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42–527 2008

GROUNDED: HOW THE AIR TRANSPORTATION 

CRISIS IS HURTING ENTREPRENEURS 

AND THE ECONOMY 

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

JUNE 26, 2008 

( 

Small Business Committee Document Number 110-103 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

HEATH SHULER, North Carolina 

CHARLES GONZALEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

BRIAN HIGGINS, New York 

MAZIE HIRONO, Hawaii 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director 

STANDING SUBCOMMITTEES 

Subcommittee on Finance and Tax 

MELISSA BEAN, Illinois, Chairwoman 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

VERN BUCHANAN, Florida, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

Subcommittee on Contracting and Technology 

BRUCE BRALEY, IOWA, Chairman 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma 

(II) 

Subcommittee on Regulations, Health Care and Trade 

CHARLES GONZALEZ, Texas, Chairman 

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

Subcommittee on Rural and Urban Entrepreneurship 

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DAVID DAVIS, Tennessee 

Subcommittee on Investigations and Oversight 

JASON ALTMIRE, PENNSYLVANIA, Chairman 

CHARLES GONZALEZ, Texas 

RAUL GRIJALVA, Arizona 

MARY FALLIN, Oklahoma, Ranking 

LYNN WESTMORELAND, Georgia 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1 

Chabot, Hon. Steve .................................................................................................. 2 

WITNESSES 

Dow, Mr. Roger, President and CEO, Travel Industry Association .................... 4 

Ruden, Mr. Paul, Sr. Vice President, Legal & Industry Affairs, American 

Society of Travel Agents ...................................................................................... 6 

Gallagher, Mr. Mike, President, CityPass, Napa, CA .......................................... 8 

Faberman, Mr. Edward P., Executive Director, Air Carrier Association of 

America ................................................................................................................. 10 

Mitchell, Mr. Kevin, Chairman, Business Travel Coalition, Radnor, PA ........... 12 

Segerberg, Ms. Terry, CEO, Mesa Industries, Inc., Cincinnati, OH ................... 14 

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 28 

Chabot, Hon. Steve .................................................................................................. 30 

Dow, Mr. Roger, President and CEO, Travel Industry Association .................... 31 

Ruden, Mr. Paul, Sr. Vice President, Legal & Industry Affairs, American 

Society of Travel Agents ...................................................................................... 34 

Gallagher, Mr. Mike, President, CityPass, Napa, CA .......................................... 46 

Faberman, Mr. Edward P., Executive Director, Air Carrier Association of 

America ................................................................................................................. 49 

Mitchell, Mr. Kevin, Chairman, Business Travel Coalition, Radnor, PA ........... 60 

Segerberg, Ms. Terry, CEO, Mesa Industries, Inc., Cincinnati, OH ................... 67 

(V) 

(1) 

GROUNDED: HOW THE AIR TRANSPORTATION 

CRISIS IS HURTING ENTREPRENEURS AND 

THE ECONOMY 

Thursday, June 26, 2008 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:10 a.m., in Room 

1539, Rayburn House Office Building, Hon. Nydia M. Vela ́zquez 

[Chair of the Committee] Presiding. 

Present: Representatives Vela ́zquez, Shuler, Larsen, Altmire, 

Ellsworth, Chabot, Akin, Buchanan. 

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ 

Chairwoman VELA ́ ZQUEZ. Good morning, everyone. And to the 

witnesses here, I am sorry for being so—this is not our committee 

room, but this is Washington. So our committee room is under renovation and it was supposed to be finished, but it will take much 

longer. So I call this hearing of the House Small Business Committee to order. 

Commercial air travel has been a mainstay of the economy since 

the 1940s. As the industry has evolved, businesses in both small 

towns and big cities have gained access to markets previously 

thought unreachable. Today air flight continues as the mainstay of 

our country’s trade and business travel. It not only drives the Nation’s $740 billion tourism industry, but it also sustains the economy. Virtually every sector depends on the speed, reach and relevant convenience. Without airplanes, commerce as we know it will 

very simply cease to exist. 

But now in the face of grave industry challenges, air travel has 

come to be as much of a hindrance as it is a help. Today we are 

facing what can only be described as an air travel crisis. Last year, 

flight delays alone accounted for 20 percent of total air travel time 

and, according to the Travel Industry Association, proved to be far 

more than just an inconvenience to travelers. In fact, TIA estimates that delays dealt a $41 billion blow to an already struggling 

U.S. Economy. It accounted for $12 million in lost productivity. 

It seems airport waiting areas have become virtual black holes 

for business travelers and it gets worse. These delays, when paired 

with soaring fare rates and exorbitant new passenger fees, are costing the economy an additional $26.5 billion. With prices skyrocketing and convenience plummeting, millions of Americans are 

turning away from the airlines altogether. 

2 

Just last year, travelers opted out of 41 million domestic flights. 

These avoided trips are costing the U.S. economy billions of dollars, 

the brunt of which has been borne by our entrepreneurs. Small 

firms make up 97 percent of the travel and tourism industries 

which drive a multi-billion dollar sector of the national economy 

and have been hard hit by declining air travel. Perhaps not surprisingly, close to one-third of the economy’s $26.5 billion setback 

has been shouldered by the entrepreneur driven hospitality sector. 

The fallout of America’s air travel crisis has reached beyond the 

travel and tourism sectors to threaten a myriad of other related 

businesses. In 2007, industries that relied on air travel suffered 

losses close to $10 billion. For these small business dominated sectors of the economy, the future effects will be twofold. On the one 

hand, tourists may decide to forego certain trips altogether. The 

other possibility is that travelers will simply scale back their travel 

expenditures, taking a chunk out of the entrepreneur driven hospitality industry. Already we are seeing hotels slash room rates in 

an attempt to attract these increasingly cost conscience travelers. 

But consumers are not the only party suffering from our broken 

air travel system. A lack of runway capacity and regulations has 

forced many small airlines into bankruptcy and as these businesses 

fail, passengers are faced with fewer or more expensive choices. 

This means that small firms in certain regions will have less access 

to diverse markets and clients. 

Entrepreneurs currently make up 97 percent of exporting businesses. In our increasingly global economy, the last thing we need 

to do is create new roadblocks for them. 

There is not one single solution to these problems and anyone 

who suggests otherwise is oversimplifying a very complex set of 

issues. Before attempting to tackle these challenges, there are a series of concerns we must address. Not least of all is a severely deteriorated and inefficient infrastructure. As a result of this, airports 

are unable to accommodate today’s volumes of planes and passengers. If we are to it ease the congestion and curb delays, then 

we must first focus on improving and expanding airport infrastructure both on the ground and in the sky. 

America’s airline travel system is broken. Massive delays and 

rising ticket prices are pushing the problem beyond the point of inconvenience. It is now a serious threat to both small businesses 

and our national economy. 

In today’s hearing, we will discuss the current air travel system’s 

effect on small businesses and explore potential solutions for what 

has truly become a crisis in our skies. 

I want to thank all the witnesses in advance for their testimony. 

The committee is pleased they could join us this morning and looks 

forward to their insights on these issues. With that, I now yield to 

the ranking member, Mr. Chabot, for his opening statement. 

OPENING STATEMENT OF MR. CHABOT 

Mr. CHABOT. I thank the gentlelady for yielding and for holding 

this important hearing on the impact of rising air travel costs. I 

would also like to thank all of our witnesses who have taken the 

time out of their very busy schedules to provide testimony to the 

committee here today, and I want to extend a special welcome to 

3 

a fellow Cincinnatian, Terry Segerberg, who I will introduce in a 

little while. 

Record high oil prices are causing airlines to downsize capacity, 

eliminate destinations and raise fares, even as demand for their 

services remains high. In 2000, passenger and cargo carriers spent 

$16 billion on jet fuel. That was back in 2000. Last year they spent 

$41 billion and they are expected to pay $61 billion this year. So 

from 16 to 61 in the course of 8 years. This rise in jet fuel will 

ground millions of travelers. 

The full impact of the service cuts and increased costs won’t be 

felt until 2009 because most aren’t slated to go into effect until this 

fall. By this time next year there could be as many as 20 percent 

fewer seats available. That would be like shutting down a carrier 

the size of American Airlines. 

Rising costs and reduced access of air services is impacting the 

entire economy. Small businesses consistently rank as one of the 

hardest hit sectors when it comes to fluctuating costs and remain 

particularly vulnerable to the continuous rise in the cost of air 

travel and cargo. At the same time, these small businesses are coping with a near recessionary economic environment coupled with 

an increase in the overall cost of doing business. 

In particular, small companies are being hit with rising energy 

costs and rising employee health insurance costs. Because these 

firms often have razor thin margins and very competitive pricing, 

passing on the cost increase to the customers could result in loss 

of sales. Over the long term, it could cost them their business itself. 

They could literally go out of business. 

The impact of high cost of jet fuel and air service for companies 

such as airlines and resorts and hotels is particularly significant. 

Unless action is taken by Congress, conventional oil supplies will 

remain tight in the years ahead. Fuel is currently the largest expense for airlines. 

By authorizing exploration and production on the Outer Continental Shelf, for example, and Alaska, including the Arctic National Wildlife Refuge, or ANWR, with reasonable environmental 

safeguards, we would increase domestic production. This would 

keep the cost of oil from rising as fast and make us less dependent 

on foreign oil. It would also give the Nation needed time to develop 

diversified fuel sources, including clean coal and nuclear energy, 

and develop and implement a balanced coherent national and global energy policy. 

A majority of Americans now support opening up areas to drilling. A recent Gallup poll shows that 57 percent of Americans support opening up these and other new territories to drilling, while 

a Wall Street Journal-NBC News poll conducted this month said it 

was up to 59 percent, and the most recent poll available from Fox 

News said it is 76 percent. That was as of just a couple of days 

ago. They say essentially drill now. And I think it is absolutely critical that we do that if we are going to benefit this industry which 

has been hit so hard because of the rising costs and everything, as 

I said, from health care costs to fuel costs, et cetera. 

So, Madam Chair, I look forward to working with you as always 

on this very important issue, and we want to thank all the panel 

4 

members for providing their testimony that we are looking forward 

to here today, and I yield back the balance of my time. 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Chabot. And it is my 

pleasure to welcome Mr. Roger Dow, who is the President and CEO 

of the Travel Industry Association. Prior to joining TIA, Mr. Dow 

was Senior Vice President of Global and Field Sales at Marriott 

International. TIA is the national umbrella organization representing all segments of the $740 billion U.S. travel and tourism 

industry. 

Welcome. And you have 5 minutes. 

STATEMENT OF MR. ROGER DOW, PRESIDENT AND CEO, 

TRAVEL INDUSTRY ASSOCIATION 

Mr. DOW. Thank you, Chairwoman Vela ́zquez and Ranking Member Chabot, and all the distinguished members of the committee. 

I appreciate the opportunity and the honor to testify before you 

this morning. 

The Chairwoman has described the Travel Industry Association. 

I will skip that and really get down to what the point is, that all 

businesses in the U.S. depend on reliable and efficient air travel to 

conduct their business, to stay connected to both their customers 

and their suppliers. Many economic studies show that access to an 

airport is one of the most important factors in creating an environment where small businesses can flourish. 

Entrepreneurs depend on reliable air service to raise capital, to 

make sales, to develop their supply chains. It is no accident that 

a significant technology corridor has developed right here in our 

hometown in Washington, right in the Dulles International Airport 

corridor, because the airports feed business and business feeds airports. 

I know that both the chairman and the ranking member appreciate the importance of airports, whether it be in greater New York 

airports or Cincinnati, to the vibrancy of your communities and to 

your businesses. The bottom-line is, though, all businesses of all 

types depend on air travel. 

The problem America faces today is not just about airlines, it is 

really about the whole air travel system, which is in steep decline. 

It is not a problem solely for the aviation community, but for businesses all across America. 

TIA represents the breadth of the travel community from travelers to hotels, to restaurants, airlines, theme parks, destinations, 

many others. While less than 1 percent of our membership is the 

airline aviation community, all members are really feeling the 

pinch of this deteriorating system. 

That is why we partnered with two of the Nation’s premier political polling firms to do some research to understand travelers’ concerns with the air travel process and what effect, if any, those concerns are having on their decisions to fly. 

While much attention has been on recent days in the media on 

high fuel prices and new fees, we believe the air travel problems 

are more fundamental and longstanding. A survey that we had did 

not focus on the price of fuel or on the recent cost increases. We 

5 

looked at the systemic issues that have only been amplified by 

these rising costs and the cuts in capacity. 

The survey was conducted between May 6th and May 13th of 

this year by Peter D. Hart Research and by the Winston Group. 

They interviewed a random sample of 1,000 air travelers. These 

are Americans who take at least one ground trip per year during 

the past 12 months and the results are surprising. We found there 

is a deep frustration that led them to avoid an estimated 41 million 

flights. We estimate that reflects a direct loss to the economy of 

$26 billion, 9 billion to the airlines, almost 6 billion to hotels, 3 billion to restaurants, and 4 billion to tax revenues, both Federal, 

State and local. 

As you know, Senator Schumer and Congresswoman Maloney 

also issued a study there from the Joint Economic Committee and 

on the direct—indirect impact of this and they looked at wasted 

time, wasted fuel, lost productivity and they put up a number of 

$40 million. So when you combine our direct costs, loss and the indirect cost, we are talking about a $70 billion problem to the U.S. 

economy. 

Today’s news said that we are not in a recession yet, but when we are talking about $70 billion, these kind of numbers, they are 

very serious to the impact of our economy. 

Our survey further revealed that businesses suffer from an unreliable and inefficient air system. Most important, frequent flyers 

said they are most dissatisfied with the system. The opportunity 

costs of lost—of not making that sales call, not going to a meeting, 

not making that site visit are incalculable. It is a frustrating and 

unreliable system, and it is really the sand in the gears of American entrepreneurship, and this is a very real and growing problem. 

The traveling public said that it is unlikely that they see this 

solved in the near term. More important, frequent flyers are more 

frustrated and doubt that it can be solved. 

One of the more surprising findings is that the frustration is not 

primarily directed at the airlines. Despite the avalanche of negative publicity the airlines have received, surveys shows that air 

travelers are most frustrated with the process, inefficient security 

system, flight delays due to our antiquated air traffic control system. This is important because the air traffic control system and 

security system are government functions that need to be focused 

on. The travelling public is very dissatisfied with both of these 

areas and hopes that Congress will act to seek improvement. 

Another interesting result is these are all voters. 90 percent of 

these people are voters, and this issue is going to be percolate to 

be one of the key issues in upcoming elections. 

At TIA we are hearing this loud and clear. We don’t have all the 

answers by any means. We do know that America needs an urgent 

and serious commitment to fixing this problem. I think we all need 

to work together to not have a second class system but to have a 

world class system. 

Attached to my testimony is an overview of the survey and our 

survey results, and I will be happy to answer questions later. 

Thank you. 

[The prepared statement of Mr. Dow may be found in the Appendix on page 31.] 

6 

Mr. CHABOT. Madam Chair? 

Chairwoman VELA ́ ZQUEZ. Yes. 

Mr. CHABOT. I would ask unanimous consent to speak out of 

order for a moment. 

Chairwoman VELA ́ ZQUEZ. Sure. 

Mr. CHABOT. Thank you. I just thought people might like to 

know that the United States Supreme Court just issued their decision on the D.C. gun ban or the law that does not allow Washington residents to have a gun in their home. And they struck it 

down. So I don’t know if it was 5-4 or what the numbers were. But 

it was struck down by the U.S. Supreme Court. They just announced it. 

Thank you. 

Chairwoman VELA ́ ZQUEZ. Sure. We are going to wait a second 

here to fix the timer. Okay. Thank you. 

Our next witness is Mr. Paul Ruden. Mr. Ruden is Senior Vice 

President of Legal & Industry Affairs of the American Society of 

Travel Agents. With 20,000 plus members, the American Society of 

Travel Agents is the world’s largest association of travel professionals. 

Welcome. 

STATEMENT OF MR. PAUL M. RUDEN, SENIOR VICE PRESIDENT, LEGAL & INDUSTRY AFFAIRS, AMERICAN SOCIETY OF 

TRAVEL AGENTS 

Mr. RUDEN. Thank you, Madam Chairwoman, Ranking Member 

Chabot and distinguished members of the committee. We thank 

you for holding this hearing on a topic of great interest to small 

business consumers and the travel agents who serve them. 

All ASTA travel agency members from the small, traditional 

storefronts to the major on-line retailers, meet the travel counseling and planning needs of the full gamut of travelers from individuals through small companies, to the large managed travel accounts of our country’s largest corporations. 

The subject matter of today’s hearing is familiar to nearly every 

American. Everyone has a story to tell about disrupted travel 

plans. The disruptions that the airlines call irregular operations 

play no favorites. Tourists, business travelers, first-time flyers, frequent flyers, young and old, healthy and infirm are all affected at 

one time or another. 

The symptoms of a systemic crisis are clear. Last year was the 

worst year on record for flight disruptions. On-time performance 

during the first 4 months of 2008 was the second worst in 14 years 

that this data has been collected. The demand for air space and 

runway space simply exceeds the supply, and the imbalance is not 

going to get better very soon. 

Economics textbooks tell us that an excess of demand over supply produces a price increase, and so it does. But in the present 

context, the price increase is manifested in a multitude of ways. 

The air travel system and the vast tourism network that depends 

on it are beset with unprecedented fuel prices, airspace and airport 

congestion, consolidation, environmental issues and now also fare 

unbundling. 

7 

Unbundling is the practice of separately pricing travel elements 

once thought to be an inherent part of the services covered by the 

air fare. In addition to fuel surcharges, we get almost daily announcements of new fees for baggage, charges for soft drinks and 

add-ons for aisle seats. 

While tarmac flight delays capture most of the headlines, they 

are only one result of the systemic problems the industry and the 

country face. The defeated expectations of travelers have economic 

implications far beyond the immediate inconvenience. These effects 

extend to tourist attractions, cruises, restaurants, hotels, rental car 

businesses and myriad other service firms in the travel supply 

chain, most of which are, as has been noted, small businesses. The 

travel supply chain is a very complex, networked regime of interacting parties who work to fulfill the travel goals of consumers 

while earning a reasonable profit. 

Every unplanned travel event, every irregular operation compels 

many parties in that supply chain to respond. The damage caused 

by flight delays, cancellations and diversions is difficult to quantify 

because while it cannot be predicted with precision, it affects virtually everything. Budgeting for it is almost impossible. 

The consequences of such disruptions include canceled meetings, 

unfilled hotel rooms, meals not served, transfers left unused, deals 

not consummated, tours not taken, catering not performed, conference schedules disrupted, and absent family members from oncein-a-lifetime events. 

In the background, additional uncompensated work must be done 

by travel agents and others in the supply chain to rearrange travel 

plans, reschedule meetings, lodging and so on. 

Small business travel agencies, like other small businesses, are 

acutely affected by these disruptions. The economic fallout of these 

unexpected yet very familiar events impacts everyone in random 

and unmanageable ways. 

In addition to the immediate economic and personal effects, the 

repetition of these types of events over time erodes consumer and 

business confidence in the air transportation system, resulting, as 

has been noted, in decisions to avoid traveling altogether. The impacts trickle down and they trickle up throughout the economy. 

Decisions to avoid travel are reinforced by the well-documented 

failure of the airlines to respond to consumer needs for information 

and services when these unplanned yet foreseeable irregularities 

occur. 

As the 10th anniversary of the airlines’ 1999 passenger service 

commitments approaches next year, most of the 12-point promises 

made then remain unmet. Efforts are underway to change that, but 

much remains to be done. 

The air transportation system that is a mainstay and principal 

stimulator of the American economy is indeed in very serious trouble. The Secretary of Transportation, Mary Peters, introduced earlier this year some new measures, which we support, that will deal 

with things like inadequate passenger protections and congestion. 

We support those. DOT is trying to require the airlines to publish 

new data on flight delays, which have been missing from the data 

that has been quoted to this committee and other committees of 

8 

Congress many times to suggest that these problems of flight 

delays are not quite so serious and perhaps not even important. 

The short-term outlook, however, is not encouraging. These 

unbundling practices are coming at a time when they will confuse 

consumers even more and alienate them even further from the system on which they are dependent. We also now are seeing the reintroduction of minimum stay requirements, and these and other 

practices are going to spread and further erode the goodwill between consumers and the air travel system. 

I see that my time has expired. Thank you very much. 

[The prepared statement of Mr. Ruden may be found in the Appendix on page 34.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Ruden. 

Our next witness is Mr. Mike Gallagher. Mr. Gallagher is the 

President of CityPass in Napa, California. Mr. Gallagher has over 

36 years experience in tourism, marketing and the theme park 

business. Mr. Gallagher co-created CityPass. CityPass combines 5 

or 6 of a city’s top visitor attractions into a discounted pay-oneprice ticket book. 

Welcome. 

STATEMENT OF MR. MIKE GALLAGHER, PRESIDENT, 

CITYPASS, NAPA, CALIFORNIA 

Mr. GALLAGHER. Thank you. Thank you, Chairwoman Vela ́zquez 

and Ranking Member Chabot and other distinguished members. 

My name is Mike Gallagher. I am the co-CEO and founder of 

CityPass, which is a small business which has a natural reach offering foreign and domestic travelers the best attractions in America at one package price. And this is the first time I have been in— 

come to Congress. I flew yesterday 3,000 miles to do this, and I 

really appreciate you making me feel at home. I feel like I am in 

coach. And I am used to that as a small business owner. Anyway, 

thank you also for allowing me to testify. It is particularly on behalf of small business and the travel sector that are at risk for 

being impacted by America’s deteriorating air travel system. 

I am particularly pleased to be here today because in 1997, when 

we started CityPass, we started with a Small Business Administration loan which got us going. So I want to tell you about that. 

About 12 years ago we came up with the idea for CityPass. As a 

startup business, the banks are just not interested in loaning us 

money. And so my business partner and I received and applied for 

a loan with the Jackson State—an SBA loan through Jackson State 

Bank in Jackson, Wyoming, where our operations were 

headquartered. And if it wasn’t for the SBA, we would not have 

been able to start CityPass. So we are very grateful for that. But 

it is interesting because even though with the SBA loan, even 

though the Federal Government guarantees 80 percent of that 

loan, the bank still required both of us to put up our houses. And 

you can imagine it was an interesting discussion with both our 

wives to get them to do that. I appreciate it. 

All is well now because CityPass has been very successful. And 

within a few years we not only paid that loan off with interest, but 

we have grown to 11 cities. And most importantly, our wives are 

9 

now very happy. So CityPass now serves 72 major North American 

attractions in 11 cities, including the chairwoman’s hometown of 

New York City. Several other members are represented in our cities, including Atlanta, Boston, Philadelphia, Seattle and Chicago. 

We just started Houston about a month ago. 

CityPass has become a national brand for city vacations and for 

identifying top attractions in major cities. I appreciate the SBA 

loan. It helped us get started. And in a sense we are still in business with the SBA because every year we share 35 percent of our 

profits with you in Federal taxes. When our profits increase, so do 

your revenues. 

So I am here today to speak up for the more than 95 percent— 

I think you said 97 percent of the travel industry that makes up 

small businesses just like me, companies that are less than 100 

employees. And there are hundreds of thousands of us in every 

nook and cranny in this great country of ours. These are small 

businesses that rely on travelers for some percent of their revenues. 

Let me explain the importance of that percent and particularly 

what happens when fewer people travel by air. With CityPass, for 

example, virtually all of our customers are tourists to a city. We 

estimate that over 50 percent are flying to their destination. Actions that make it difficult for people to fly or which affect the ability of travelers to fly have a very immediate and negative impact 

on our business. 

Before founding CityPass, I managed an outdoor attraction in 

northern California. As with many small businesses in the travel 

sector, we are significantly a fixed-cost business. Our cost to serve 

a thousand visitors in a day are basically the same if it is 800 or 

if it is 1,200 people that show up. At a thousand people, we can 

pay our staff and cover all our costs. Almost everything after a 

thousand visitors fall directly to the bottom line and is our profit. 

If more than 1,200 people come through the door, it is a great day. 

We are very profitable. But obviously if only 800 people visit us, 

we lose our shirts. We bleed red ink. We still have to pay the staff 

and we still have to pay all of our costs. But we don’t have the 

money, so we quickly run out of money. We would be unprofitable 

and at the end if this continues we would go out of business. It was 

clear to us that it was those last few people that come into the entrance each day that made up our profit. It was the difference between success and failure. 

Most businesses in the travel industry serve both locals and tourists. The biggest source of our business was from the locals and 

from regional travelers, but it was apparent that 200 to 400 visitors a day were long distance travelers. So even though they represented only 10 to 30 percent of our business, these long distance 

travelers who usually traveled by air were the critical difference 

between profit and loss, success or failure. 

CityPass depends on reliable, efficient air travel to bring travelers to the cities and attractions we serve. When air travel hassles 

rise to the level that Americans avoid taking a trip, that hurts our 

bottom line and that of thousands of small businesses that make 

up the travel industry. It also hurts the economies of the cities 

where CityPass is sold and where it also benefits from tourism. 

10 

So this is the summer season. This is the harvest time. It is the 

busiest time because this is when vacations are taken by families. 

And if travel is down this summer because people don’t want to fly, 

our profits will be down and this will make for a long, cold winter. 

It is a long, cold winter for the travel industry. 

So I want to thank you for letting me speak as a business owner. 

I appreciate representing other small businesses because they are 

everywhere in this country. And you know what? You can do something about this. What is great is the travel air system is run by 

the Federal Government. You guys oversee that. So it is a great opportunity to do something about it, and we appreciate you having 

this meeting to talk about it. 

[The prepared statement of Mr. Gallagher may be found in the 

Appendix on page 46.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Gallagher. 

Our next witness is Mr. Edward Faberman. Mr. Faberman is the 

Executive Director of Air Carrier Association of America. He is also 

a partner in the law firm of Wiley Rein. Previously he was Assistant General Counsel and VP of Government Affairs of American 

Airlines. Before he served for 18 years at the FAA. Founded in February 1997, ACAA works to eliminate barriers that block meaningful competition by low fare carriers. 

Welcome. 

STATEMENT OF MR. EDWARD P. FABERMAN, EXECUTIVE 

DIRECTOR, AIR CARRIER ASSOCIATION OF AMERICA 

Mr. FABERMAN. Good morning, Chairwoman Vela ́zquez and 

Ranking Member Chabot and distinguished members. I am pleased 

to be here today to talk about issues that are critical to the Nation’s air carriers, communities throughout the country, businesses 

of all sizes and to the traveling public. 

Our low fare carrier members are dedicated to providing affordable air fare options to travelers in communities that receive significant economic benefits when those options are available. As to 

Mr. Gallagher’s comment about being in coach, we will collect for 

the charge for the bottled water shortly. 

We thank this committee for holding the hearing and for highlighting the importance of a strong transportation system. 

As a result of air congestion, delays and elimination of service, 

we are at a point in time that if steps are not taken to promote 

competition and address rising costs, we may see the disappearance of travel options for millions of travelers. These are not new 

issues. Let me read you this short statement: 

There was strong indications that the airport and airway system 

was on the verge of saturation, especially between New York and 

Washington. Flight delays were far beyond mere annoyance and inconvenience. 

That statement was made in 1968 40 years ago. Deja vu all over 

again. Delays impact aviation and they are a threat to the economy 

and our future. We have gone through the TIA’s recent study, and 

it does show frustration with passengers and travelers. We applaud 

them for making that study available. 

11 

The airline industry is at a defining point in our history. We 

have seen several low cost carriers go out of business and file for 

bankruptcy. We have proposals that will increase consolidation, 

and airline costs are out of control. Every airport in New York is 

now closed to additional service and competition. 

While we address these issues, we must also take steps to make 

sure that competition and deregulation do not become only memories of a system that used to exist. Multiple studies in addition to 

the TIA studies and reports prepared by the Federal Government, 

local governments and airports and independent groups set forth 

the enormous benefits of low fare competition. In 1993, DOT invented the term ′′Southwest effect.′′ As one article mentioned in 

1999, the biggest economic boom you can bring to an area is to improve your transportation, and a cheaper price is important. 

We also note an Allegheny County Airport Authority study that 

showed when low fare service came to Pittsburgh, an additional— 

over 100,000 people visited the region in 2006. And that study says 

without low fare service and with the disappearance of options, 

passengers will either pay a lot higher fares, drive to distant airports, use other modes of transportation or just not travel. AkronCanton Airport, Flynn Airport have all shown the benefits of new 

and low fare service. 

It is time for the Department of Transportation to take some important steps, and we urge this committee to make sure that they 

do that. They need to preserve competition. They need to make 

sure that airline deregulation is not just a memory. Therefore, we 

ask you to ensure that they do address air traffic delays. 40 years 

is enough. Take some steps, even if minor, to improve the system. 

Don’t close an airport and say, well, we are going to fix this. Well, 

we were told that 40 years ago. Let us make sure that competitors 

have some options to grow so that when you wake up in 2 months, 

6 months, a year, you don’t look at your travel agent’s recommendations and find only one recommendation because there is 

only one option to fly. 

We also need to address fuel costs and some international issues. 

The Greater Miami Convention and Visitors Bureau yesterday advised me of major problems with the U.S.A. entry process. This 

committee has an opportunity to play an active role in improving 

the Nation’s system, and we thank you for holding this hearing. We 

are anxious to work with you and consumers, and we need to make 

a system that makes flying easier and safer and continues to promote deregulation. And that is all important to us. And we are not 

suggesting that only one or two parts of it be done. 

We look forward to working with the entire committee to preserve a competitive travel industry that will continue to provide 

economic benefits for businesses and communities. 

[The prepared statement of Mr. Faberman may be found in the 

Appendix on page 49.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Faberman. 

Our next witness is Mr. Kevin Mitchell. Mr. Mitchell is the 

Chairman and Founder of the Business Travel Coalition in Radnor, 

Pennsylvania. The mission of the Business Travel Coalition is to 

12 

bring transparency to industry and government policies and practices relating to travel. 

Welcome. 

STATEMENT OF MR. KEVIN MITCHELL, CHAIRMAN, BUSINESS 

TRAVEL COALITION, RADNOR, PENNSYLVANIA 

Mr. MITCHELL. Thank you for inviting the Business Travel Coalition to appear before you on a subject of the gravest importance to 

our industry, communities and country. 

The U.S. aviation industry is in a full-blown crisis that if left unchecked will devastate entrepreneurs, small and mid-sized communities, the economy and our American way of life. Robert Crandall, 

former Chairman of American Airlines, stated in today’s Christian 

Science Monitor, quote, unless something is done to move toward 

some kind of fix we are going to see every one of our major airlines 

in bankruptcy. 

He continues, if that isn’t enough of a crisis to alert everybody, 

then I don’t know what it will take. 

With oil in a sustained $130 range, the consensus estimate 

among analysts is that the airline industry will have to shrink by 

20 to 22 percent. Recent cuts in capacity for implementation this 

fall only amount to 12 to 13 percent. So it is likely that additional 

very difficult decisions will have to be made toward Labor Day to 

increase the overall reduction of the industry. 

This, together with the financial condition of the airlines and airport specific characteristics, has led BTC to identify 150 airports 

that are at risk of losing commercial air services. Virtually all airlines will be out of cash by early 2009 if oil stays in its current 

range. The conundrum that the airlines faces is that in each of the 

past 4 years they were only able to raise fares and fees by $2.7 billion on average. The top 10 carriers this year face a $25 billion increased oil bill or fuel bill. When you deduct the fuel hedges of 6 

billion, that is $19 billion additional. Well, that is a huge gap to 

meet between 2.7 and 19 billion. 

Even the high growth leader, Southwest Airlines, with the best 

hedging oil program and balance sheet in the industry, told a Merrill Lynch conference last week that at $135 a barrel, it would have 

to cut routes hundreds at a time. So you can imagine what that 

portends for the other larger legacy carriers with higher fuel and 

other costs. If as Goldman Sachs and others predict, oil reaches 

$150 a barrel by July 4th, then the industry will need to shrink 

further. At $200 a barrel, the industry would need a 40 percent reduction. 

A major concern is that there is no assurance that the industry 

can successfully downsize without collapse given the bunching up 

of several airlines whose equity will be wiped out in the same relative time frame assuming $130 oil. 

Now, failure of a single large airline with 15 percent market 

share would have huge local effects and substantial impact nationally. But multiple failures would be a catastrophe and as impactful 

and demoralizing to the Nation as a terrorist attack. 

There are steps Congress can take to help turn this dire situation around. The three most important steps I hope you and others 

will focus on in the near term are: One, policies that would crack 

13 

down on excessive speculation and possible market manipulation in 

oil futures; two, moves to strengthen the U.S. dollar against foreign 

currencies; three, U.S. government pressure on OPEC to increase 

oil supplies. In addition to these general policies, BTC respectfully 

asks Congress to consider immediately suspending Federal taxes 

and fees on U.S. airlines until March of 2009 so long as oil prices 

remain above $100 and conditioned upon individual airlines opting 

in to a series of reforms. 

U.S. taxpayers should not be asked to yet again bail out the airline industry, broken on so many levels, without true reforms being 

agreed to. Yes, the national air transportation grid is as critical a 

national infrastructure as is the electrical grid, but additional taxpayer investments should not be considered without a return on 

taxpayer investment. BTC’s proposal is that individual airlines be 

given the opportunity of opting into a tax suspension program if 

they commit to the following three reforms: 

First, passenger protections. Participating airlines would agree to 

be bound by passenger protections based upon recently enacted EU 

consumer protection laws and air transport that are very clearly 

written, serve as a global best practice, and have generated data 

that quantify their effectiveness. Such agreement would be codified 

in the airlines’ contracts of carriage. 

Two, maintenance standards. Participating airlines would agree 

to provide the U.S. DOT in a legally binding agreement a commitment timetable, reporting mechanism and auditing process for establishing a single standard for aircraft maintenance and security, 

whether aircraft maintenance is accomplished in the United States 

or around the world, whether in-sourced or out-sourced. 

And third and finally, participating airlines would commit to providing the U.S. DOT in a legally binding agreement a commitment 

timetable reporting mechanism and auditing process for implementing full content availability and a distribution channel of 

choice for travel agencies and corporate travel departments. 

Thank you for the opportunity to share my perspective with you 

today. 

[The prepared statement of Mr. Mitchell may be found in the Appendix on page 60. 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Mitchell. 

And now I recognize the ranking member for the purpose of introducing our next witness. 

Mr. CHABOT. I thank the chairwoman for recognizing us and I 

would like to announce our witness here from Cincinnati. As I 

mentioned, she is a fellow Cincinnatian. Terry Segerberg is the 

Chief Executive Officer and Chairwoman of the Board of Directors 

of Mesa Industries, and it is a small business located at Lunken 

Airport in Cincinnati, Ohio. Founded by Terry’s father in 1967, 

Mesa manufactures and distributes items for the petroleum industry and the construction industry. Mesa employs approximately 75 

people. The company is proud of the fact that the average employee 

remains with the company over 10 years. 

Terry has been a very active member of the Cincinnati Chamber 

of Commerce. Mesa was the Chamber’s Small Business Award of 

14 

Excellence runner-up for 2008 this year. Terry was mayor of Hercules, California, from 1997 through 2001 and also served as a city 

council member from 1994 through 2001. She holds a Bachelor of 

Business Administration Degree in accounting from Armstrong College in Pasadena, California. And we welcome you here this morning and look forward to your testimony. 

STATEMENT OF MS. TERRY SEGERBERG, CEO, MESA 

INDUSTRIES, INC., CINCINNATI, OHIO 

Ms. SEGERBERG. Thank you. Good morning, Chairwoman 

Vela ́zquez, Ranking Member Chabot, and distinguished members of 

the Committee on Small Business. And, gentlemen, thank you. 

I think if we are in the coach section, I am on the window with 

no window. I think that costs extra. 

You have given my family history beautifully. I am honored to 

be here and to represent my company. It is a nontraditional role 

for a female, as you can appreciate. My father founded the company in 1967 to support our family. And I have had the honor to 

go out on my own, come back after politics, and come back into the 

family business, and now I lead it as the CEO and Chairwoman. 

Mesa is currently composed of four different companies: Mesa 

Rubber Company, Gunite Supply and Equipment, Airplaco and 

Mesa Laminated Fabrics. With a diverse corporate mix of products 

and companies, that puts us both in the petroleum industry as well 

as in new construction and renovations. We operate out of three locations, Cincinnati, Houston and Los Angeles. Initially, our goal 

was quite simple, provide a product in an industry that we knew 

well so that our own family could support itself, clearly a true example of the American dream as ever could be. 

We don’t get the press that the mega corporations get and we 

don’t get the resources that they have either. What we do have is 

the integrity and desire to support our family and the families of 

our employees. Over the years, we have faced many challenges, yet 

we have managed to eke out a profit in every one of our 40-plus 

years. And those things in which we have control, we have successfully navigated Mesa. 

The demands of operating our business have grown significantly, 

especially since 2002 when we have essentially doubled our activities. Clearly to operate and manage such a diverse set of companies 

and products, communication and travel are integral parts our routines. For example, I have flown over a million miles in just the 

last few years, with a window. The average cost in the last 2 years 

for me to fly from Cincinnati to L.A. And back in 2 years has risen 

from $390 to $630. That is a 62 percent increase with the luxury 

of advanced planning. 

Clearly the airline industry has struggled to keep their costs 

down, and yet with the escalating cost of fuel they are out of cost 

saving options. The constantly increasing costs are being passed on 

to us passengers by reduced flight options, elimination of travel 

comfort items and windows, and now we must pay to travel with 

a suitcase. 

As a business owner, I fully understand their dilemma. In order 

for me to afford my airline ticket today, we must increase our sales 

and generate more profit. Not such an easy solution. 

15 

Now when you multiply these increased costs by 20 to include 

my traveling staff, the impact is thousands and thousands of dollars each month. Conducting business over the phone and via the 

Internet is fine, but it is not a realistic solution for my business. 

It is not a solution for cutting travel costs. The complexities of 

many of our products require customization on a case-by-case basis, 

the nuances of which are magnified when you consider the cases 

where we are dealing with environmental protection systems for 

the petroleum industry itself. 

In order to manage my business, operating out of three States, 

travel is not a perk. It is a requirement. It is essential that the continuity of Mesa in our operations and our long-term stability that 

we have the flexibility to travel. Nonetheless, we have been forced 

to reduce our intracompany travel. 

Earlier this week, I had an employee tell me that he was feeling 

the pinch, too. It is not just the airline industry and it is not just 

Mesa. It is my employees. And when I said what kind of pinch are 

you feeling, he said I feel like my kids are robbed. I said what do 

you mean your kids are robbed. I wasn’t quite sure what he meant. 

And he said we have to pinch and save money so much now, that 

we don’t have any more family outings and we canceled our family 

vacation. 

Well, that is a pretty sad statement. I have had other employees 

talk about cutting costs and economizing in the grocery store, and 

perhaps the most frightening story I heard was one employee finally voiced up that this winter in Ohio he turned his heat off save 

money for gas. This spring, we instituted a gas card reward program for employees. We give four cards away a week just to help 

them because their pocket money is gone. We just doubled that to 

eight cards a week. And why do we do this? Our employees need 

relief and otherwise are out of options. We pride ourselves on the 

quality of our employees and the benefit programs that we offer 

and the living wages we pay. 

The other area hit hard by gasoline is our shipping costs, where 

we see gas surcharges that are now ranging from 26 to 51 percent. 

And when something is shipped by air freight, it is exorbitant and 

often unimaginable. While in theory we can pass these actual costs 

on to our customers, the realities hit once again and we must remain competitive in our industries. Our vendors are facing the 

same increases and therefore our raw materials are going up and 

the freight to receive our products is going up. It is nearly a daily 

occurrence that we receive a letter from a vendor telling us about 

another price increase. We have limited reactions. We can raise our 

prices to maintain our margins and hope our customers will tolerate the increase, or we can lower our margins and hope we can 

survive these times. 

So where does that leave us? We see a bifurcated solution as the 

only viable course of action. As a nation, we have got to require 

higher yielding engines for our vehicles, we must utilize our oil resources that are fallow, and we have to come up with a realistic 

energy plan. 

It may appear that I have digressed a little, but in my opinion 

the core issue for the airlines is the same that I am facing as a 

small business owner; the cost of oil is simply too much. 

16 

Thank you very much. 

[The prepared statement of Ms. Segerberg may be found in the 

Appendix on page 67.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Ms. Segerberg. 

Mr. Dow, according to a recent study conducted by TIA, 41 million trips were avoided in the previous year because of problems 

with the air travel system. That figure doesn’t reflect the one trip 

that I avoided just this Monday when I decided not go to 

LaGuardia. And even today when I go home, probably I will go directly to Union Station. Were you able to identify the primary reasons why people are avoiding trips? 

Mr. DOW. Yes, we were, Madam Chairwoman. This study was 

one of the few times where a correlation was made between dissatisfaction and people’s actions. And keep in mind we did the 

study before this big spike in oil and before many of the price increases. So when people said it is the hassle factor. People just said 

the whole process curb to curb is so challenging, they don’t know 

whether to allow 15 minutes or 3 hours to get through security, 

they don’t know whether when they get through security whether 

their flight will be delayed because of air traffic control backup and 

they will be sitting there, and they don’t know if they will make 

their destination. On close appointments, they cancel the trip because of saying I may not even get there in time for the meeting. 

So that is a factor and it is one of the few situations where we 

see the most frequent customer is the most dissatisfied. I cannot 

think of a business that I know of where your largest users are the 

people that are the most dissatisfied. 

Chairwoman VELA ́ ZQUEZ. Thank you. Mr. Ruden, the major airlines are imposing new fees on passengers and almost like every 

week there is something different. You say one bag, a second bag. 

What role do travel agents play in making sure that consumers 

understand these new fees and what challenges are you facing in 

educating consumers about all these changes? 

Mr. RUDEN. I think the essential value that travel agents continue to bring to a marketplace in which everyone virtually has access to the Internet is their ability to counsel and advise people 

about budgeting for travel and about the uncertainties that we 

have all talked about here. And we expect and I think most travel 

agents, if not all travel agents, are acutely aware that their customers need to know this, that they want to know it, that they expect to be told. The problem is that the methods by which airlines 

communicate some of these changes are not well calculated to get 

the information into the hands of travel agents in a usable manner 

and in a timely manner and certainly not into the hands of the consuming public. 

I mentioned the confusion factor in my testimony, and it is a 

very real phenomenon. When people are uncertain, they tend to 

pull back and to avoid travel or to do other things that are not 

going to be healthy for the economy of the country. We are trying 

to address these issues to the airlines so they will understand that 

they can’t just issue press releases and expect the public and travel 

agents to understand this. We try every day to compile lists for our 

members to make them aware of the new changes. But as you said, 

17 

it is a daily phenomenon and it is very difficult to keep up. There 

are new things I am sure coming that we haven’t even anticipated 

yet that they will be charging for. I don’t think we are critical of 

them in one sense, but we also have to understand that they are 

in a desperate situation. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Gallagher, can you please talk to us about how has your 

business been affected by higher air fares in recent months? And 

are there any cities that you anticipate will be hit particularly hard 

by the rapid increases in these air fares? 

Mr. GALLAGHER. Well, a lot of what is going on is happening 

now. This research that just came out with Roger. So our business, 

60 percent it of happens in June, July and August, which is coming 

up. So I can’t tell right now exactly what is going to happen this 

summer. But anybody, we have got to believe, if you are a family 

and you are a leisure traveler, which is where our business is, you 

are just going to make changes. You are just not going to travel 

this summer by air anyway. And the research proves that out. 

So I can’t tell you numbers wise until October, which I am happy 

to come back and tell you. But I hope it is good news when I come. 

But my fear is it is not good news and that the travel is going to 

be down in these cities and those cities that rely most on—like 

New York—on leisure travel will be the ones that are going to be 

hit the hardest. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Faberman, American Airlines recently announced that it is 

cutting many flights to LaGuardia New York. Will discount carriers be able to fill that void? 

Mr. GALLAGHER. Well, I think we have to ask Secretary Peters 

about that because, you know, tomorrow if a carrier cancels a 

flight, it doesn’t necessarily mean that someone else can come in 

and start utilizing that flight. It is important that those requirements and restrictions be looked at very closely and that in addition to looking at the long term and as the Department of Transportation has proposed auction options, we need to look at some 

things that would immediately allow some new levels of competition. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Mitchell, the higher prices have been a major challenge to 

the airlines. This week several energy analysts testified before the 

Energy and Commerce Committee that limiting speculation will cut 

or could cut all prices significantly. Do you believe that speculation 

is contributing to the costs of jet fuel and the troubles of the airline 

industry and, if so, how? 

Mr. MITCHELL. Well, I am not an expert in this area, nor do I 

have a whole lot of confidence in the experts that are out there because they have been wrong over time in so many ways and times. 

The hearing that was held last week, I think the experts that were 

of the view there was a speculative premium, put that premium between 25 and 50 percent of the current price of a barrel of oil. I 

think what is very important, and as the Congress is doing, is to 

actually get to the answer of whether this is a supply and demand 

imbalance or indeed there is excessive speculation and/or manipulation going on in the market. If it is an oil imbalance, then we 

18 

should take that piece of information and understand that as a 

critical infrastructure at 130 or 120 or 140, the model doesn’t work. 

We will not have a national transportation infrastructure at that 

cost of input. 

If it is a matter of speculation or manipulation, that needs absolute full attention, immediate attention, because it is not just crippling the airline industry, it is hurting every single American, and 

it is outrageous if it is happening. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Now I will recognize Mr. Chabot. 

Mr. CHABOT. Thank you very much, Madam Chair. And first of 

all, Mr. Mitchell, you mentioned a couple of things that you 

thought we needed to do. You mentioned speculation. I tend to 

agree. I disagree with the administration on this, who has tried to 

pooh-pooh that whole speculative issue. I think that is one of the 

issues that is at play here. And I agree with the strength of the 

dollar being an issue and I do agree also that we ought to put pressure on OPEC. I agree with you on all those things. 

I would just add on to some of the things you mentioned and I 

also believe that we have got a short-term and a long-term problem 

relative to supply where we have essentially handcuffed ourselves 

in this country and said we are not going to go into ANWR, we are 

not going to go into the Outer Continental Shelf, and we know 

there are huge resources in both. So that is part of the picture. And 

I think that is related to the speculation because you have some 

′′okay, ifs′′ that say even if we drill in ANWR now, if Congress 

passed legislation saying we could drill in ANWR now, we are not 

going to see that oil for 3 years or 5 years or 10 years or whatever, 

and that certainly is true. We won’t see that particular oil. That 

is why we should have passed this many years ago, which I consistently voted to do. But we can’t go back and undo that. But what 

we could do, I think it would affect the speculative nature of the 

problem because it would show that we are serious, that we are 

going after that oil now, and think you would see that reflected. 

Because a barrel of oil went up from $58 to $135 in a year’s time. 

You can’t tell me that there aren’t speculative factors involved in 

that. So I agree with all the points you made. 

I would go beyond that and say we need to go after supply that 

we have available to us and we need conservation and we need alternative renewable sources. It has to be a comprehensive plan. 

Does anybody want to comment on that? 

Mr. MITCHELL. In defense of the speculators, they are able to leverage this concern that America can’t solve its own problems anymore and that we are sitting idly by while the Chinese and Indian 

and other economies expand so rapidly. 

So I 100 percent agree with you that it is the psychology of the 

futures market that we need to attack, and that means looking like 

we are doing things, and doing things. You know, at least opening 

the debate on offshore drilling, talking about things like strengthening the dollar, opening up the oil reserves. These are things that 

the marketplace needs to know we are not going to sit around and 

just be victimized by them. 

Mr. RUDEN. Mr. Chabot, if I might, Mr. Dow and I were talking 

about this very subject before the hearing. 

19 

It is impossible—and I am no expert, either, but it is impossible 

for an intelligent person to get their mind and arms around the 

idea that this imbalance in supply and demand has moved from the 

condition it was in a year ago, when we had an imbalance, too, to 

the condition it is allegedly in today such as to produce a more 

than 100 percent increase in price of oil. It just doesn’t make sense 

in basic economic terms. 

So this issue—again, I am not expert, but it seems to me this is 

one of the primary pressure points that could have short-term effects. And right now our industry, and I think the whole economy, 

needs some kind of short-term encouragement, some sign that 

something is going to change this pretty quickly before businesses 

simply say, I am not going to lose more money; I will just fold up 

right now and go away. 

Mr. CHABOT. Ms. Segerberg, did you want to comment? 

Ms. SEGERBERG. Yes. Oddly, one of our biggest customer bases 

is the petroleum industry; and in the last 4 to 5 years the sales 

that we have done to China and India are something as crazy as 

the gas prices are today. 

What we are seeing is aboveground storage tanks in China, for 

example, that are probably larger than anywhere in the world. 

Each individual tank, it is frightening to know how much petroleum product is in some of these tanks, millions and millions of 

gallons. 

And I don’t think I help the speculation, but all I know is our 

company is running as fast as we can to sell them products as they 

are building these new tanks. When those tanks are built, the oil 

that they plan on putting in these tanks isn’t going to come here. 

They are going to get it. 

So I think we have future shortages yet that we can’t anticipate 

just by looking at the design and activity that is happening both— 

and the same is happening in India. It is a couple of years behind, 

but we are there in those refineries talking to those engineers. We 

have never seen anything like what we are seeing the growth 

there, and that oil is going to come out of our pockets one way or 

another. 

Mr. CHABOT. Mr. Dow, I think you were trying to— 

Mr. DOW. Yes, sir. 

I think you all hit it on the head. We have got to peel the onion 

in 100 different ways, and we have to get some significant commitment. There is no shortage of ideas. There is a shortage of leadership. 

This has been isolated to an airline issue only by the media, and 

it is not an airline issue. It is a travel industry issue, it is a small 

business issue, and an American freedom to travel issue. And if we 

don’t elevate this to a critical crisis for America and take it beyond 

an airline fuel issue, we are going to have a problem. 

Mr. FABERMAN. That is why all the other airline associations and 

other groups have joined in supporting the PUMP Act that is out 

there. We think that is an important step. 

Also, a lot of the airlines are using more fuel-efficient aircraft 

that are using less fuel; and maybe one of the small—if there is 

a word—′′benefit′′ that goes with retiring aircraft is that some of 

the older aircraft will no longer be consuming fuel. 

20 

Mr. CHABOT. Thank you. 

Mr. Gallagher, let me ask you a different question, if I can. I 

think your concept and your business is very interesting, and you 

go to a number of cities. Cincinnati is not one of those cities right 

now, correct? 

Mr. GALLAGHER. That is correct. 

Mr. CHABOT. Let me just mention some reasons why I think it 

should be, and I would like to talk to you about that. 

We have one of the best zoos, for example, in the country. We 

have the Cincinnati Reds, the first professional baseball team; Cincinnati Bengals. We have great, great symphony, Pops. We have 

got Kings Island; many really world-class museums; Tall Stacks, 

which is really unusual, where the riverboats literally come, and 

we have thousands and thousands of people come. 

Let me put in a plug also for the Delta Queen at this time, which 

is the last of her kind, that we need to save. I will continue to have 

that discussion with Mr. Oberstar whom we have battled on the 

floor, whom I have great respect for, but on the issue we just differ. 

In November, its exemption runs out; and that would be the end 

of the Delta Queen. And we can’t let that happen, and I hope Congress doesn’t. 

And I mentioned Kings island. We have fine restaurants. We 

have got fine hotels. We have got great arts opportunities. We have 

the second-largest Octoberfest in the world after Munich. And at 

that Octoberfest, among other things, we have had the largest, 

greatest number of people doing the chicken dance at the same 

time in the entire world as well; and we are proud of that, of 

course. And one of the largest fireworks displays at Riverfest that 

we have in the world. 

So it is a great place for families to come. It is very convenient. 

The population is from all over the place. So how could Cincinnati 

become one of the cities that you would—that your company would 

bring folks to? 

Mr. GALLAGHER. How this works is we are invited to a city by 

the Convention and Visitors Bureau. We don’t ask anybody for any 

money, but we do need a promotional organization to help support 

bringing more people. So we look at the number of leisure travelers. We look at the attractions. We assess the deal. 

We haven’t heard from Cincinnati for quite a while. They initially talked to us, but then there was Newport across the street 

there, and there was a conflict between those two bureaus, and so 

we backed away. Because you do need one promotional entity that 

is there to help promote this thing. And the real thing about 

CityPass is it helps extend length of stay and put more heads in 

beds is what it does. 

But could I take one moment? Here is something you can do. 

There is a Travel Promotion Act that many of you may know about 

that is on the table right now, and it is sponsored by a majority 

of the House and almost a majority of the Senate. That is something that you can do right away that will really help you and help 

Cincinnati and every one of these cities. 

We are the only country in the world that does not promote 

itself, the only one. France does it. Australia does it. Canada does 

it. Are we so arrogant to think that we don’t have to do that? It 

21 

is like a politician saying, I don’t have to promote myself. I am just 

going to get re-elected. 

It doesn’t happen that way. It is not going to take any taxpayers’ 

money if we can get this passed. Some of you are already sponsoring it, which is great. 

It is a small deal, but having more people come to our country— 

Australians come here and spend on the average of 22 and a half 

days. They visit multiple cities. I can sell them a bunch of 

CityPasses. 

Mr. CHABOT. I will certainly have a discussion with our Convention and Visitors Bureau, and we would love to have Cincinnati included as one of the of locations you bring folks to. It is a great 

city. 

Mr. GALLAGHER. We will come take a look. 

Mr. CHABOT. Thank you, and I thank the panel. It has been an 

excellent panel. 

Chairwoman VELA ́ ZQUEZ. Mr. Shuler. 

Mr. SHULER. Thank you, Madam Chair. 

Ms. Segerberg, I think you are exactly right. When you look at 

some of the growth of some of the other countries throughout this 

world—China, India, Japan—the dollar continues to fall. And it is 

kind of embarrassing. 

I had my children up this week. They are in Washington. And 

whether it has been in committees or on the House floor, I see the 

lack of maturity, quite frankly, in this House of Congress where 

Members are actually—parties are fighting against one another for 

their own political posturing or political gain of power when we are 

allowing other countries to surpass us. And until this House - until 

we change the dynamics of this Congress, on both sides of the aisle, 

we are only going to continue to fall further and further behind. 

I am on the Natural Resources Committee and whether we are 

talking about drilling in ANWR or we are talking about offshore 

drilling, we have got 68 million acres that are available for drilling 

today. That would be 81 percent of all estimated, oil and gas. We 

would actually produce, just on the 68 million acres, 4.8 million 

barrels of oil a day, 44.7 billion cubic feet of natural gas a day. 

That would double our capacity of petroleum, and it would increase 

just in oil production. It would increase 75 percent of our natural 

gas. 

But yet we stand on the House floor and people try to become 

Hollywood stars, if you will, because of C-SPAN; and they talk 

about this and talk about it. When we actually need to unite together as a body, the People’s House, and say what can we do to 

better our country and to make sure that we remain at the top and 

we remain at the top for not only my children but for generations 

to come. 

So I think you are exactly right. When other countries are surpassing us because it has been—it has been this way for a long 

time. I am a new Member here, and so I think you are right. 

I do have a couple of questions. 

Ms. SEGERBERG. Could I respond briefly? 

If you need a lesson, I am old enough to give you one, which is, 

when I was elected to city council—I am a Republican in the San 

Francisco Bay area—I served on every transportation body there 

22 

was available to me. It is because it was practicality and not what 

party I belonged to. 

So you are right. We all have to work together. It is the truth. 

We all work for one another, and we are all the citizens. 

The other place have to not overlook is Canada. The oil sands 

projects today is generating extraordinary amounts of oil and revenue for Canada, and we are their number one consumer. But it 

is the new technologies that they are using because years ago they 

thought it was impossible to extract that oil, and today they are 

doing it successfully. 

So there are also new technologies for those that are afraid of the 

environmental impacts. Clearly, we sell the product because we 

care about the environment, too. But there are new technologies 

that we should be looking at as well. 

Mr. SHULER. And also, just to clarify that, what country do we 

send more of our refined gasoline to? Canada. So I think we have 

about 3 million barrels a day of refined gasoline and diesel fuel 

that goes to Canada. 

One more question. Mr. Faberman, if you look at—how did the 

airlines calculate this? And I am going to tell you my story for the 

week of—everyone has that story. But you are charged $25 for a 

bag. So what does everyone then try to do? They want to take it 

on board with them to the overhead luggage space. 

We were here at the airport. Every single person carried on 

every bag they possibly could, to their limit. There wasn’t enough 

space. They had to check 25 bags. We were delayed to get en route. 

So then we sat at the end of the tarmac, and they said because 

we are delayed out of the terminal, then we were delayed. I missed 

my flight, my connecting flight, so—which normally would take 

about, door to door, about 4 hours to get home. I could have driven 

8 hours by that time. 

Why do the airlines—didn’t they see that this was going to be a 

problem of everybody trying to—there wasn’t enough overhead 

space before these $25 prices. Of course people are going to try to 

save money and take as much as they can on board. Did they not 

take that into consideration? 

Mr. FABERMAN. Unfortunately, I think it is an airport-by-airport 

scenario; and people who will carry on bags at a National Airport 

or La Guardia Airport are a lot different than those who will try 

to carry on bags in Orlando or Las Vegas or other places. And I 

think the airlines are now beginning to look at that and see, at 

least before the planes are boarded, look at how much carry on 

bags are going to come on and try to see if there is a better way 

of perhaps putting some of those bags somewhere else. 

But, you know, we have a great airport, airline system in this 

country, with hundreds of airports; and, unfortunately, every single 

one of them is so dramatically different and carries different types 

of passengers. 

But you are right. National and La Guardia are particular issues 

for carry on bags. 

Mr. SHULER. Thank you, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Mr. Ellsworth. 

Mr. ELLSWORTH. Thank you, Madam Chair. 

23 

I don’t have too many questions. I would just like to associate my 

comments with Mr. Shuler, getting down to honest debate. 

Both sides of the aisle throw out facts and figures. And I know 

I have charged my staff with, you know, getting to the truth so 

when I go back home to Indiana that I can tell the folks back home 

what is real, how much oil is under that 68 million acres. Are they 

drilling? Do they have the equipment? Do they not? We get inundated with talking points from both sides. That is confusing. 

And again, when I was in my former life, how many times you 

had to raise your right hand and promise to tell the truth, the 

whole truth, and nothing but the truth, so help you God. There are 

people who haven’t taken that oath or forgot, and that is what we 

really have to get down to. 

Thank you, Ms. Segerberg. You said one of the most important 

things in what you are doing in your business and what is going 

to happen in the future and these other countries that are getting 

ready to buy that oil. And regardless of what we do right now, we 

have to look in the future, what is going down the road. 

And I didn’t hear it mentioned here—I came in late—but also our 

future military needs. And I know we all want a strong defense, 

besides small business, but a lot of these military contractors are 

small businesses but on the large end that we protect our country. 

And what we are going to fuel our military jets, our military tankers if we don’t have anything to put in the tanker. I guess it is a 

whole different story. 

But this honest debate on what our future holds. Because no 

matter how you look at that—do we drill ANWR, do we not, Outer 

Continental Shelf, all those options—there is a finite amount of oil 

on this planet. 

I look at the guzzler at the local convenience store. It looks like 

too much to drink. But if enough people start drinking out of it, 

it goes away; and by the end of the trip it is not there anymore. 

There is finite oil under this, and we have to move in a manner 

that we find the alternatives so that oil that we do have left— 

planes are only going to fly on certain things. So if we can find and 

run other things on different types of fuel it will leave that oil for 

the day we have to drill ANWR, we have to go into the Outer Continental Shelf, whatever it is. That we start picking and choosing 

where we are going to put these fuels and what we can do. 

Whether it is coal to liquids, nuclear, we have to look at all these 

tools in the tool chest so we can reduce in some areas to save it 

for the other. Because it is not unlimited no matter—it may be 50 

years. But I would kind of like my grandkids to know what it is 

like to drive a car or fly a plane, and it is not that far away when 

you think about it. 

Not a lot of questions. I appreciate the testimony. It seems like 

every hearing I have been in, no matter—my hearings all go back 

to this subject. It is mission critical for us right now, and I know 

the American public want us to continue to discuss it in an open 

and honest way. 

Thank you all for your testimony. It has been very helpful. 

Thank you, Madam Chair. I yield back. 

Chairwoman VELA ́ ZQUEZ. Mr. Faberman, I would like to address 

the following question to you. 

24 

The FAA states that the construction of new runways is critical 

to addressing the root of the flight delay problem, which is congestion at the airports. Delayed flights cost an already struggling airline industry as much as $19 billion, and jet fuel consumed as a 

result of delay costs more than $1.6 billion. Do you agree that we 

need to build more runways and that this will reduce congestion? 

Mr. FABERMAN. Well, there are two types of congestion. There is, 

obviously, specific airport congestion; and there is airspace congestion. In certain parts of the country adding another runway at an 

airport and having dozens of additional aircraft go to an airspace 

system that is not equipped to move the traffic would create more 

problems. 

In the New York area, for example, delays and congestion at the 

three New York airports and Philadelphia are creating problems 

for airports like Westchester and Stewart and other Upstate New 

York airports. But in other parts of the country—and we are soon 

going to see a new runway open in Chicago at O’Hare airport, certainly that will help congestion there and would allow some additional flight activity at that airport. 

Chairwoman VELA ́ ZQUEZ. But in the sense that if we have congestion in New York you have a ripple effect in the rest of the Nation, so how much is infrastructure contributing to these delays? 

That is my question. 

Mr. FABERMAN. Well, it contributes particularly on days where 

there are weather issues and days when aircraft may break down 

or some other problems may occur. 

Chairwoman VELA ́ ZQUEZ. And more and more we are seeing. 

Mr. FABERMAN. We are seeing that. Right. So I would say it has 

30 percent impact on it. 

Chairwoman VELA ́ ZQUEZ. I will come back. 

Mr. Chabot. 

Mr. CHABOT. Thank you. 

One thing that we did mention since we have gotten into energy 

here was nuclear, which we basically stopped building nuclear 

plants in this country about 20 years ago. We have over 100 of 

them. We stopped building them back then. 

Countries like France has 80 percent of their electricity produced 

by nuclear. They are building them like gangbusters in China, 

India and Russia and all over the world, but we haven’t done that 

in the United States. 

Now, obviously, we are not talking about nuclear-powered planes 

and cars and things like that. That is not the point. But the point 

is that many of our plants, if they are not powered by coal, well, 

it is natural gas and oil and other things. So all that is in competition. So that ought to be one of those things, I believe, that is out 

there. 

And, you know, we had a couple of comments. One of then was 

about the 68—when we talk about talking points, that was one of 

the talking points that we hear—and I think it was last week—was 

the 68 million acres that aren’t being drilled out there so we don’t 

need to go to ANWR because we have that out there. The fact is— 

Chairwoman VELA ́ ZQUEZ. If you allow me, if you yield. 

Mr. CHABOT. I would be happy to yield to the gentlelady. 

25 

Chairwoman VELA ́ ZQUEZ. It is just that ANWR is apparently the 

answer for everything. And I guess that if we drill in ANWR, my 

allergies will go away. That is not going to happen. 

We need some short relief, and what we are saying is combine 

the 68 million acres with preservation and other energy policies. 

But the fact of the matter is that for the last 12 years we didn’t 

have an energy policy. 

Thank you for yielding. 

Mr. CHABOT. Absolutely. And reclaiming my time, relative to 

preservation and conservation, we are for that, but it is one of 

those things where I think, as a Nation, we ought to do this. As 

the gentleman from Indiana mentioned, it ought to be in a bipartisan manner. We ought to work together on this one. 

And we need to do all of the above. We need to do conservation. 

We do need the alternative and renewable sources which the folks 

on the other side of the aisle have stressed but have also said we 

are not going to do ANWR. And I am not saying every person on 

the other side of the aisle saying that, but enough were that it 

stopped it. So we didn’t do ANWR. We didn’t do the Outer Continental Shelf. 

And the gentleman mentioned down there that we should have, you know, those available for the day when we need them. At $4 

a gallon, we are way past that day. I think that we have to go after 

those resources. 

And to get back to the 68 million acres that are out there that 

are out on lease, what happens is when people bid and purchase 

those leases for 5 years or 10 years, they have a certain amount 

of time to drill and explore and then it lapses and then it goes back 

and—but it doesn’t mean that there is oil on all those. They purchase them with the hope that maybe there is oil there. And, over 

time, they do ultimately explore and drill if they discover oil. 

In ANWR, we know it is there. We don’t know if it is 10 billion 

barrels or if it is 16 billion barrels. But we know it is there, and 

we know there is a lot of it. 

We also know that this isn’t a place where Americans go up and 

vacation. It is in a place where about 8 to 10 months of the year 

it is essentially frozen tundra. 

Now the photographs that you see from the more extreme environmentalists that have put that off limits over the years, they will 

show you the couple of months when there is some greenery up 

there. But most of the time it is a barren wasteland. 

And in the Outer Continental Shelf it is an area that we do need 

to have great care when we go out there. We certainly don’t want 

to harm the environment. But it is an area where we can go out 

there without harming the environment. 

Look at all the oil wells we have down in the gulf. We had one 

of the worst hurricanes of all time sweep through that area and 

take out a number of oil wells, and there weren’t environmental 

spills of any significance, and that was about the worst storm ever 

that went through there. 

So we do need to do it in an environmentally safe manner, and 

we can do that. But I think we are way beyond the time when we 

can afford to put this off limits. Even if we don’t have that oil right 

now, I think because of the speculation that is inherent in the marVerDate Aug 31 2005 17:03 Sep 11, 2008 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\42527.TXT RUSS
26 

ket I think you would see the oil costs come down dramatically and 

very quickly if Congress would just act and give us a vote and let 

us vote on this again. 

Because even though it did pass in the House, we couldn’t get 

it through the Senate. As high as the costs are now, I think it 

would pass. But we can’t have it pass if we can’t have a vote on 

it; and, right now, we haven’t had a vote in this Congress. 

I yield back. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Dow, I would like to ask—maybe Mr. Dow or Mr. Ruden 

would like to comment on this question; and it is the weak dollar 

should be attracting more tourists, more foreign travelers to come 

to our Nation. And what we have seen is that in 2007 compared 

to how we did in 2000 we actually had 2 million less foreign visits 

tourists coming to our Nation. Why has the number of foreign travelers to the U.S. declined and how can we make travel to the U.S. 

more appealing? 

Mr. DOW. You are exactly right. We had 2 million fewer travelers, but, to aggravate the situation, the rest of the world was up 

35 million during the exact same period. Not only we didn’t get one 

of them, we lost 2 million when we were totally on sale. 

The problem is threefold. One, the difficulty in getting a visa. If 

you come from Brazil, it will take you 100 days to get your interview, and you have to bring your whole family for a 5-minute interview, and we have lost half a million Brazilian travelers. And it 

goes on and on. 

Second is the perception and reality of the difficulty of getting 

through customs and border protection, and people feeling if you 

make one wrong statement you are going to be sent back or put 

in a room for 3 hours. And the foreign press is beating us like crazy 

on this, saying America doesn’t want you. 

And the third thing, Mr. Gallagher spoke to, is we do not in any 

way share all the policies of change. We do not go out and tell people why we are doing these things, and we are just getting pushed. 

So we need to promote America. We have not said anything to 

bring people to America, and that is one of the huge things and 

why this Travel Promotion Act is so critical. 

Mr. RUDEN. I think Mr. Dow said it pretty well. 

Mr. GALLAGHER. You see, in Australia, they have commercials. In 

the United States—and France. People assume the United States 

does that, and they don’t. We don’t. There is no welcoming campaign, no explaining our procedures, and this Travel Promotion Act 

would do that. So I put in another plug for that. 

Chairwoman VELA ́ ZQUEZ. Yes, Mr. Dow. 

Mr. DOW. Another very important factor is this is our, you might 

say, stealth public diplomacy. If we can get more people coming 

here instead of going elsewhere, when they come to America and 

they see the diversity of our country and they see our freedom, they 

go back home and say they are not so bad; they are really great. 

We should be pushing this as a great deal of our public diplomacy 

in the State Department, the Department of Defense. If we get 

more of this going on, we wouldn’t have to have a lot of these dollars, because this is how American is seen. They are seeing all of 

us. 

27 

Chairwoman VELA ́ ZQUEZ. Okay, gentlemen and lady, thank you 

so very much for being here today. This has been quite an insightful hearing. 

I ask unanimous consent that members will have 5 days to submit a statement and supporting materials for the record. 

Without objection, so ordered. This hearing is now adjourned. 

[Whereupon, at 11:33 a.m., the Committee was adjourned.] 

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