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AIRPORT DEREGULATION

(108–60)

HEARING

BEFORE THE

SUBCOMMITTEE ON

AVIATION

OF THE

COMMITTEE ON

TRANSPORTATION AND

INFRASTRUCTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

APRIL 1, 2004

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

JACK QUINN, New York

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

JIM DEMINT, South Carolina

DOUG BEREUTER, Nebraska

JOHNNY ISAKSON, Georgia

ROBIN HAYES, North Carolina

ROB SIMMONS, Connecticut

SHELLEY MOORE CAPITO, West Virginia

HENRY E. BROWN, JR., South Carolina

TIMOTHY V. JOHNSON, Illinois

DENNIS R. REHBERG, Montana

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

BILL SHUSTER, Pennsylvania

JOHN BOOZMAN, Arkansas

CHRIS CHOCOLA, Indiana

BOB BEAUPREZ, Colorado

MICHAEL C. BURGESS, Texas

MAX BURNS, Georgia

STEVAN PEARCE, New Mexico

JIM GERLACH, Pennsylvania

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

VACANCY

JAMES L. OBERSTAR, Minnesota

NICK J. RAHALL, II, West Virginia

WILLIAM O. LIPINSKI, Illinois

PETER A. DEFAZIO, Oregon

JERRY F. COSTELLO, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JERROLD NADLER, New York

ROBERT MENENDEZ, New Jersey

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

NICK LAMPSON, Texas

BRIAN BAIRD, Washington

SHELLEY BERKLEY, Nevada

BRAD CARSON, Oklahoma

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

JULIA CARSON, Indiana

JOSEPH M. HOEFFEL, Pennsylvania

MIKE THOMPSON, California

TIMOTHY H. BISHOP, New York

MICHAEL H. MICHAUD, Maine

LINCOLN DAVIS, Tennessee

(II)
SUBCOMMITTEE ON AVIATION

JOHN L. MICA, Florida, Chairman

THOMAS E. PETRI, Wisconsin

JOHN J. DUNCAN, JR., Tennessee

JACK QUINN, New York

VERNON J. EHLERS, Michigan

SPENCER BACHUS, Alabama

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

JOHNNY ISAKSON, Georgia

ROBIN HAYES, North Carolina

TIMOTHY V. JOHNSON, Illinois

DENNIS R. REHBERG, Montana

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

BUD SHUSTER, Pennsylvania

JOHN BOOZMAN, Arkansas

CHRIS CHOCOLA, Indiana, Vice Chairman

BOB BEAUPREZ, Colorado

STEVAN PEARCE, New Mexico

JIM GERLACH, Pennsylvania

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

VACANCY

DON YOUNG, Alaska

(Ex Officio)

PETER A. DEFAZIO, Oregon

LEONARD L. BOSWELL, Iowa

WILLIAM O. LIPINSKI, Illinois

JERRY F. COSTELLO, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

ROBERT MENENDEZ, New Jersey

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

BRAD CARSON, Oklahoma

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

NICK J. RAHALL II, West Virginia

BOB FILNER, California

JAMES L. OBERSTAR, Minnesota

(Ex Officio)

(III)

(V)

CONTENTS

TESTIMONY

Page

Allin, Bonnie, President and Chief Executive Officer, Tucson Airport Authority, Tucson, Arizona ............................................................................................. 3

Barclay, Charles C., President, American Association of Airport Executives .... 3

Bennett, James E., President and CEO, Metropolitan Washington Airports

Authority, Washington, D.C. ............................................................................... 3

Faberman, Ed, Executive Director, Air Carrier Association of America ............. 3

May, James C., President and Chief Executive Officer of the Air Transport

Association of America, Inc. ................................................................................ 3

Shane, Hon. Jeffrey N., Under Secretary for Policy, U.S. Department of

Transportation ...................................................................................................... 3

PREPARED STATEMENTS SUBMITTED BY WITNESSES

Allin, Bonnie ............................................................................................................ 32

Barclay, Charles C ................................................................................................... 32

Bennett, James E .................................................................................................... 32

Faberman, Ed .......................................................................................................... 50

May, James C ........................................................................................................... 58

Shane, Hon. Jeffrey N ............................................................................................. 86

(1)

AIRPORT DEREGULATION

Thursday, April 1, 2004

HOUSE OF REPRESENTATIVES, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, SUBCOMMITTEE ON

AVIATION, WASHINGTON, D.C.

The subcommittee met, pursuant to call, at 10:05 a.m. in room

2167, Rayburn House Office Building, Hon. John L. Mica [chairman of the subcommittee] presiding.

Mr. MICA. Good morning. I’d like to call this hearing of the

House Aviation Subcommittee to order. I’d welcome everyone this

morning.

The topic of the subcommittee hearing today is airport deregulation. We have one panel, and the order of business will be opening

statements from Members and then we will turn to our panel of

witnesses.

I’ll start with my opening statement, and then yield to other

Members who want to be recognized.

Today’s hearing, as I said, will focus on airport economic deregulation. Airline deregulation ended the Federal Government’s involvement in the day-to-day business of the commercial airliners.

Airlines are free to decide what service to provide, where to provide

it, and how much to charge. While the Federal Government is now

completely out of the business of regulating air fares and services,

it continues to exercise considerable control over airport economic

activities. Most airports are not subject to true market competition

and require Federal oversight to ensure equal access, promote fair

competition, and protect interstate commerce.

The Department of Transportation and the Federal Aviation Administration have set strict guidelines on airport access, competition, landing rates, gate charges, and revenue usage. Some members of the airport community have voiced concern over the growing number of Federal mandates associated with their airplane finances. They feel that these mandates reduce flexibility, create unnecessary cost, and also impede important airport development.

Airport development is a key to the economic future growth not

only of local communities and States, but also to our country. The

Federal Government must strike a balance between airport capacity and its other responsibilities.

This summer hopefully we’ll finally see a return of our once robust airline passenger traffic. As the economy continues to recover,

we can expect major congestion delays at many of our Nation’s

busiest airports.

The Department of Transportation and the Federal Aviation Administration announced last week temporary measures to prevent
2

runway and airway gridlock this summer, and some of these provisions, as you know, and ability to deal with this was included in

our Flight 100 legislation, so we are pleased to see them take this

action. But despite these efforts, in the end the only way to meet

future demand is to build more runways, improve our airports’ infrastructure.

The recently passed FAA reauthorization bill, Vision 100, contained environmental streamlining provisions, which also will help

some, and those changes address cumbersome Federal environmental review processes; however, we made those changes without

weakening underlying environmental laws. These provisions will

reduce the time it takes to build much-needed airport capacity and

improve infrastructure. However, I believe that we need to take a

similar approach to airport economic regulation. I think we can reduce the amount of costly bureaucratic procedures that we have in

place and some of the red tap that we have while maintaining Federal interests in the airport system. I think this is an important

hearing on the future of these infrastructure hubs and transportation hubs of the future. I think it is a critical issue that this subcommittee addresses to where we go from here.

We have a great panel of witnesses with tremendous expertise,

and I look forward to their testimony.

Mr. DeFazio should join us later, but I’m pleased to yield at this

time to Mr. Boswell.

Mr. BOSWELL. Thank you, Mr. Chairman. I look forward to what

part I can be here to listen to these testimonies. It is an important

subject, for sure.

Mr. DeFazio would like to ask for concurrence that he can make

his opening statement when he arrives.

Mr. MICA. Without objection, when he arrives we will recognize

the ranking member.

With those opening comments, I am pleased to recognize our

panel of witnesses today. We have with us The Honorable Jeffrey

N. Shane who is the Under Secretary for Policy at the U.S. Department of Transportation; Mr. Charles Barclay, president of the

American Association of Airport Executives; Mr. Jim May, president and CEO of ATA, Air Transport Association; Mr. Ed

Faberman, executive director of the Air Carrier Association of

America; Mr. James E. Bennett, president and CEO of the Metropolitan Washington Airports Authority; and also Ms. Bonnie Allin,

president and CEO of the Tucson Airport Authority from Tucson,

Arizona.

I want to first of all welcome our panel of witnesses. Some of you

have been before us before, some of you are new. If you have

lengthy statements which you’d like to have made part of the

record, please request so through the Chair and we’ll add that

data, lengthy statements, to our record of today’s proceedings.

With those comments, I am pleased to recognize for a statement

The Honorable Jeffrey N. Shane, Under Secretary for Policy of the

U.S. Department of Transportation.

Welcome, sir. You are recognized.
3

TESTIMONY OF HON. JEFFREY N. SHANE, UNDER SECRETARY

FOR POLICY, U.S. DEPARTMENT OF TRANSPORTATION;

CHARLES C. BARCLAY, PRESIDENT, AMERICAN ASSOCIATION OF AIRPORT EXECUTIVES; JAMES C. MAY, PRESIDENT

AND CHIEF EXECUTIVE OFFICER, AIR TRANSPORT ASSOCIATION; ED FABERMAN, EXECUTIVE DIRECTOR, AIR CARRIER

ASSOCIATION OF AMERICA; JAMES E. BENNETT, PRESIDENT

AND CEO, METROPOLITAN WASHINGTON AIRPORTS AUTHORITY, WASHINGTON, D.C.; AND BONNIE ALLIN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, TUCSON AIRPORT

AUTHORITY, TUCSON, ARIZONA

Mr. SHANE. Thank you, Mr. Chairman. I would like to submit a

longer statement for the record.

Mr. MICA. Without objection, your entire statement will be made

part of the record. Please proceed.

Mr. SHANE. Good morning, and good morning to members of the

subcommittee, as well. Thank you very much for inviting me to appear before you today. Airports play an essential role in our national economy due to the services they provide and the jobs and

business opportunities they create. Despite the challenges of a

post–9/11 security environment, airports have benefitted from the

economic recovery of the past couple of years and a concomitant rebound in air travel. Thanks in part to the efforts of this subcommittee, Federal funds for airport infrastructure have increased

by 69 percent over the last five years.

In the future, we will need the airport and air space capacity to

meet whatever type and level of demand the market may bring.

Having the infrastructure to avoid congestion and accommodate

new business models will ensure the sustainability of healthy competition in the aviation marketplace. If our aviation system is allowed to bog down, the implications for America’s economic wellbeing would be very serious. That’s why Secretary Mineta has

launched a next generation air transportation system initiative to

triple the capacity of our system between now and 2025.

I have submitted a longer statement for the record, and so in the

interest of time I will just highlight a few key points this morning.

First, existing Federal policies and programs governing airports

work well. Despite the fact that Federal funds have restrictions attached to them, our Federal airport programs have a lot of builtin flexibility and the FAA has a demonstrated track record of working with airports to maximize their effectiveness.

This hearing furnishes a welcome opportunity to discuss the new

policies that were adopted in Vision 100 and begin to engage the

airport community in a dialogue that will inform proposals for the

next reauthorization cycle.

Airport operators have repeatedly expressed their desire for more

flexibility in the way that they can use AIP funds. We’re happy to

note that at the Administration’s urging Vision 100 included such

additional flexibility.

PFCs are another substantial source of funding for airport capital development, especially at major airports. These local funds are

subject to a Federal review process mandated by law, including restrictions on their use that were the result of a carefully crafted

compromise between the airport and airline communities. That
4

compromise has been modified over the years to add new flexibility,

but remains largely intact in Vision 100.

Vision 100 streamlines the Federal PFC review process and

eases the requirement of consulting with airlines that have an insignificant presence at the airport. The law also includes a pilot

program that will simplify the PFC application process for non-hub

airports. Both of those provisions were recommended to the Congress by the Administration.

Airports are complex enterprises, and public policy, therefore,

must focus on providing strong financial support for airports while

ensuring fair access to airport facilities. Congress, of course, has

outlined broad public policy direction on both the collection and the

permissible uses of airport revenue. As a condition of receiving AIP

grants, an airport must agree to provide access to the airport on

reasonable conditions and to levy similar charges on air carriers

making similar uses of the airport. The FAA’s current policy is intended to implement a clear Congressional mandate that the use

of airport revenues be limited to the capital and operating expenses

of the airport, the local airport system, and other local facilities

owned or operated by an airport and directly and substantially related to air transportation of passengers or property.

One other critical aspect of our work is ensuring compliance with

AIP grant assurances. Some airport operators have questioned the

need to retain all of the requirements currently imposed through

AIP grant assurances. The vast majority of these assurances are

required by statute, but we are always required to consider appropriate adjustments and to review specific suggestions; therefore,

when we publish a notice in the ‘‘Federal Register’’ this summer to

implement the new assurances required by Vision 100, we will also

use that opportunity to solicit comment on all current assurances,

as well.

Before I conclude, let me turn quickly to competition plans. The

Department’s statutory guidance requires us to consider several

factors in the public interest as we develop regulations, including

encouraging entry into air transportation markets by new and existing air carriers. One important tool that we use to promote airline competition is the plans that most major airports are now required to file. The Department staff devotes a considerable amount

of time to reviewing airport competition plans and offering suggestions as to what actions airport officials might take to reduce barriers to entry. The competition plan process provides an opportunity for us to provide guidance on best practices and to promote

robust airline competition more effectively. All of this, of course, is

designed to benefit the traveling public.

Some have argued that the competition plan requirement is a

significant and unnecessary regulatory burden. I can assure you,

Mr. Chairman, that the department goes to great lengths to minimize that burden. We feel strongly, however, that the requirement

carries significant benefits. Since the competition plan requirement

has been in effect, we have seen reduced barriers to entry at many

airports at which concentration had become a problem.

I have submitted with my written statement a paper that provides a list of many of the initiatives airport managers have adopted in response to the competition plan requirement. As of April,
5

2003, low-cost competitors had gained entry or expanded service at

29 of the 38 covered airports, resulting in greater choices and lower

fares for air travelers around the country.

That concludes my summary statement, Mr. Chairman. I would

certainly be pleased to answer any questions that you or the subcommittee may have at the appropriate time.

Mr. MICA. Thank you. We’ll withhold questions until we have

heard from all of our witnesses.

Mr. Charles Barclay, American Association of Airport Executives,

you are recognized.

Mr. BARCLAY. Thank you, Mr. Chairman. We would appreciate

making our full statement——

Mr. MICA. Without objection, your entire statement will be made

part of the record. Please proceed.

Mr. BARCLAY. Mr. Chairman and members of the committee,

thank you for this opportunity to discuss the ways airport executives believe we can improve the efficiency of the system, reduce

costs, and better meet future needs of our national aviation system.

We’ve called our collection of proposals ‘‘airline economic deregulation,’’ but the first thing I want to do is to thank this committee,

its leaders, and its staff for Vision 100, especially the dedication

and determination it took to pass that exceptional piece of reauthorization legislation in the closing moments of last year’s session.

It is only because of that accomplishment that we have the luxury

of addressing the long-term broader issues we bring before this

committee today, so thank you.

In our testimony today we revisit a few of the reauthorization debates we lost, we offer critiques of the legally required roles of

some of our friends at DOT and FAA, and I suspect we may step

on the toes of a few of our industry partners. It is not our intent

to be ungrateful or to criticize others for doing their jobs under current law or to be argumentative. We are especially grateful for the

efforts of FAA’s airports office to get AIP funding out to airports

under current law.

Our purpose today is to be candid and open about fundamental

changes that, from our perspective, would make the system work

better at less cost and be better able to adapt to change. I have

three general points I would like to make about our testimony.

The first is that airports are local government creatures with all

the checks and balances, public oversight, and public incentives of

other government institutions, including the Federal Government.

After years of slowly accepting new economic regulations, airport

executives feel as if they’ve acquired a Lilliputian web of Federal

economic regulations, large and small, that bind their hands in

nearly every decision when trying to quickly and efficiently improve airport facilities.

Local government goals and incentives for providing public airport facilities are virtually identical to those that drive Federal policy-makers, so what is the long-term benefit of the duplication

pointed out in our testimony’s examples? Why have the Federal

Government duplicate resources to regulate and re-decide local government decisions in areas where the goals are mutual government

goals? Obviously, the Federal interests in our national aviation system need to be protected in law. We recommend making safety, se-
6

curity, non-discrimination, and the prohibition of airport revenue

diversion the four corner posts of Federal requirements on airports,

but then let airports make decisions within those corner posts.

The Federal Government has one like-minded, like-incentivized,

responsible-to-the-public partner in aviation infrastructure, and

that’s airports.

My second point is that time is money. The delay inherent in

adding duplicate layers of unnecessary Federal oversight to the existing layers of local procedure and oversight are very costly. Our

testimony and my colleagues’ examples point out the years that are

lost in avoidable delays that don’t change outcomes but slow the

progress while escalating costs. Our members’ frustration at this financial waste is evident in many of the examples they provide.

One simple case is missing a construction season in the northern

States when a budget or appropriations complication in Washington delays the release of AIP funds. Why not allow construction to

proceed with reimbursement authorized for eligible projects properly carried out?

Over and again throughout the years airport projects have been

penalized by millions of dollars due to a wide variety of Federal

funding and oversight delays that are purely procedural. Delegation of more authority to the local level is our preferred solution to

these delays, but there are also a number of targeted changes that

could save significant sums on future delay-driven costs, and we’d

like to work with the committee on both those options.

My final point is that in airline deregulation the Federal Government determined that private shareholder-driven companies should

be economically deregulated in order to unleash lower costs and

greater innovation. The theory was that price and services would

be policed by competition and new entry rather than government

regulation. Most people would acknowledge this theory works unevenly in practice, with some markets enjoying significant competition and others left without the benefit of actual or some even potential competition. Airline deregulation is a matter of how one

sees the balance of benefits and costs, and the answer a person provides often depends on their geographic place in the system.

Having the Federal Government step back from its economic regulation of airports would seem to us to be a much more modest

step. In place of uneven competitive forces to police prices and services, you have a consistent, proven pattern of local government

checks and balances and local public oversight to substitute in

every case for Federal regulation and oversight. You can still expect the benefits of reduced costs and greater innovation at airports

that can operate within broad Federal guidelines but not with the

pervasive Federal regulations that crop up daily and delay—sometimes frustrate—the price, service, and improvement decisions

made at airports.

Mr. Chairman and members of the committee, we look forward

to working with you on these issues.

Mr. MICA. Thank you for your testimony.

We will now hear from Mr. Jim May, president and CEO of ATA.

Welcome, sir. You are recognized.

Mr. MAY. Permission to have my whole statement——
7

Mr. MICA. Without objection, your entire statement will be made

part of the record. Please proceed.

Mr. MAY. Thank you, Mr. Chairman and members of the subcommittee. Thank you for inviting me to address the issue of socalled ‘‘airport deregulation.’’

In our view, the airport community has misappropriated the

word ‘‘deregulation.’’ Their confused agenda ultimately comes down

to seeking less oversight on how they spent the revenue generated

by passengers and other users of the system. Airports are asking

for more flexibility on using Federal grant money and less Federal

interference. Said another way, what they want is to be released

from the obligations they agreed to when accepting Federal funding. Those obligations, by the way, were crafted to safeguard or to

protect the public. That’s not deregulation as I understand it.

As Congress knows well, under our national aviation scheme the

Federal Government is responsible for air traffic control. Localities

have the authority to decide whether and where to build airports.

And the airlines determine where and how to provide service based

on market demand. This three-way partnership has produced an

air transportation system that is safe, more efficient, and more cost

effective than any other in the world.

Airports derive revenue almost entirely from the users of the airport system. We care about how this money is spent because either

directly or indirectly it comes from our customers, your constituents. This year alone we and our customers will contribute nearly

$19 billion to the aviation system through taxes, airport fees, and

passenger facility charges. Only a small fraction of airport revenue

will come from State and local government general funds.

Now, as you know, the operating costs of an airport are covered

entirely through rates and charges paid by airlines and other tenants of those airports. Airlines in that case currently pay approximately $7 billion a year in landing fees and rents. Now, some of

this goes to debt service for capital improvements and the rest goes

to pay for day-to-day operations of airport facilities.

Airports are, as Chip said, governmentally controlled public facilities and are subject to rules and policies designed to promote

the public good. While airports are not economically regulated, they

are subject to financial guidelines due to their status as government entities. Like it or not, they really are not private sector enterprises. Public airports are bound by the Commerce Clause of the

United States Constitution to refrain from placing an undue burden on interstate commerce, and they are also constrained from exercising their natural monopoly power.

By accepting Federal funds, airports, like any other grantee, are

obligated to comply with a specific set of requirements, including

financial ones. Congress imposed these obligations on airports to

protect the Federal investment of the national airport system.

As outlined in my written testimony, we believe the conditions

placed on AIP grants, PFCs, and airport rates and charges should

be strengthened and improved, not weakened. Airports maintain

the current projected capital development needs exceed the funds

available. Well, given the uncertain economic outlook and the many

competing demands on the Aviation Trust Fund, I think it is more

important than ever that FAA prioritize and direct funding to those
8

projects that result in meaningful and cost effective capacity and

safety improvements. We simply can’t afford to support an ‘‘edifice

complex’’ if it comes at the expense of an efficient airport system.

None of us can or should support nice-to-have-but-marginally-useful projects while critical needs go unmet. At the same time, it is

essential that tax money collected to airport projects is managed

carefully. Some of the rules and conditions controlling airport

spending are, indeed, complex and could be streamlined, but we

need to remember that their core purpose, which is to safeguard

the investment in our national aviation system for the benefit of

all Americans. Airports must remain fiscally responsible to the

American public, as well as their tenants and local constituents.

Mindful of these considerations, we recommend the following:

First, we urge this subcommittee to take a fresh look at the allocation of AIP funds and consider making a much larger percentage

of them available as discretionary grants for the most critical safety and capacity projects. As a starting point, we recommend that

security projects be removed from AIP in order to free money for

safety and capacity projects.

Second, we recommend the subcommittee direct the FAA to

strengthen their oversight of airport spending and vigorously enforce the prohibition of revenue diversion. Further, it is high time

that Congress close the loophole that allows a handful of grandfathered airport operators to continue to siphon off airport revenue

to non-aviation purposes.

Finally, we recommend that all airport capital expenditures be

justified by a cost/benefit analysis. While FAA has developed such

a methodology as part of its selection criteria for some AIP grants,

it doesn’t apply at all to projects funded with PFCs. I think that

situation ought to be corrected.

In summary, Mr. Chairman, airports are entrusted with spending money generated by the users of the aviation system and must

be held to the higher standards of fiscal responsibility. Instead of

loosening the Federal controls on these funds, we should safeguard

them and maximize their impact by focusing our efforts on projects

that are the most critical to the development of a safe and efficient

airport system.

Thank you.

Mr. MICA. I thank you.

We’ll hear now from Ed Faberman, executive director of the Air

Carriers Association of America.

Welcome. You are recognized.

Mr. FABERMAN. Thank you. Chairman Mica, Congressman

DeFazio, members of the committee. It is a pleasure to appear before you today to discuss an issue that is critical to the continued

economic growth of communities throughout the United States, the

expansion of airline competition.

I ask that my full statement be made part of the record.

Mr. MICA. Without objection, so ordered.

Mr. FABERMAN. Thank you.

As a result of the expansion, particularly of low-fare service,

Americans are returning to the skies. As Secretary Mineta stated

last week, ‘‘The combination of shifting demand for air travel and

the emergence of more low-fare airlines has set the stage for major
9

change in the airline industry. Demand for low-fare service is

strong and growing stronger. The changes underway now are the

kind of market-based cost competition that the architects of deregulation thought would happen 25 years ago.’’

American travelers are searching for more affordable travel alternatives. While legacy carriers are offering lower fares and some are

even pretending to be low-fare carriers, unfortunately many believe

it is more important to block facilities and gates than to be profitable.

Low-cost carriers average as many as 11 to 12 turns per gate. In

some situations, larger carriers only may average three to four

turns per gate, or only utilize gates to park aircraft, in some cases

regional jets. While in an open market system a carrier should be

free to spend as much money as it wishes to control facilities, that

is not the case when lack of facilities blocks competitive travel options.

While many communities have benefitted from increased low fare

travel, competition remains a dream in some markets due to barriers. Today’s hearing addresses one issue that has historically

blocked entry into airports, the unavailability of gates and other

airport facilities.

The focus placed on facility issues and requirements for competition plans has made an important difference in opening airports for

new entry. This is not a new issue. In the early 1980’s the department had to help People Express obtain gates and facilities at Minneapolis/St. Paul. In 1989, the Justice Department stepped in to

change the availability of gates in Philadelphia and National Airport. In 1999 DOT issued a study that said, ‘‘If airlines cannot gain

access, they will be unable to compete successfully.’’ That study

said also the following, ‘‘Until recently, the Department was not

proactive in facilitating efforts by new entrants to gain access.’’ We

will need to be more vigilant in ensuring that airports accommodate all qualified airlines.

A Transportation Research Board study—also in the early

1990’s—said that airports that are chronically short of gates and

other passenger facilities for use by potential competitors should be

compelled to make sufficient facilities available.

As a result of the attention paid to this issue by this committee

and the Department, access problems at several airports have been

addressed, allowing new levels of competition. As a result, new entrants are expanding at Boston, Philadelphia, DFW, Dulles, and

other airports. There’s little doubt that the requirement to file a

competition plan and the Department’s involvement resulted in an

acceptable resolution of these cases. This was in large part the result of Congressional direction that an airport must provide a report if it cannot accommodate a request for facilities. Nevertheless,

facility problems continue to exist.

We fully support Section 424 of Vision 100. Under this section,

an airport only submits a report if it has been unable to accommodate a request for facilities. If the problem is resolved, the airport

would not have to submit a report.

Competition plans provide important data for government oversight of the competitive marketplace. Some of the data collected, including gate utilization, type of gates, and gate availability for new
10

entrants, should be submitted and updated on a regular basis. This

information should also be made available to the public. It is also

essential that Government monitor subleasing of gates and facilities. We would also like to see the Government rank airports in

terms of steps taken to enhance competition. All should have this

information available.

At the same time, we would not object to a reduction in the information that must be provided to FAA under the airline competition

plan requirements.

We support the request by certain airports that they be allowed

to utilize various airport funds to attract new service. When airports provide marketing or other funds to attract service, it is more

likely the service will work. Limitations must be placed on such a

proposal, however, to ensure that this authority doesn’t create new

barriers.

Times are changing, and to ensure that all are able to obtain

competitive, low-fare service, all parties—the Federal Government,

airports, and carriers—must take the necessary actions to meet the

growing demand for low-fare service referenced by Secretary Mineta.

I thank you again for focusing on issues that impact true airline

competition. We believe all communities should be able to enjoy

low-far service. We look forward to working with this committee to

make that a reality by eliminating all barriers to entry. The founders of deregulation would not have it any other way.

I’d be delighted to take questions later.

Mr. MICA. Thank you.

We’ll now hear from James E. Bennett, president and CEO of the

Metropolitan Washington Airports Authority.

Welcome, sir. You are recognized.

Mr. BENNETT. Thank you, Mr. Chairman, Ranking Member

DeFazio, and members of the subcommittee. I want to thank you

for holding this hearing today.

I know this is somewhat off point, but I also want to thank you

for holding the hearing March 16th at Ronald Reagan Washington

National Airport concerning general aviation access.

I appreciate the support the committee has shown concerning the

return of general aviation to Reagan National and once again affirm that the Metropolitan Washington Airports Authority will do

whatever is required to ensure the secure return of this important

segment of our air transportation system.

I also want to thank you for the enormous assistance you provided to airports last year when you passed the Vision 100. That

bill will go a long way toward ensuring that the aviation system

continues to be safe, secure, and ready for the increased demand

that is already beginning to materialize. As my airport colleagues

mentioned, airports understand the need for Federal regulations to

ensure safety and security, to prevent unjust discrimination, and to

prevent airport revenue diversion; however, over time there appears to have been a shift in the regulatory environment where the

Government seems to be no longer interested in being the regulator, but appears to behave more like what I would like to call

‘‘the doer.’’
11

Airport competition plans are a prime example of the Government behaving as a doer instead of a regulator. Air21 contained a

provision requiring certain large and medium hub airports to file

a competition plan. If those airports failed to file these plans, they

risked being ineligible to receive AIP funds or collect new PFCs for

much-needed safety and capacity projects. In response to this provision, the FAA issued a 15-page program guidance letter that compels airports to collect and submit detailed information on some 62

items. In the case of the Metropolitan Washington Airports Authority, we spent nearly three months collecting this information and

developing a plan for Dulles. It then took the FAA nearly seven

months to accept the plan. In accepting the plan, the FAA requested that the Authority amend certain provisions of its lease

agreement with the airlines that had been in place for 12 or so

years and serves as the basis of securing over $2 billion in airport

bonds.

In addition, the FAA took some exception to the Authority’s air

service development program, indicating we were not focusing

enough on competitive service in existing markets and focusing too

much on trying to attract new service in new markets.

Mr. Chairman and members of the committee, I suggest to you

that we as airport operators, not the Federal Government, have a

better understanding of the best way to promote our community in

the global and domestic market. This in my opinion is an example

of the regulator attempting to be a doer and not a regulator. Medium and large hub airports are very complex economic entities

that have very large capital investment requirements in order to

meet the capacity and safety needs of the communities in which

they serve. Federal involvement in local business relationships that

have been formed between local communities and the airlines they

serve is not necessary. Airport operators believe in competition and

encourage it at our airports. In our particular case, we spend several million dollars each year developing competition and attempting to improve air service to the Washington region. At no time has

an airline ever been denied access to one of our airports as a result

of the Authority’s business practices. We make sure that all are

treated on a nondiscriminatory basis. The airport community’s view

is that aviation and competition is good for you. The more you

have, the more successful you will be in fulfilling your mission of

serving your community.

Competition plans do not enhance competition at our Nation’s

airports. They are nothing more than an attempt by the Federal

Government to intrude on the local business affairs of airports.

I encourage members of this committee to review the competition

plan requirements and determine for yourselves whether they actually lead to competition in this Nation.

I would also like to turn your attention to another issue of most

importance to the airports. I realize this committee does not have

direct oversight in this matter, but I feel it important to make you

aware of the issue. As the committee is aware, airports rely on a

number of different sources of funds to pay for capital development

projects. In our case, bonds finance about 59 percent of our multibillion-dollar development program at Dulles, while PFCs finance

29 percent and AIP hopefully will supply 12 percent. However, Fed-
12

eral tax law unfairly classifies approximately 90 percent of airport

bonds used for critical aviation infrastructure as so-called ‘‘private

activity bonds.’’ This classification means that these bonds are subject to the alternative minimum tax. As a result of this private activity classification, airports pay a penalty when financing major

capital development programs.

Let me turn your attention to Dulles and our multi-billion-dollar

program as an example of the impacts of such classifications. A key

component of our Dulles program is the construction of new runways and air field improvements to support an ever-increasing demand for air transportation in the Washington region. We anticipate that since these bonds used to finance these programs are considered private activity, it will cost an additional $35 million in

AMT penalties. This is $35 million that the airlines using the airport will have to pay in additional fees over time.

Runways are no different than an interstate highway system

through a major city; however, under current Federal tax law the

runway is considered a private activity and therefore subject to the

AMT. This results in airports having to pay higher interest rates

on bonds used to fund their construction programs.

Airports are owned and operated by State and local governments

and they clearly serve a vital purpose. It would be very helpful if

Congress reclassified airport bonds as public purpose and allowed

airports to advance refund their bonds without limitation.

Again, Mr. Chairman and Ranking Member DeFazio, Ms. Norton, thank you very much for holding this hearing today. The airport community appreciates your willingness to consider some of

our proposals to make airports more efficient and less costly to operate.

Mr. MICA. Thank you.

We’ll hear now from our last witness, which is Bonnie Allin,

president and CEO of Tucson Airport Authority.

Welcome. You are recognized.

Ms. ALLIN. Thank you, Chairman Mica, Ranking Member

DeFazio, and members of the Aviation Subcommittee. Thank you

for inviting me to testify. It is truly an honor to participate in this

for the first time.

I would like to begin by thanking you and the members of this

committee for the leadership you provided on Vision 100. Airport

operators around the country are grateful for the record level funding for AIP, the budget protections, and the funding for programs

that will help small communities retain and attract air service. We

also appreciate the numerous provisions in the bill that will help

expedite the time it takes to build runways and other capacity enhancement projects at congested airports.

Members of this committee work together to find ways to streamline the environmental review process without violating NEPA,

Clean Air Act, or the Clean Water Act. We encourage Congress to

take a similar approach to streamlining economic regulations while

preserving those regulations pertaining to safety, security, unjust

discrimination, and revenue diversion. Streamlining economic regulations will save airports, their customers, and the Federal Government valuable time and considerable funds.
13

Airports are owned and operated by local units of government.

We are held accountable by a myriad of checks and balances to ensure that we are carrying out our fiduciary responsibilities and providing the best quality of air service to our communities.

Tucson International Airport is approaching 80 percent capacity

on our air field. We are significantly beyond capacity in our terminal building. This year we’ll complete phase one of a $65 million

terminal expansion project that creates 80,000 additional square

feet of space in our terminal to relieve congestion and accommodate

projected passenger growth. We are now turning our attention to

the concourses to focus on meeting ADA, security, and additional

capacity requirements.

We were allowed to use AIP funds for some of the facilities associated with this project, but not others. We were allowed to use

PFC funds for some of the facilities but not others.

Mr. Chairman, there has to be a more efficient way for airports

to add capacity to the system. Considering the local accountability,

airports should be allowed to use these different sources of revenue

for any lawful project that benefits our customers and meets the

four regulatory cornerstones previously mentioned. Creating a common currency that would allow the Tucson Airport Authority and

airports around the country to build projects more quickly, would

allow us to pass these cost savings on to our customers, including

the airlines. Giving airports more flexibility would also allow us to

use airport revenues to promote critical commercial air service.

Today the Tucson Airport Authority and other airports in this

country do not have that option.

It is critical to the economic health of our communities—in fact,

they demand it—that we have financial capability to promote air

service and reduce leakage to nearby airports. As airport directors,

we are striving to provide that for our communities.

With help from this committee, small communities receive Federal funds to promote commercial air service as part of the popular

small community air service development program. We feel that all

airports should be allowed to use airport revenue to enhance airline competition and to improve air service to our communities.

In addition to giving airports more flexibility on how we can use

AIP and PFC funds, it would be very helpful to streamline the PFC

approval process. It is important to underscore that PFCs are local

user fees approved by local governing entities. Vision 100 included

a good provision that will allow non-hub airports to test alternative

measures to impose PFCs. Airports participating in the program

will be able to save precious time and money by allowing them to

notify DOT of their intent to impose PFCs rather than forcing them

to endure a lengthy application process.

If the recognition is there that requirements are a significant

burden both financially and in time, why shouldn’t airports of all

sizes be able to take advantage of these alternative measures to expedite the PFC approval process?

The Tucson Airport Authority is considering raising its PFC from

$3 to $4.50 to pay for our concourse rehabilitation project. We expect that PFC approval process will take at least nine months and

could cost up to $50,000 to prepare and go through. It’s simply too
14

long and too expensive. The money could be better used on the precious facilities that our customers need.

This committee took some welcome steps to improve the PFC

process in Vision 100. We encourage the Congress and the Administration to work with airports to help find other ways to streamline the process.

As I mentioned earlier, airports understand the need for regulations that ensure safety, security, and those that prevent unjust

discrimination and revenue diversion. Members of this committee

worked together to find ways to streamline the environmental process when it considered Vision 100, and we hope that we can work

together in the same effort to do that on economic regulation that

delay airport construction projects and increase the cost.

Thank you very much, Mr. Chairman and members, for allowing

me to speak today.

Mr. MICA. Thank you for your testimony.

I thank all of our witnesses. I have a few questions, and then I’ll

yield to some other members.

A chart was up here just a few minutes ago that showed that the

money that finances the airports is 98 percent user fee—who has

got that? Did I see it right—from airport users. So in a way the

Federal Government is just a collection agency where the airlines

are and collecting some of these fees and distributing them. That

would make a case for deregulation. However, looking at the national interest, it is important that we ensure competitiveness and

that we ensure certain standards be met, since we do set safety

and security standards. Everyone has testified they want the Federal Government to be responsible for that.

There’s criticism of the requirement of the competition plans. I

think it emanated from Air21. Then we had testimony that low-cost

carriers are in 29 of 38—is that major airports? Was that you? Who

gave us that?

Mr. SHANE. I talked about the 29 airports that had improved the

competition picture as a result of the competition——

Mr. MICA. Out of 38?

Mr. SHANE.—out of 38 that were covered by the requirement.

Yes, sir.

Mr. MICA. And what do we do with the other airports to increase

competition or to—it looks like we’ve got nine airports that are not

served or do not have what’s termed ‘‘adequate competition’’?

Mr. SHANE. It may well be that the competition plan in those

cases simply validated what had already been done. Not every airport is a problem airport. I subscribe to what you’ve heard from

some of our airport representatives this morning, that airports are

about competition in many cases.

Mr. MICA. Well, they describe the process as sort of bureaucratic.

It took them three months, I think they testified, to put their report together, and then it took seven months to review. I mean, I

can look at airports and see where there is competition and there

isn’t competition. That’s not rocket science. How could we improve

the process to ensure competition and have less of a bureaucratic

approach that they’re speaking about, Mr. Shane?

Mr. SHANE. Well, there’s always an interest on our part in trying

to make the process more user friendly. If, indeed, the airports are
15

experiencing as much of a burden as they say, I’d like to know

more about why that is.

There’s no question in my mind that the competition plan requirement has produced enormous dividends in terms of the quality of competition. Mr. Bennett said it has produced no—he was

very categorical—no additional competition in the business. I just

can’t buy that. I think if you take a look at the report that we submitted, together with my prepared testimony done in April of 2003,

you’ll see chapter and verse, airport-by-airport, requirement-by-requirement in which airports, as a result of the competition plan

process, have taken real steps to improve access to their facilities

by additional airlines, new entrants, facilitating more competition.

To say that the process is perfect would be silly. I’m not here to

argue that the process is perfect. I’m here to argue that the process

has produced dividends, and we are more than receptive to complaints about the process, and I would be delighted to sit down

with our airport operator friends and see if there are ways to make

the process better.

Mr. MICA. It seems again like sort of a very complex bureaucratic

process taking a long period of time and a lot of resources. We

want some mechanism to create competition, ensure competition. I

think that is a responsibility that we should have.

Mr. May, you weren’t—well, you would like the Federal Government to stay in certain parts of this business, as far as ensuring

that funds are spent a certain way. I guess you pay 36 percent in

landing fees and grants, so you are an important customer of the

airports.

Mr. MAY. So are your constituents, Mr. Chairman, as are the

constituents of everyone here. If you were to look at this chart——

Mr. MICA. Well, they’re paying the bulk of the money.

Mr. MAY. Yes, $19 billion a year in 2004 is what we project, and

the reason we feel strongly that the Federal Government needs to

stay invested, if you will, is that when you look at the AIP funds

which are part of the trust fund, those are generated from ticket

taxes and cargo way bill taxes, fuel taxes, etc. When you look at

PFCs, they’re collected by the airports, themselves.

Mr. MICA. But, again, for Federal, a Federal interest is to best

utilize our dollars. I mean, they’re pass-through dollars——

Mr. MAY. I agree.

Mr. MICA.—and for us just to be adding runways at some of the

major hub airports—and we’ve had basically a hub, the development since deregulation has been pretty much hubbing, and a few

carriers have dominated probably 30 hub airports. Then we have

airports where we have Federal money and passenger money

where you can bowl down the center of the runway and not hit

anything probably 18 of 24 hours. There’s nothing happening. That

doesn’t seem like a very good utilization of funds.

Now, we have done in our Federal policy and all since September

11th, the private market is altering some of that. But don’t you

think that we should have a responsibility to also utilize the resources, the infrastructure that we’re investing in to the max?

Mr. MAY. Mr. Chairman, I think there are some very real concerns, and I suspect the airports will share them with us. If you

were to look at this chart, this is where the AIP money is going,
16

and far be it from me to suggest that Congress inappropriately directs spending, but the reality is if you look at this most recent AIP

allocation, really only about 125 million, 3.8 percent, is undesignated, discretionary funding that FAA can put against a variety of

different projects. The rest of it is almost an entire entitlement program as directed by Congress. Forgive me, but what we need to do

is have Congress empower DOT, FAA to take a long look at AIP

funding, to take a look at PFC funding, to come up with a series

of important priorities as to where we can best enhance the national capacity. It may come at some smaller airports, medium,

larger hubs, and figure out the best ways to spend that money to

go to the purposes for which it was intended, which is capacity,

safety, security, and noise. And I think that—we talked about this

in your office yesterday afternoon—I think having a plan that looks

at the whole system needs for capacity is overdue, and part of the

problem is that so much of that AIP money is effectively already

spoken for.

Mr. MICA. Well, one of the things I think that’s lacking is any

kind of a national strategic aviation service plan, and that is a bigger problem, and then work and build towards that with the private sector and with the airports.

Finally, Mr. Barclay, you described a series of changes that

would allow for going forward with projects and being reimbursed

after the project proceeds. How would that work? It seems like you

have a good idea that sometimes the Federal Congressional appropriations process or the disbursement of funds at the Federal level

doesn’t match with construction seasons or other projects at the

local level. How would you devise something that would ensure

that these projects could move forward and still not get the funds

up front?

Mr. BARCLAY. I believe I think I am right that we already do this

currently with land purchases, that you can purchase it, you can

go ahead and purchase it and then do a reimbursement. There are

some parts of AIP where that is currently already eligible. Our

point is simply that if you’ve got eligible projects and they are properly carried out, go ahead and let them fund them with AIP. Bring

AIP and PFC into consistency with each other as far as what is eligible. Then let people go ahead and build facilities that they need

for safety, capacity, security, and the other reasons, and then reimburse themselves in future years if that’s the best way to run the

program at their airport. You could get more improvements more

quickly into the system that way.

The airports today have a lot of stovepipes of financing that for

different parts of the project they have to use different stovepipes

of money, and so when you slow down, speed up, have a problem,

it winds up creating a huge management problem over these different money streams coming in. So one of our thoughts is to go

ahead and simply say, ‘‘This is all eligible. Go ahead and build it.’’

You have to build it to the standards, but then the timing of the

funding, you don’t have to wait for that, which today you’ve got to

wait until the funding is available to start the project.

Mr. MICA. OK. I have questions about market-based rates and

also flexibility and AIP funding. Right now I am going to defer to

other Members so they have a shot at this. I may come back.
17

Mr. DeFazio?

Mr. DEFAZIO. Thanks, Mr. Chairman. I’m struggling to maintain

my voice, so I will be unusually taciturn here today. I just want

to get to this issue with the competition plans a little bit more. We

heard from Mr. Bennett it was three months to prepare and seven

months to evaluate. I guess the question would be: is that in part

because this was an issue of first impression that airports weren’t

keeping track of some of this data, most of which, it seems to me,

does really go to the issues of underutilization or potential underutilization of gates or potential discriminatory financial agreements

that would prevent expansion of service by new entrants? I mean,

have you now established a template and the update will be easier,

Mr. Bennett?

Mr. BENNETT. Mr. DeFazio, the updates are easier than the original submission; however, a lot of the time and the expense associated with competition plans is actually in some cases going through

the DOT databases on fares and other information and actually

paying a consultant to analyze that information to submit back to

FAA and DOT in your competition plan that’s showing the average

fares being paid by customers in your market. In addition, they

want quite detailed information about your business relationships

and your use and lease agreements that you have with the airlines

and how you administer those agreements, and that takes A) quite

a bit of time in collecting the information and, B) trying to then

put it in a format that they will then understand.

As I mentioned in the testimony, the airport/airline business relationship is extremely complex, and when you have an airline use

and lease agreement that in some cases is three or four or five

inches thick that deals with all types of issues in terms of how you

economically deal with airlines in your marketplace and then DOT

is looking for specific information within that document, it is very

difficult to drill down in there, pull that information out, and then

relay it to somebody in context as to what it actually means.

Mr. DEFAZIO. Mr. Shane, would you care to comment on what

you perceive as the differences between this original round and

what improvements or changes for the updates you’re anticipating

that would make this less burdensome? Or do you think it will just

be inherently less burdensome?

Mr. SHANE. Well, I hope the thought implied in your question is

realized, that with successive rounds it does become easier and

that, in fact, the very process of drafting a lease is conformed to

some extent to what everybody now knows the Federal Government

is likely to look for in terms of an evaluation of the quality of those

leases for the purposes of the competition plan. That would be one

source of improvement. Another source, as I said earlier in response to Chairman Mica’s question, is that, of course, we are prepared to work with the airport community in seeing whether there

might be ways, particularly now that we have some more experience under our belt on both sides, of making this a somewhat more

user friendly program.

I’m not happy to hear that it takes three months to respond to

a requirement that the Federal Government imposes. In some

cases, I wonder whether that’s a worst case example. Does it al-
18

ways take three months? I would hope not. And I am unhappy to

hear that it takes us so long to finally respond.

We are looking for a sweet spot. We want to get the benefits of

the competition plans out there and we’ve demonstrated the importance of the requirement. Now what we have to do is hone the requirement such that it is not an unreasonable one in terms of the

amount of time and effort that airports are required to invest in

it.

Mr. DEFAZIO. One thing that he raised which I thought was kind

of interesting is that they’re having to hire consultants to analyze

your database regarding fares to come up with numbers in that

area. Couldn’t you be doing that analysis on your side if you are

the repository for this data?

Mr. SHANE. Yes. I don’t quite understand. I’d like to hear more

about that. We try to make that information as transparent as possible. It’s available on a website that you can log on called

‘‘transstats,’’ and you can manipulate the information in all kinds

of ways. I thought that maybe it is because consultants have been

hired that that’s why it takes 200 or 300 hours to do it, because

they bill by the hour. But I wouldn’t want to cast aspersions on

anybody.

Mr. DEFAZIO. OK. I just have one other, if I could, Mr. Chairman. This whole issue of AIP and PFC, I mean, we’ve had other

hearings where we have heard absolutely phenomenal numbers on

the needed investment over the next couple of decades to meet capacity, both on the air side and terminal side. I can’t remember,

but it’s many billions of dollars that we really don’t foresee in the

funding pipeline. I’m wondering what impact people think breaking

down these barriers would have. I, for one, am fairly reluctant to

go there, but I’m always willing to listen to someone make a case.

If anybody could sort of comment on that and make sense, we are

already looking at a huge under-funding, as I understand it, on

both sides of the equation under current revenue projections and

current passenger load projections, how this is going to help with

that? Are there airports that are just fine, that they’ve just done—

I mean, I suppose there maybe are some that have done everything

and anything they want to do that relates to AIP requirements and

they’re limited on their PFC capabilities, have already maxed them

out, and they still can’t meet the terminal needs because they are

so far behind. I don’t know. Does someone want to comment on

that?

Mr. BARCLAY. Mr. Chairman, the needs that are showing up are

$15 billion a year, so it is an enormous demand that’s out there.

I don’t have a number for you on what, if you took all of these oneand two-year delays for each project and add them up and what

kind of a dent that makes. It certainly will be significant from

what we believe we’re hearing from the members.

The key issue to us is just that I don’t think you are going to

see any difference in the outcomes. A lot of these delays wind up

not changing whether or not the airport builds a runway. It just

slows the series of Federal delays.—Federal procedures and reviews after all the local procedures and reviews and decisions.

Same thing with the competition plan. It doesn’t change what actu-
19

ally winds up happening; it just creates another layer of review

over government employees who have the same incentives.

Competition is in the DNA of airport executives. What we do is

we go out there and we try to build facilities and we want as much

competition in there to serve the public as we possibly can. You’d

have to. As people come to you and want facilities, you have to find

a balance. You have to be fair to the existing tenants. You give access based on the same kinds of standards you have for your current tenants. Otherwise, you are creating an unlevel playing field.

So our points are that we think there should be fewer levels of

review. Since you have Government employees incentivized and

overseen by local public checks and balances, you can get the same

outcomes and save money.

Mr. DEFAZIO. Well, you’re doing OK on the first part of the answer. You shouldn’t have really—I didn’t ask the second part of

that question. And I think you have at least challenged my understanding of some of the problems in leasing arrangements and preferential leasing arrangements that have been entered into that

have unduly restricted capacity, but I’ve run out of time so I won’t

have any.

Thank you, Mr. Chairman.

Mr. MICA. Thank you.

Mr. Ehlers?

Mr. EHLERS. Thank you, Mr. Chairman. I apologize for being

late. I was in a markup with several recorded votes. I had to stay

in that committee. Therefore, I am not prepared to ask any questions, but I do thank you for calling this hearing. I know from my

own airport manager that there are many issues that he would like

to see addressed more quickly and more fluidly, and so I appreciate

your calling it.

I yield back the balance of my time.

Mr. MICA. Thank you. I’ll recognize Mr. Moran.

Mr. MORAN. Thank you very much, Mr. Chairman.

Concerns, Mr. Shane, with regulation—and maybe this is also a

question to Mr. Barclay—do the criteria or the way that they’re implemented, the hurdles, the length of time that it takes to get approval, do they vary region from region within the FAA, or is there

a clear national standard and implementation is the same and the

time? These concerns about the months of delays, do they vary

across the country?

Mr. SHANE. There is no regional variation. In fact, I was reminded after answering the last question that I responded to that

the FAA has now established a formal performance objective for

itself in reviewing competition plans to be responsive within a period of 70 days, so I think the seven-month story is history at this

point. At least we’ll do everything possible that it is.

Mr. MORAN. Mr. Barclay, do you agree with that?

Mr. BARCLAY. Yes essentially. The FAA not addressing the competition plans, but getting the money out—works hard under current law and does a good job at that. Occasionally people run into

disagreements with one individual reviewing a construction project,

but in general the FAA does a good job.

Mr. MORAN. Mr. Ma you, for the time I have been in Congress

I have certainly heard from the airline industry that you are over-
20

regulated, and so in some ways your testimony seems not inconsistent but different. It’s a different topic today. But explain to me why

regulation that is bad for the airline industry might be good for the

airports.

Mr. MAY. As I said in my testimony, it is an interesting dichotomy. I favor deregulation, but I think the fundamental difference

is that you’re looking at entities that are, in fact, governmental

agencies. All airports—I think almost all airports are, in fact, you

know, run by cities or States or port authorities, etc., so they

have—we’re not talking a free market economy in that sense. They

have capital expenditures that they need to make, they have operations and maintenance that they need to enjoy, but as we pointed

out in the chart a little bit ago, virtually 98 percent of all of the

revenue that they use for that, whether it is paying off debt service

on bonds, whether it is operation and maintenance, whether it is

promotion, whether it is capital expenditures, originates with Federal taxpayers. And it may be collected directly by the airline, it

may be paid by the airline as a tenant, etc. So I think that we have

a very specific dog in the fight, if you will, and the rules and regulations that have been established that governed spending that create the safeguards for spending are those that have been established by Congress to protect that money and assure that it’s used

in an appropriate way.

I think anything that can be done to streamline the process, anything that can be done to make it simpler, faster, that will allow

delivery on what we don’t disagree on at all, which is that we need

significant airport improvements wherever possible to enhance capacity ought to be done.

But I also think that there’s a reason for these rules and regulations, that the money should be spent in specific ways, and to

change that is not, in my view, deregulation.

Mr. MORAN. Mr. Barclay, it would be interesting to know—and

I doubt that you can answer the question—about what percentage

of the costs incurred by an airport are to meet Government rules,

regulations. My guess is it is a significant amount of money. I also

noticed that Mr. May used a phrase that caught my attention, the

Edifice Complex. Any thoughts about that story? Is there a problem

out there that airports are creating, things that don’t meet what

Mr. May calls capacity or safety improvements, and that we’re actually building monuments like, I suppose, to a local mayor or

something?

Mr. BARCLAY. Yes. The Edifice Complex term is a new term, but

it is an old story that we have been hearing for years that airports

build too much stuff. Every time we get into a bad period of airline

profitability we hear that louder, and we then ask for a list, and

we say, ‘‘OK, give us the Edifice complex list, please,’’ and we never

get a list because if you get all the airlines together they can agree.

You can say, ‘‘Do airports build too much?’’ You get everybody nodding. Then you say, ‘‘OK, should we take the Atlanta project off?’’

No, no. Then you have some going no and some going yes. Same

thing happens when you bring up the Dallas project. So you never

can get the list of projects. In fact, I don’t want to hit a sore point

here today, but this committee knows this issue very well when

other Members of the House come to you and say, ‘‘Keep that high-
21

way bill total cost low, but don’t cut the project in my District.’’ We

have airlines that come to us and say, ‘‘Keep the cost of airports

down, but don’t cut my project.’’ That’s what winds up happening

in the system.

The other answer I’d give you is to say that the airlines are

meeting right now with FAA about how to slow the system down

this summer because we’re worried that there’s going to be too

much demand and too little airport capacity in the system. That’s

not the definition of a system that’s got an Edifice Complex.

We are looking at the kind of delays we had in the summer of

2000 because we don’t have enough airport capacity in the country.

I’ve got enormous respect for the men and women who run the Nation’s airlines. It is one of the toughest businesses they’re in, but

they’ve got this one wrong.

Mr. MORAN. Thank you, sir. My time has expired. Thank you,

Mr. Chairman.

Mr. MICA. Thank you.

Mr. Weiner?

Mr. WEINER. Thank you. You know, to some degree Mr. Barclay’s

last comment is a good place for me to jump off. This discussion

about building competition almost has an Alice in Wonderland feel

if you’re coming from New York. The problem there is that deregulation—and Mr. Bennett probably experiences the same thing—we

in New York have more takeoffs by 9:00 than Ms. Allin has all day.

And the problem that we have is that deregulation has a blind spot

to the problem that we have no one who can say no if we simply

run out of space. So we have a situation where local port authorities are saying, ‘‘Well, we’ve got to give you the space. You have

a gate here. You want to take off at 8:00 you can take off at 8:00.

We can’t control that.’’ And you have a situation where dozens of

planes are lining up aside the runway waiting to take off, and it

simply just doesn’t work. There’s no authority placed with anyone

to make common-sense managerial decisions in the context of this

new law because it is based entirely on the idea that there are obstacles of the way of airlines coming in.

Well, for those who think there shouldn’t be any obstacles at all,

I would invite you in, I don’t know, let’s say August of 2000—frankly, any time before September 11th to try taking an 8:00 shuttle

that took off any time before 9:00 coming to Washington, D.C. The

system simply doesn’t work when you put no one in charge of making rational usage decisions.

I would argue also that it ultimately creates a safety problem.

That is, there are only so many planes you can line up on a hold

on the side of the road at an airport as tiny as LaGuardia or National and say, ‘‘OK, this is still a safe situation.’’ It simply isn’t.

But I’d like to ask a question about another issue of blurred authority, and that is as it relates to noise abatement and departure

routes and the like. We in New York City after the crash of Flight

587 asked for and the FAA instituted a departure route to take

flights out over the Rockway Peninsula from Kennedy Airport in a

way that didn’t cross over people’s homes. The FAA, to their enduring credit, went through a long regulatory process, books were published, computers were programmed. Now we have a situation

where airlines are saying no. Airlines are getting on the runway.
22

At 12:47 on the 28th of October America West Airline Flight 55 got

an instruction from the air traffic control to take Pay-Lu 3 out and

you’re on your way, and they said no. They said, ‘‘Take a hike.

We’re not doing it.’’ As a result it created about an hour of delays.

My question is: who has the authority to sanction that airline?

Is it the local port authority? Is it the FAA? IS it nobody?

Mr. Shane, do you want to take a stab at that question?

Mr. SHANE. I would only take a stab at it with great trepidation,

because I’m not sure I know the legal answer to the question. You

started the question by referring to blurred authority. It may well

be that there is some there, but I’m not familiar with the episode

and I’d love to look into it.

Mr. WEINER. It is an episode. I actually have a list here just from

one month, a long list of airlines that have said, not from safety

reasons, not for weather reasons, that I was—these are folks that

were assigned to take off a departure route who simply refused to

take it.

Mr. SHANE. Yes. My——

Mr. WEINER. And the tower—who has the authority to go to

them and sanction them or to say, ‘‘OK, well, you’re not going to

take off until your change your mind, or you’re going to get fined’’?

Who has that authority? I m, part of the mantra of deregulation

loses sight of the fact that at the end of the day we do want some

regulatory authority, to be able to set the rules of the road and be

the traffic cop. It is unclear to me. In this era of deregulation it

seems like everyone is just sitting on their hands just a little bit

too cautious about executing reasonable authority, and so in this

case, in all of these cases in the month of October with airlines

large and small who have essentially said—and this is just one

month I asked for, and these are the various flights throughout the

day that said what I said. I said, ‘‘Take out someone that’s not safe

who says it is not safe. Only do it because—’’ I’m sure you recognize one guys says, ‘‘I’m not going to fly this way.’’ It has ripple

effects all around the system. And so I say to me it’s quite an easy

concept to me. I say, well, someone sends that guy a ticket or someone says, ‘‘You can’t take off tomorrow. You’re out of luck.’’ You

don’t believe your agency has that authority?

Mr. SHANE. No, I’m not saying I don’t believe it. I think it is a

series question. It sounds like a serious problem and I’d like to look

into it and provide a deliberate answer.

Mr. WEINER. Thank you.

Mr. Bennett, would you take a stab at that. You at your airport,

since you have so many important muckety-mucks flying and so

many important people who live in your jurisdiction, you have a

noise abatement procedure that says after 10:00 no one can land.

Is that how it works?

Mr. BENNETT. Our noise abatement policy at Reagan National is

that we have what we fondly refer to as ‘‘stage three plus’’ after

10:00. The airport is still open but you have to——

Mr. WEINER. What if someone violates that rule and says, ‘‘To

heck with you, I’m landing here anyway.’’

Mr. BENNETT. At National if you violate the 10:00 p.m. to 7:00

a.m. night time noise restriction, we have a mechanism in place

where we can actually—the airport authority actually levies a fine
23

against the offending carrier, and we track that and enforce that

very tightly. The issue that I think I hear you talking about, if on

a flight track, if it is done—if that flight track is developed as part

of a Part 150 noise abatement program, compliance with those

flight tracks is, for the most part, voluntary on the part of the pilot

in command, and there really, at least from the airport authority’s

perspective, there is no enforcement mechanism in place if the pilot

in command elects to not follow that noise abatement procedure. In

the case of Reagan National, once again, our departure path is to

basically follow the Potomac River to the north to avoid——

Mr. WEINER. Yes, this isn’t a Flight 150. This is just the regular

FAA normal everyday takeoff. You know, I’ve got to tell you I find

it stunning that here at this panel talking about deregulation, who

has the authority and complaints about each other, not using your

authority correctly, that we can’t—the basic question about if an

airline says ‘‘take a hike’’ to an air traffic controller, who has the

enforcement. I think that would be something—I would appreciate,

Mr. Chairman, if perhaps I could ask on the record that Mr. Shane,

and, frankly, anyone else who cares to weigh in on this, because

at the end of the day I think some of you represent some of the

airlines that are on this list of offenders, and it is a troubling, to

me, problem with the concept of deregulation, the rubber hitting

the road of who has the authority to do these things.

I thank you, Mr. Chairman.

Mr. SHANE. I’ve already committed to doing that, Mr. Chairman.

Mr. MICA. Thank you.

Mr. Hayes?

Mr. HAYES. Thank you, Mr. Chairman. Thank you for holding

the hearing.

Mr. Shane, when does the FAA and DOT expect to issue its

grant assurance report to Congress? And you know where the—I

won’t quote the verse in the Scripture, the law.

Mr. SHANE. We’re proposing to put out a notice this summer that

will take the Vision 100 grant assurances and ask for comments on

how best to implement them. And at the same time we do that,

Congressman, we are also going to open the question more broadly

and say, ‘‘What can you tell us about other grant assurances that

either may have outlived their usefulness or are overdoing it or can

be either eliminated or reduced.’’

I mean, I appreciate that there are long, long lists of grant assurances that one has to undertake as a prerequisite to getting all this

money from the Federal Government. It is a Faustian bargain, if

you will. Through the AIP process, airports get a lot of important

resources, and it is not unreasonable, it seems to me, for the Federal Government to ask, since it is a national system and since that

money is the users money in the first instance, that airport operators assure the Federal Government they will comply with statutory requirements in the running of the airport. Those grant assurances are, for the most part, required by statute, not made up by

the FAA.

What we’d like to do is have a dialogue with the airport community, take a hard look at the grant assurance process. If it looks

as though some of it may no longer really be necessary or in the

public interest, then we’ll come back to the Congress and we’ll
24

share those reactions with you, and then we can see, in the course

of the next reauthorization, whether or not some of that can be reduced, if not before.

Mr. HAYES. Early, mid, or late summer?

Mr. SHANE. I’m not sure. I think it will be early summer.

Mr. HAYES. OK on timing. Mr. Bennett, March the 16th we did

have a meeting—I’m asking Ms. Norton’s question for her here.

Two weeks and two days later after the two-week deadline that

TSA imposed upon themselves to get back to us, have you heard

anything from them in relationship to that hearing in regard to

that hearing?

Mr. BENNETT. Mr. Hayes, no, sir, we have not.

Mr. HAYES. We’ve got another call in to them.

One more thing—this is a little bit off the subject—but flying

Sunday air traffic controllers were telling VFR pilots that they

could not give them flight clearance because they did not have any

more transponder codes which they could assign to monitor those

flights. Is this an indication of some capacity issues with the system we need to work on? I had never heard that before.

Mr. SHANE. You’re asking me? Congressman, I hadn’t heard it,

either. I’d like to ask that question, as well. That catches me by

surprise. It would be a capacity issue if they’re running out of

transponder codes. Yes. I’ll come back to you with an answer, if I

may.

Mr. HAYES. OK. I would appreciate that.

We’ve got too many IFR flights if we can’t give any BFR codes

out.

Thank you, Mr. Chairman.

Mr. MICA. Thank you.

Mr. Boozman?

Mr. BOOZMAN. I want to go back to the competition plan real

quickly, Mr. Shane. You mentioned earlier the 200 hours that you

thought might be because consultants were doing the hours. Does

your staff have an hour figure for us as far as what they think it

would take to complete the competition plan?

Mr. SHANE. I don’t know that they do. We have imposed an hour

requirement on ourselves in terms of the review, but I don’t think

the FAA has a gauge of what it ought to take. If I’m wrong about

that, I’ll certainly correct the record, but——

Mr. BOOZMAN. If, in fact, we are asking a lot of questions that

come from data that you, yourselves, have, is it reasonable to ask

them to give you that data back? It’s not only data that you have,

but sometimes that data is hard to understand.

Mr. SHANE. I would challenge that as the characterization of the

process. I think that there may well be one or two questions that

relate to traffic, and the traffic is collected by the Department of

Transportation as it is collected, indeed, by other entities, and it

is made available by the Department of Transportation to the public or anybody who wants to use it. But the vast majority of the

questions are questions that can only be answered by reference to

what the airport operator knows. I don’t buy the suggestion that

we’re asking airport operators to feed back to us that which we already know about their operation.
25

You know, the competition plan requirement is an effort to share

best practices. The Government was characterized, I guess by Mr.

Bennett again, as being more of a doer than a regulator. Again,

we’re not attempting to do anything. What we’re attempting to do

is find what airports have done successfully that facilitates new

entry, that facilitates the quality of competition which the public

expects to find in the marketplace and make sure that if we know

it works in some airports—and in many cases those measures were

taken wholly out of a concern with the airport operator that there

be competition at that airport—then we want to make sure that experience is shared among airports, generally. The competition plan

program has produced such enormous dividends, and I would only

refer you once again to the details of the report which is appended

to my prepared statement. Because there is such a good story to

tell, while we are more than happy to talk about whether or not

we can tweak the program, make it more user friendly, not require

that so many hours be spent—and I was just kidding about those

consultants, lest there be any doubt. We’d be happy to do that, but

not to the point where we’re going to divest ourselves of the benefits that we see that have emerged from the competition plan requirement, itself. It’s a good requirement and it has produced real

dividends in the quality of competition in the system.

Mr. BOOZMAN. One of the problems we hear talked about is mission creep, you know, where you get into situations, and that’s especially used in peacekeeping issues and things like that. Is it possible that this program’s mission crept in a little bit where it is

used as a club in certain areas where perhaps Congress didn’t intend it to be able to held over the airports and individuals?

Mr. SHANE. I’ve seen the syndrome, as we all have. I don’t think

we have mission creep yet, but that is precisely what I’d like to

take a look at. Again, we are going to be reaching out to the airport

operator community. We want this program to be a program that

delivers benefits, not detriments, and I think, if I can refer back

to the sweet spot again, that’s what we’re looking for, and hopefully

in dialogue with the airport operators we’ll be able to find it.

Mr. BOOZMAN. Thank you.

Mr. MICA. Thank you. I’ve got a couple questions. I don’t know

if any of the remaining Members have any questions. But let me

just go back to pricing and the question of pricing for some services—landing fees, things of that sort. If we went to a marketbased approach, wouldn’t that be fairer? And how would, like, Tucson, how would you feel about the Federal Government getting out

of the pricing regulation business?

Ms. ALLIN. Mr. Chairman, we feel that the market does regulate

how we deal with our airlines. We are in a situation where we are

out working very hard to bring in additional air service. We have

a very large leakage problem. Of our passengers, 20 percent go up

the highway to a low-fare competitive airport. We do have an airline, Southwest Airlines, who provides low fares and has brought

our fares down considerably in the last ten years since they have

been there and provided a lot of competition and brought a lot of

our customers back, but we still fight with that.

As far as our landing fees with airlines, since the improvement

in our traffic our landing fees—and we are an airport that has one
26

of the long-term residual, which means the airlines guarantee the

bottom line and pay the rates and the landing fees—and our landing fees have come down in the last 15 years because of other revenue we have been able to generate, to less than 10 percent of our

total revenues. And so we are using good business practices to

make ends meet and operate our facilities and develop our facilities, and the additional regulation just costs us more in staff time.

Mr. MICA. Thank you.

Mr. May, market-based pricing?

Mr. MAY. I suppose it will come as no shock to you, Mr. Chairman, that we do not support market-based pricing. I think the Congress has wisely set out a rule that says that under the operations

and maintenance that the fees and rates and charges that airports

can levy should not exceed their operating expenses, and I think

that’s an appropriate guideline to be maintained.

I think, you know, finding ways to create a competitive environment is all well and good, but it has been mentioned here a couple

of times today, and I want to at least make the record clear from

our perspective, that it is fine to market a facility, but there are

a number of places in this country, or one in particular, where they

are trying to rob Peter to pay Paul by using rates and charges revenue to subsidize new entrants into that market, and it is that particular practice that we violently disagree with.

Mr. MICA. What about the problem—now Mr. Weiner is gone, but

we are going to pretty soon be at capacity back in LaGuardia and

the New York market probably. Of course, O’Hare, we now have

our mechanism for DOT to be the arbiter on scheduling. Do you

favor that approach versus letting the market prevail on deciding

landing rates?

Mr. MAY. I think there are a couple of different issues here, but

we think that the voluntary agreement that has been reached by

United and American at O’Hare is a very positive development and

I think it has the potential to yield great results. In terms of responding to a comment that my good colleague from AAAE made

a minute ago, what we’re looking to do on a voluntary basis working with the FAA as we approach this summer is not try and slow

down traffic across the country, but to see if we can evenly space

out using a lot of the techniques that were used when we have bad

weather. And so I think that, rather than trying to slow the whole

system down, we’re trying to improve and smooth the edges, if you

will, of the whole process.

Finally, for those who suggest demand management, i.e., taxing

certain times of day, for example, to control traffic I think is absolutely a non-market-based approach. We would very much oppose

that approach.

Mr. MICA. Any difference of opinion, Mr. Bennett?

Mr. BENNETT. Mr. Chairman, just for recreational purposes I

would probably disagree with several of those comments. Not to

say that in Washington we would adopt a market-based pricing approach to our facilities, but I certainly support the concept that airports be given the flexibility to price their facilities at the market

rate. What Ms. Allin charges in Tucson is very appropriately probably going to be much less expensive than what might be charged

in New York. But by the same token the demand for that product
27

is much different in those two markets. Right now the way the

rates and charges structures are regulated, airports don’t have the

flexibility to price their product according to demand, and that

sometimes leads to a situation where you are at over capacity or

you do not have the resources necessary to build additional capacity because of the restrictions on your pricing scheme. So I would

support the concept of market pricing.

Mr. MICA. Mr. Faberman?

Mr. FABERMAN. Yes, Mr. Chairman, we are very skeptical of market-based programs to decide who can operate and what time they

can operate. We would be against doing that in terms of

LaGuardia, in terms of almost any of the airspace issues out in

front of us. The reason for that is that simply means that the carrier that is willing to spend the most will have the access and the

carriers that may only have a few operations and are not prepared

to spend as much would have no access.

Secondly, I think it is very important to look at what is causing

those capacity problems which you mentioned in your opening comments. We’re being saturated in this system today by aircraft, 37-

seat, 50-seat aircraft. While they certainly have a valuable place in

the marketplace, they are creating problems that are reverberating

throughout the competitive environment, and I think those are

issues that really have to be looked at very carefully.

I will note that at one point in time everyone thought that access

at National Airport and slots should be done through a marketbased system, and that proved to be something that’s never

worked.

Thank you.

I just want to add one other small comment, and that is that we

sympathize with airports that need to have to spend four, five, six,

nine months to get responses and decide whether their programs

are valid. We believe that the Department is working carefully to

reduce that. But I also think we have to remember that there are

many airlines that sometimes take one to two years or even longer

to be able to get into an airport.

Secondly, as to what Jeff Shane mentioned before about the

number of new entrants or competition that’s increased at certain

airports, that doesn’t mean that those carriers that have gotten in,

although that is an important first step, have competitive access

and have competitive gates and can control their own gates and

can run their own operations at those airports, so it is just a first

step, but it doesn’t mean that we’ve come all the way yet.

Thank you.

Mr. MICA. Mr. Barclay?

Mr. BARCLAY. Mr. Chairman, I’d just point out that in a case like

New York where you can’t add capacity, and once you physically

run out of space you’re left with what is the least worst alternative

for allocating what’s left. The choices are simply somebody in the

Government picks the winners and losers, and you do a lottery, or

you put in a market-based mechanism. I don’t think you want to

get rid of the market-based mechanism option that’s out there.

Generally with rates and charges at airports, one of the ironies

that makes us smile is when we hear our friends and tenants talk

about airports shouldn’t be able to charge market-based prices. An
28

airport that builds a gate and leases it to an airline has to do that

at cost under the regulations. But when airlines have that and sublease to each other, they sub-lease it to each other at market rates,

not at the rates the airport leases the gates at. So there’s a little

bit of ‘‘do as I say and not as I do.’’

Mr. MICA. I appreciate your comments on that.

Mr. SHANE. Might I add one more comment, Mr. Chairman?

Mr. MICA. Go ahead, Mr. Shane. We’ll let everybody chime in

here.

Mr. SHANE. Well, you’ve asked an important question. I just

wanted to make sure the record reflected that the Department of

Transportation issued a notice requesting industry comment on

this very question some time ago on the whole issue of marketbased demand management. The comments that we received in response to that notice you will probably not be terribly surprised to

hear were approximately as wide ranging as the ones that you just

heard this morning, very little consensus about it.

Obviously, we have to work with all parts of the industry and

find ways to manage demand, but I don’t think we should overlook

the most important conclusion from all that. I mean, when we—

Secretary Mineta and Administrator Blakey deserve great credit,

as do United and American, for the solution they found at O’Hare

as a way of alleviating the congestion that we were seeing there

for some time, but we shouldn’t miss the point that that’s really reducing the service and there are some communities that are going

to lose service by virtue of that agreement. That’s not a good thing.

At the end of the day we can talk about managing scarce resources, but the real objective of Government ought to be to make

sure that there are enough resources, which is why we attach so

much importance to the initiative I mentioned in my opening statement, the next generation air transportation system initiative that

the Secretary of Transportation announced some time ago. The

idea there is to triple the capacity of the system, not immediately

but over time, and to do it in a way that allows the system to build

up to it.

We can’t expect aviation to continue to contribute to our economic wellbeing as long as we are talking about how to manage

within these scarce resources the demand that is obviously outstripping what we have available to us. The real objective has to

be to get beyond all of this.

Mr. MICA. I’m not sure if we’re not just dividing the pie among

those who already have the pie. Again, someone in Washington—

I’m supposed to get a call, they just told me, in a few minutes from

the Secretary I guess on the slot issue. Here’s Government making

decisions on who gets a slice of the pie. Coming from the private

sector, I think we are going to have to look for a market-based solution. Again, private sector works this out. If Government was

really interested, we’d be building a high-speed transit rail system

between some of these areas and taking some of the burden out of

the air, which brings up use of AIP funding, but I won’t get into

that now, but I will look into the private activity bond issue. I

think that’s probably a ways and means as opposed to our subcommittee. I appreciate your addressing it today.

Ms. Millender-McDonald has joined us. Did you have a question?
29

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman. Of

course the transportation bill is on the floor, so I have been on the

floor fighting against certain amendments that will be coming in,

but I thank you so much, Mr. Chairman, and I thank all of you

who are here today. I just have a couple of questions, and I’m sure

maybe they have been asked already.

Mr. Barclay, Mr. Bennett, and Ms. Allin, if you are suggesting

that AIP eligibility should be expanded to cover the construction of

gates and airline ticket areas, what about the most pressing capital

development needs that are facing airports, especially the airport

of Long Beach that had runways that had really very deep holes

and pots in them that we were just afraid every time a plane would

land whether or not it would scurry off the runway? And have airports been profitable over the last few years, given the capital, the

need, the pressing needs for capital development and improvements of these airports? That’s the question, along with—I think

you are seeking AIP eligibility to be expanded, and for purposes

that really does not speak to those issues at the Long Beach Airport that Los Angeles have.

Mr. BARCLAY. The gates are already eligible for PFC funds, the

passenger facility charge funds, so we were saying make AIP the

same as PFCs for those. But under both you would have to make

sure that all your safety and capacity projects were finished before

you went to using your monies for those kinds of improvements.

But gates really are a capacity issue. They are a competition issue

at many airports because sometimes you have new entrants that

can’t afford the cost of building a whole new area of the terminal

and a gate to come in, but they’d like to come in, and the airports

could accommodate that with extra flexibility in funding.

I’m sorry. I forgot the second part of your question.

Ms. MILLENDER-MCDONALD. The other one was I think, despite

the regulatory issues that we have raised today, have airports been

more profitable over the last few years?

Mr. BARCLAY. The airport profitability—its actually nonprofitability rather than profitability. Since all airports are government

owned, they’re nonprofit entities. They live just to cover their costs

and to have enough reserves to make sure they stay viable. So the

way you judge airports is by their bond rating and how does Wall

Street look at them. Airports have moved to the front of the line.

It used to be that airlines were looked at. In the days of regulation,

Wall Street often looked at the airline backing of airport bonds as

being the most important factor. Today, with airlines’ ability to

come and go and after 9/11 in particular where you’ve seen airline

bankruptcies and problems that the industry has had, now Wall

Street looks to the airport and its market. In fact, recent DOT reports have pointed out that airports have really managed remarkably well and have kept their excellent bond ratings even with the

difficulties of the industry, so that’s one of the bright stories of the

industry.

You know, if I could take just one more minute and say that, as

tough a business as the airlines have—and it is one of the most

brutal businesses I think in the history of free enterprise—but one

of the good things they’ve got is that if you analogize them to other

private industry, then airport facilities are their plant and the air
30

traffic control system provided by Mr. Shane is their production

line. In other heavy industries, you’ve got to have the money to

build your plant and your production line by yourself before you

can get your first customer, and then you have to hope you get

enough customers to pay back all that fixed investment. In the airline business, government—local government at the airports and

the Federal Government for the air traffic control system—fund all

that up front at public financed rates, and then they allow the airlines, as they get customers, to pay for that fixed investment. So

they’ve turned a fixed cost into a variable cost in accounting terms,

and it is that one area is a big benefit for the airlines, and airports

are very proud of their part in that and their role in that part of

the system.

Ms. MILLENDER-MCDONALD. Mr. Chairman, I know we are about

to close this hearing and I have a speaking engagement next door,

so I will just submit my statement for the record and thank you

so much.

Mr. MICA. Without objection, we’ll include your statement.

Mr. Moran?

Mr. MORAN. Mr. Chairman, thank you. In listening to the comments by our witnesses just in recent few moments, it caused me

to have an additional question just about the trends. We’ve been

talking about capacity at the airports, capacity I assume with airlines. There’s clearly a trend which I am not so fond of, of moving

towards regional jets. Does that change the capacity requirements

of our Nation’s airports? Are we actually going to have more people

flying? We’re going to have more planes landing and taking off? Or

is this just a re-shuffling of passengers that already are on aircraft? Mr. Bennett?

Mr. BENNETT. Mr. Moran, from the airport operators’ perspective, regional jets have evolved recently to become a very important

component of the air service picture at the airport; however, what

it has done in many situations, including here in Washington, is

that it has more or less derailed the planning theory that had gone

into the airports’ development up until this point. There had been

a basic assumption in most airports that over time the average aircraft size would grow and you could accommodate more passengers

without having a tremendous spike in the number of aircraft operations. Today that basic assumption has really changed dramatically in that the average aircraft size now, instead of growing, is

actually decreasing in size, and so the number of operations obviously have to come up considerably to carry the same volume of

passengers.

Mr. MORAN. Meaning the same volume of passengers, fewer—the

size of the aircraft is smaller, and therefore there’s more aircraft

at an airport?

Mr. BENNETT. Correct.

Mr. MORAN. More operational experiences?

Mr. BENNETT. So when you look at the FAA forecast in this country where we are going to reach one billion passengers, that’s going

to take place with far more aircraft operations than was originally

assumed years ago.

Mr. MORAN. Which I assume has consequences for how we build,

construct, remodel, maintain our airports?
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Mr. BENNETT. Indeed it does. Indeed it does, and it adds congestion to the air traffic system, but also to the airport environment,

the runways and the taxiways and the gate areas as these aircraft

have different requirements than what was assumed a few years

ago as we were planning our airports.

Mr. MORAN. Yes, Mr. Faberman?

Mr. FABERMAN. Congressman, the DOT Inspector General issued

a report not too long ago that showed that aircraft movement at

a number of airports, including Washington National and

LaGuardia, were up but total number of passengers were down. In

some airports, including those two, regional jets used the same

runways. There’s really, in most cases, one runway, and it does

slow the system down. As a result of that, there is fewer opportunities to add service at some of those airports. And in some cases,

as Jim said, those kind of aircraft are critical to serve many markets out there. Larger carriers are not going to go into many of

those markets. On the other hand, we’re now seeing those regional

jets, even 37-seaters, as a shuttle operation flying into the biggest

airports in the country.

Mr. MORAN. But certainly a mixed story. Coming from Kansas,

we have lots of—we’d like to see expanded service at our airports,

expanded service that’s more than likely going to come from regional jets, but being 6’2‘‘ and flying every week, it’s not a trend

I’m fond of. But even from a more provincial perspective, we’d like

to see aircraft that are built in Kansas being utilized in the Nation’s air system, a trend that’s not occurring in this case.

I thank you for your answers. Thank you, Mr. Chairman.

Mr. MICA. I thank you. I think that concludes our questions

today on a very important topic, and that’s the question of airport

deregulation. We appreciate the participation of our witnesses

today. We may have some additional questions that we’ll submit to

you for the record, and ask that you please respond to them

promptly.

Without objection, the record will be kept open for a period of

two weeks.

There being no further business to come before the Aviation Subcommittee this morning, this hearing is adjourned. Thank you.

[Whereupon, at 11:55 a.m., the subcommittee was adjourned, to

reconvene at the call of the Chair.]
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