting us here at the university, and I want to thank each of the

witnesses on this panel and our previous panel for their testimony

and participation, especially our small business participants. When

you are the chief cook and bottle washer, taking time off to be with

us is difficult, but it is especially important that we take the issue

of competitiveness out here to the heart of aviation manufacturing

and hear from you.

The good news is, some of what we heard was positive as to

where we are now. The challenge we face, of course, is keeping

ahead of the curve, and then addressing all the issues that were

raised here, health care, insurance, liability, certification, competing as the world grows flatter, as one of the witnesses testified.

So we welcome your participation today, and Congress is involved in an ongoing process of changing the laws and our policies

and programs hopefully to assist you so we can be successful together. So there being—as I mentioned, too, we couldn’t have everybody testify in Wichita. We have dozens, hundreds of companies

as we have heard and learned. We do welcome additional testimony

from anybody who would like to submit it to the members here or

to me as Chair. It will be made part of the official record, and we

will include that in today’s testimony. So the record will be open

for a period of 2 weeks.

There being no other business to come before the House Aviation

Subcommittee, I declare this hearing adjourned. Thank you.

[Whereupon, at 12:30 p.m., the subcommittee was adjourned.]
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83Æ