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[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

   SEPTEMBER 11, 2001 PLUS 30: ARE AMERICA'S SMALL BUSINESSES STILL 
                               GROUNDED?

=======================================================================

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON REGULATORY REFORM
                        AND PAPERWORK REDUCTION

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                    WASHINGTON, DC, OCTOBER 11, 2001

                               __________

                           Serial No. 107-31

                               __________

         Printed for the use of the Committee on Small Business

                                _______

                  U.S. GOVERNMENT PRINTING OFFICE
77-046                     WASHINGTON : 2002
____________________________________________________________________________
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                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               BILL PASCRELL, Jr., New Jersey
STEVE CHABOT, Ohio                   DONNA M. CHRISTENSEN, Virgin 
PATRICK J. TOOMEY, Pennsylvania          Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN R. THUNE, South Dakota          TOM UDALL, New Mexico
MICHAEL PENCE, Indiana               STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director
                                 ------                                

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

                     MIKE PENCE, Indiana, Chairman
LARRY COMBEST, Texas                 ROBERT BRADY, Pennsylvania
SUE KELLY, New York                  BILL PASCRELL, Jr., New Jersey
SAM GRAVES, Missouri                 CHARLES GONZALEZ, Texas
ROSCOE BARTLETT, Maryland            DAVID D. PHELPS, Illinois
TODD AKIN, Missouri                  JAMES P. LANGEVIN, Road Island
PAT TOOMEY, Pennsylvania             ANIBAL ACEVEDO-VILA, Puerto Rico
                Barry Pineles, Professional Staff Member
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 11, 2001.................................     1

                               WITNESSES

Coyne, James K., President, National Air Transportation 
  Association....................................................     5
Tarascio, Maureen, Owner, Air East Management....................     8
Doughty, George F., Executive Director, Lehigh-Northampton 
  Airport Authority on behalf of Airports Council International-
  North America..................................................    10
Wartofsky, David, Partner, Potomac Airfield......................    12
DeGroot, Quintin, President, Spencer Avionics....................    14
Adams, Bonnie, Owner, Lewiston Travel Bureau.....................    27
Swift, William H., President, Business Traveler Services, Inc....    30
Torres, Hector, Vice President, Capital Hotels...................    32
Cheseboro, David, President, Daytona Orlando Transit Service, Inc    35

                                APPENDIX

Opening statements:
    Pence, Hon. Mike.............................................    43
    Shuster, Hon. Bill...........................................    47
Prepared statements:
    Coyne, James K...............................................    50
    Tarascio, Maureen............................................    55
    Doughty, George..............................................    60
    Wartofsky, David.............................................    69
    DeGroot, Quintin.............................................    74
    Adams, Bonnie................................................    81
    Swift, William...............................................    90
    Torres, Hector...............................................    94
    Cheseboro, David.............................................   103
Additional material:
    Letters submitted by Ms. Christian Christensen...............   111
    Prepared statement of Paul Fiduccia..........................   121
    Prepared statement of Jason Dickstein........................   125

 
   SEPTEMBER 11, 2001 PLUS 30: ARE AMERICA'S SMALL BUSINESSES STILL 
                                GROUNDED

                              ----------                              

                       THURSDAY, OCTOBER 11, 2001

                  House of Representatives,
                       Committee on Small Business,
           Subcommittee on Regulatory Reform and Oversight,
                                                    Washington, DC.
    The committee met, pursuant to call, at 1:05 p.m. in room 
2360, Rayburn House Office Building, Hon. Mike Pence (chairman 
of the committee) presiding.
    Mr. Pence. This hearing of the Subcommittee on Regulatory 
Reform and Oversight of the Committee on Small Business will 
come to order.
    I want to begin today by thanking all of those who will be 
testifying on our two panels for your time on what turns out to 
be a rather auspicious day, and to say that we do anticipate 
other members joining us as we go forward in what will probably 
be two or three hours of testimony and questions. Several 
members of our subcommittee indicated that they would be 
attending the Pentagon ceremonies this morning, which we 
certainly respect and appreciate, but wanted very much to go 
forward with this hearing given the sacrifices that the various 
witnesses have made in being here and for which we are very 
grateful.
    Let me begin with some opening remarks. Then I will 
introduce each of the first panel in succession. You will be 
recognized for five minutes of remarks, and those of you that 
are more veteran here on the Hill will appreciate the lights 
will signal you. Green will represent the obvious, yellow will 
mean not step on the accelerator but begin to slow down, and 
red, you will not be gaveled unless you seriously violate the 
red light, but we will just ask you to wrap up your comments as 
best you can. We also would indicate that those of you that 
have submitted written remarks, those will obviously be made a 
part of the record of this hearing.
    And we will hold questions, I have questions for all of the 
witnesses, as I am sure other members who will be joining us as 
we go, questions we will hold until all of the various 
panelists have made their opening statements, and then we will 
go into the question and answer session.
    My parents' generation remembers where they were when 
Franklin Delano Roosevelt died. Even elementary school children 
of my generation remember where they were when they heard that 
President Kennedy had been assassinated, as do I. Indelibly 
etched in our collective memories will be the pictures on 
television and the occurrences that occurred one month ago 
today, September 11, 2001. The events of 11 September have 
reverberated throughout this nation and the world, as I saw in 
evidence at a recent terrorism conference that I attended in 
Berlin.
    Though at a glance, they may seem pedestrian, today's 
hearing examines what are in fact significantly important 
economic consequences of the events of September 11. 
Immediately after the events, the Federal Aviation 
Administration, quite correctly, shut down all air traffic 
throughout the United States. During the shutdown, the 
commercial airlines estimated that they lost more than a 
billion dollars. Congress responded appropriately, in my 
judgment, with an economic package to stabilize commercial 
airlines.
    However, the events of September did not just affect the 
commercial aviation industry. Shaken by concerns over the 
economy and the safety of air travel, Americans and foreigners 
have, as many of those who will give testimony today will 
attest, cancelled plane flights, businesses have substituted 
video and telephone conference calls for face-to-face meetings 
that required travel, and people have simply cancelled vacation 
plans in their entirety.
    The economic consequences of the events of September 11 
have not just been felt in New York City and in Washington, 
D.C., but throughout the country, and certainly in my home 
state and home district, in central Indiana. And the impact has 
been most dramatic on thousands of small businesses that rely 
and depend on aviation for their livelihood.
    It is easy to understand the effect that the shutting down 
of commercial aviation had on airlines. But the reverberations 
of 11 September permeate the American economy much more deeply. 
Congress so far has only dealt with the problems of some very 
large businesses. I expect testimony today will prove 
invaluable, as I am sure my colleagues will agree, as the Small 
Business Committee deliberates on the actions it can take to 
assist the small business community whose plight has been 
largely ignored by government to date.
    Obviously, the businesses that serve aviation have been 
affected most dramatically. Smaller airports, like many of 
those in my district, whether they serve commercial airlines or 
general aviation, have suffered substantially through reduced 
flight operations. Not only does this reduce the revenue 
streams of the airports, but it also adversely affects the 
businesses that provide support, such as catering services, 
fuel suppliers, aircraft maintenance and the like. And we 
cannot forget that access to air service plays a vital role in 
economic development--an issue that is of crucial importance to 
many members of the committee and of this subcommittee.
    Travel and tourism are an important sector of the American 
economy in the four corners of this country. The travel 
industry depends on air transportation to get many of their 
customers to destinations. In the wake of the events of 11 
September, airlines have seen air traffic reduced by 40 
percent. And on the domestic and international flights that 
this chairman has personally taken, 40 percent would be a very 
generous estimation of participation in the flight. When people 
do not fly, hundreds of thousands particular of small 
businesses suffer, and we are here to talk about that today.
    It is easy to picture the problems faced by concessionaires 
at Reagan National Airport who have had no business for nearly 
a month. But what about a restaurant or a newsstand that has 
lost significant amounts of foot traffic because it is now 
located beyond the security checkpoint? One can also imagine 
the problems facing the rental car industry where 90 percent of 
business is done at airports that are now suffering from 
substantially reduced traffic. Travel agents have lost revenue 
from cancellation of airline flight, hotel and car rental 
reservations, and cruises. Fine dining restaurants now serve 
fewer tourists and business customers.
    Hotels, large and small, cannot fill their rooms, and not 
just in New York City or Washington, D.C. Hoteliers in Los 
Angeles County have already laid off 40 percent of their 
workers, as an example, and closed entire floors in efforts 
simply to stay afloat.
    Taxicabs and limousines that take passengers to and from 
the airports have also seen severe reductions in operations and 
revenue. Given the concern about air travel, one might imagine 
that bus operators are thriving; they are not. They join the 
rest as they continue to struggle in this economy.
    These grim data show that the small business economy is 
without a doubt struggling. Businesses across the country are 
feeling the adverse effects of the events of 11 September. We 
will hear from a wide variety today of small business owners of 
aviation-related and aviation-dependentbusinesses on their 
economic outlook.
    I also look forward to their recommendations on legislative 
and regulatory changes that can be made to help them through 
this crisis time. Those suggestions are particularly timely as 
the committee is examining changes to the Small Business Act 
that will provide greater assistance to small businesses that 
have been adversely affected by the economy as a whole, and not 
just those in declared disaster areas.
    I look forward to the testimony today. I want to thank all 
the witnesses for taking the time to travel to Washington, D.C. 
and be willing to be with us. And given the importance of this 
hearing, I would also like to offer each member of the 
subcommittee present an opportunity to make an opening 
statement.
    And with that, I would like to turn to the gentlelady from 
the Virgins Island, Ms. Christian-Christensen for her opening 
remarks, and welcome.
    [Mr. Pence's statement may be found in appendix.]
    Ms. Christensen. Thank you. Thank you, Mr. Chairman, and 
thank you for holding this hearing.
    The events of September 11th clearly had a devastating 
effect on several vital sectors of our economy. Most notably 
has been the impact on the airline industry where estimates of 
losses are in the range of two to three billion dollars, and 
industry-wide layoffs expect to exceed $100 billion.
    To shore up this industry, Congress acted quickly and 
passed the Air Transportation Safety and System Stabilization 
Act. The legislation provides $15 billion through grants and 
loans to assist the airline industry. This legislation was an 
important first step, but it is only the beginning, not the 
end. Still unresolved is the struggle facing thousands of 
workers in the airline industry who have lost or stand to lose 
their jobs. US Airways has announced they will eliminate 11,000 
jobs, a 23 percent cut as a result of the attack.
    Congress must act with the same speed they did to come to 
the aid of the airlines, ensure that workers not only have 
access to unemployment insurance because it is estimated that 
almost half of all laid off airline workers do not currently 
qualify for unemployment, but also to extend health coverage 
through COBRA and provide training assistance.
    While the challenges facing both the airlines and their 
workers have been well documented, what has been lost for the 
most part is the effect that these events have had on the 
thousands of small businesses in air travel and tourism 
industries. Travel agents have seen their numbers plummet with 
the possibility of losing a full one-third of the industry if 
action is not taken soon. For the motor coach industry, the 
picture is not much brighter. Tour operators report 
cancellations of between 30 and 80 percent, amount to 500,000 
lost trips per day, and job cuts of up to 20 percent.
    What is clear is that actions must be taken to help build a 
bridge across this difficult period. Democratic members of the 
committee have introduced H.R. 3011 that allows industries 
specifically affected by the events of September 11 to qualify 
for low-cost and no-cost loans through the Disaster Loan 
Program. This will provide some assistance while these vital 
parts of our economy get back on their feet. The committee 
should act on this common sense solution, and I would encourage 
my friends on the other side of the aisle who care about the 
plight of these small businesses to join us in passing this 
important legislation.
    These industries play an important role in the air 
industry. When we took up the airline bailout bill, many said 
if we just made the airline industry whole, everyone would 
benefit. We did that, but what is clear is that the whole 
airline industry depends on these small businesses just as much 
as they do the airlines because if there is no one to fuel, 
repair, supply or clean an aircraft, no travel agents to sell 
tickets, no buses to get travelers to their destinations, no 
hotel to stay at, restaurants to dine in, the bottom line is 
that people will not travel and the bailout for airlines will 
be in vain.
    I represent the U.S. Virgin Islands, and for us tourism is 
70 percent of our economy, and we are very dependent on 
airlines, so this is particularly important to us. This 
scenario is exactly why we must act to assist small businesses 
and help them through the rough times ahead as Americans 
gradually regain a sense of security and translate that 
confidence into new travel plans.
    I am also particularly pleased that this hearing is 
scheduled to look at the smaller aviation industry as well. In 
the past two days, I have received several pieces of 
correspondence from small general aviation airlines in the 
Virgin Islands requesting my help in getting an FAA ban lifted 
on Part 91 flights from many foreign jurisdictions which has 
caused a virtual shutdown on these small Virgin Island airline 
operators. As an example, we have the British Virgin Islands 40 
miles away. For them to come in from there, they would have to 
go to the Bahamas, about 1,600 miles away, and then come back 
to the Virgin Islands. That is just one example of some of the 
issues raised in those letters.
    I look forward to hearing the testimony of our panelists 
this morning. And once again, thank you. This is a very 
important hearing.
    Mr. Pence. Thank you, Dr. Christian-Christensen, and thank 
you for being here on what we all know is a very busy day on 
the Hill and off the Hill.
    With that, as I mentioned before, for the benefit of my 
colleague, that we will hear from each of our witnesses on this 
first panel, and then we will each of us in turn ask questions 
of the witnesses that are of interest based on your testimony.
    Our first witness today, we are very pleased to have 
Congressman James Coyne, who is president of the National Air 
Transportation Association. Congressman Coyne served in the 
United States Congress where he had a distinguished career. He 
then served as a member of the White House senior staff and 
became National Air Transportation Association president, 
representing nearly 2,000 large and small aviation businesses 
in April of 1994.
    Since leaving the White House in 1985, he has also been an 
author, a consultant, and a popular speaker around the country, 
had been president of the American Consulting Engineers 
Council, founder and president of the American Tort Reform 
Association, and also worked in the term limits movement around 
the country.
    His love for and commitment to aviation though is very 
likely what brings him to this panel today. It has been an 
important facet of his personal and professional life. Two 
business airplanes helped him to expand his business 
significantly in the 1970s. He also regularly flew from 
Washington to Pennsylvania throughout his terms in Congress, 
and as NATA president, he has visited over 300 FBOs and 
aviation service businesses across the country.
    He calls McLean, Virginia home, and is also married to an 
instrument-rated pilot as am I.
    So Congressman Coyne, welcome, and you are recognized for 
five minutes.

     STATEMENT OF JAMES K. COYNE, PRESIDENT, NATIONAL AIR 
                   TRANSPORTATION ASSOCIATION

    Mr. Coyne. Thank you very much, Mr. Chairman. Congresswoman 
Christensen, it is also a pleasure to have you here.
    I should say it is a very small group of people of members 
of Congress, former members of Congress or current members of 
Congress who are fortunate enough to have a wife as a pilot. It 
keeps us on the straight and narrow, I know, and I am very 
happy to be here.
    I am also very happy that Mrs. Christensen is here because 
we have had a lot of concern about the Virgin Islands. In fact, 
one of those 300 airports that I have been to has been down to 
St. Croix, and also to other locations, in St. Thomas, and I am 
very, very happy to discuss with you the problems that they 
face.
    But, first, I would like to describe, if I may very 
briefly, the impact that our industry is enduring in response 
and as an effect, a direct effect not only of the catastrophe 
that occurred of one month ago today, but also in response to 
the actions of our federal government in effectively responding 
to that crisis, but also imposing very severe restrictions on 
aviation in America.
    To put it quite simply, we face a catastrophe, a 
catastrophe unlike any catastrophe has ever faced the 
businesses that make up aviation in America today. Never before 
since the invention of the airplane have so many small 
businesses in America in aviation faced literal disaster, face 
bankruptcy, face the economic catastrophe that they face today.
    Why is this? Well, simply put, as you know, any business 
has to deal with the challenge of making a profit day in and 
day out. And these businesses have suffered in two ways.
    First, their sales have been devastated because activity 
has been prohibited at most of these airports. Currently, 
today, there are 280 airports in America that are effectively 
shut down to all VFR traffic, which in most of these airports 
represents between 75 and 85 percent of their activity. Today, 
280 of these airports are effectively shut down. Many airports 
are shutdown, as you will hear from other witnesses, entirely 
still today airports here in the Washington area and the New 
York area and other places.
    And, in addition, there are airports in the far-flung 
corners of America, from Maine to Alaska to the Virgin Islands, 
Puerto Rico, to North Dakota to the borders along our southern 
boundaries where because of restrictions on international 
travel these airports are effectively curtailed.
    And I would especially like to bring to your attention the 
hardships that these businesses are facing, which is 
principally because of the actions of the federal government, 
which have restricted the use of our airspace for the last 31 
days in many different ways.
    But not only have sales fallen for these companies in many 
cases to zero percent, but in addition, their expenses are 
going up at the worst possible time. Most of our member 
companies are facing increases in insurance, and I do not want 
to criticize the insurance industry, but clearly in this time 
of unusual threat and concern there are many people in the 
insurance industry that have rushed to cancel policies or to 
make it impossible to have affordable premiums. Several of our 
member companies have been told that they have been literally 
shut out of insurance, forced to go to what they call naked in 
the insurance business. Others have seen insurance premiums 
increased by 20- or 30-fold, not just 20- or 30-percent, but 
20- or 30-fold in many areas.
    In addition, new security costs are being imposed on many 
of these businesses. Local airports are demanding new 
procedures, new staff to be hired, new equipment to be bought.
    So at a time when their sales in many cases is only a tiny 
fraction of what it should be at this time, they are facing 
increased costs. The result is that many of these businesses 
have laid off virtually all of their employees.
    I know businesses that have had--that are owned, let's say, 
by a husband and wife. They might have 20 employees. All 20 
employees are laid off, and the husband and wife are coming 
into the office trying to barely stay alive, to keep afloat in 
these very hard times.
    I would like to especially mention one of our members who 
was invited by the committee to be here. It is a typical small 
business in North Dakota, a place that people might say is far 
removed from the disasters that struck in New York and 
Pennsylvania and at the Pentagon. But even in North Dakota, 
just as you know, Congresswoman, in the Virgin Islands, this 
far-flung disaster has created economic disaster.
    The gentleman from North Dakota who was expected to be here 
and who had been invited is the owner of a small operation in 
North Dakota. The name of the company is North Country 
Aviation, and you had invited him to be here, I think, a Neil 
Mathison, but unfortunately he called us a couple of days ago 
and said there was just no way he could afford to leave his 
business at this time, to afford to buy the plane ticket to 
come here from North Dakota, and he asked me to speak on his 
behalf.
    Even in far-flung North Dakota, they have lost about 70 
percent of their business, over $100,000 just in the last 30 
days, and that far exceeds their normal profit in a full year. 
Much of their business in North Dakota depends upon the ability 
to fly Americans up to Canada, and to go on fishing and hunting 
trips. And they find themselves, because of new government 
regulations, unable to do that.
    Same thing is true in Virgin Islands as you know, where the 
principal operator there, Bulky Aviation, I am sure you are 
familiar with, has seen its sales fall by nearly 80 percent 
over this past month, and they do not see any light at the end 
of the tunnel.
    So what has effectively happened, if I may say so, Mr. 
Chairman, it is as though a tornado hit these airports; not one 
tornado, hundreds and hundreds of tornados. The small business 
community has frequently faced these kinds of disasters and 
looked to the government for relief against natural disasters. 
Now we hope that they can give financial assistance, loans and 
other things, in the same way, but not just to one airport with 
one tornado, but all of these airports with a disaster that has 
affected them all.
    I thank you very much for the opportunity. And if I may, I 
would like my full comments to be included in the record, and I 
look forward to answering your question.
    [Mr. Coyne's statement may be found in appendix.]
    Mr. Pence. Without objections, and Congressman Coyne, thank 
you for your thoughtful remarks.
    With that we will recognize Maureen----
    Ms. Tarascio. Tarascio.
    Mr. Pence [continuing]. Tarascio.
    Ms. Tarascio. Tarascio, right.
    Mr. Pence. Thank you very much.
    And is your husband, Mike, here as well today? He is. Good. 
Good to have you here.
    Maureen Tarascio and her husband began Air East Airways in 
1982. Air East is a flight training school located at Republic 
Airport in Farmingdale, New York. Maureen is the operations 
manager of the flight school.
    In 1994, the aircraft charter company began. Maureen also 
took on the position of overseeing charter sales. The diversity 
of running both companies is a challenge which she describedly 
enjoys. Dispatching the company's Lear Jets to different 
destinations makes her job exciting and ever-changing on the 
flight school level whose membership exceeds 300 students and 
pilots. Maureen guides members to realize their dreams in 
becoming either commercial or private pilots.
    And Maureen Tarascio, you are recognized for five minutes 
testimony before the subcommittee.

 STATEMENT OF MAUREEN TARASCIO, PRESIDENT AND OWNER, AIR EAST 
  MANAGEMENT, FARMINGDALE, NY, ON BEHALF OF THE NATIONAL AIR 
                      TRANSPORTATION ASS'N

    Ms. Tarascio. Thank you.
    Chairman Pence, Ranking Minority Member Brady, 
Congresswoman Christensen, and member of the Regulatory Reform 
Committee and Oversight Committee, my name is Maureen Tarascio. 
I am the owner and operations manager of Air East Airways, a 
company located at Republic Airport in Farmingdale, New York.
    I am also the secretary of LIBAA. LIBAA is Long Island 
Business Aviation Association. It is a recently formed 
organization that represents the business aviation industries--
represents the business aviation interest on Long Island.
    Being from the Long Island area, as you well can 
understand, we are deeply affected by the September 11th 
disaster. We are continually saddened by the death and 
destruction we have experienced.
    My company is here today testifying on behalf of National 
Air Transportation Association, an organization that represents 
nearly 2,000 aviation businesses.
    I would like to tell you a little bit about my company and 
how we are affected by the closure at Republic Airport. My 
husband, my four children and I have worked 20 years to make 
the company what it is today. We began with one aircraft in 
1982, and have built up the business to include our charter and 
maintenance department. We also recently completed our 
facility, a project which took us 10 years to complete, so it 
was through a lot of hard work.
    We are just like many companies in this industry. We work 
long hours to provide our customers with a place to train for 
their pilots license, and working with many people who are 
looking to advance to that as a career. It is the love for 
aviation that drives us forward.
    Due to the closure of our airport, we are in jeopardy of 
losing everything we worked so hard to create. The 
ramifications of Republic Airport being closed to most 
operations for nearly one month is immense. It has affected so 
many people: the worker who fuels the aircraft, the caterers, 
the limo companies, even the deli or restaurant outside the 
airport who had our customers frequent their establishments.
    And I want to mention that Republic Airport happened to be 
one of the busiest airports in the region. When we were closed 
down, we normally had 580 aviation operations a day, we were 
down to 26.
    General aviation is not just about the person who flies the 
airplane, it's about the economic boost that is given to many 
industries related and unrelated.
    Between September 11th and October 6th, Republic was closed 
to all operations except Part 135 charter, which meant a 96 
percent reduction in total flight activities. This resulted in 
a loss of $4,000 per day to my company and $200,000 per day to 
all the companies at Republic Airport.
    At present, Republic is only partially open, the area is 
still only 50 percent operational. We need to have the 
restrictions lifted so we can regain the other 50 percent 
revenue needed. We are concerned that we have lost a percentage 
of our business that will never be regained. There are some 
businesses at Republic which may never reopen. We have lost 
business because local airports such as Islip were open within 
a week after the disaster, so we have customers that have gone 
to those airports to do their training.
    One other great concern to us is the aviation insurance 
problem. We have already experienced problems within the first 
week after the WTC tragedy with the cancellation and resale to 
us of war risk coverage. We also expect to have major increases 
in our premiums when we go into renewal on our aviation 
insurance policy. There are some companies at Republic that did 
recently go into renewal, and they told us they had a 200 
percent increase in their premium. We had already experienced a 
35 percent increase last year, last January, so we can expect 
this to be phenomenal.
    The problem with the insurance is that, of course, to make 
up for that our rates are going to have to go up, which would 
make it difficult for the consumer to be able to afford it, be 
it flight training or aircraft charter. Survival of our 
industry will directly affect the national economy. We need 
funding to somehow make up for the losses we have incurred. We 
are hoping to obtain that funding in the form of federal 
grants, and we need this process expedited. Our future and the 
future of general aviation greatly depends on the federal aid 
our industry receives.
    To sum up my testimony, first, I encourage members of the 
subcommittee to ask the Bush Administration to lift the 
remaining enhanced Class B airspace restrictions throughout the 
country; and second, I request that General Aviation Small 
Business Relief Act of 2001 be approved and provide us with 
relief.
    Thank you for giving me the opportunity to speak today.
    [Ms. Tarascio's statement may be found in appendix.]
    Mr. Pence. Thank you, Ms. Tarascio. I want to thank you and 
Mike for making the trip here and giving us some harsh facts 
but very important facts for this hearing.
    Ms. Tarascio. Thank you.
    Mr. Pence. I am going to yield to the gentleman from 
Pennsylvania, Congressman Pat Toomey who has a witness at the 
panel that he will introduce.
    Mr. Toomey. Thank you, Mr. Chairman, and thanks for your 
indulgence. I am--right now another committee that I serve on 
is marking up an important bill and I will have to excuse 
myself, unfortunately, because we do expect votes for that 
markup. But I wanted to be here to introduce a constituent of 
mine, whom I am very grateful for his appearance today, and I 
look forward to his testimony.
    George Doughty is the executive director of the Lehigh- 
Northhampton Airport Authority in the Lehigh Valley of 
Pennsylvania, and specifically Lehigh Valley International 
Airport, and this is a post he assumed in 1992, prior to which 
Mr. Doughty was responsible for the management of Stapleton 
International Airport in Denver, prior to which that he has 
experience as director of airports in Cleveland, he has 
experience in the Baltimore-Washington International, Airport 
and a number of other major regional airports as well as many 
different capacities in the aviation industry. He has been 
active in many aviation associations.
    He is a licensed private pilot, and I know there can't be 
more than a handful of people in the entire country with more 
firsthand knowledge and firsthand experience in managing 
airports across the country, in particular, airports like the 
Lehigh Valley International Airport, which plays such a 
critical role in the economy of our entire region.
    George, I appreciate all of your input and your willingness 
to be here today to share with us your perspective on how the 
attack and subsequent federal action has had an impact on 
airports, particularly ours, but others like it, and I thank 
you for being with us.
    Mr. Pence. Mr. Doughty is recognized for five minutes of 
testimony.

STATEMENT OF GEORGE DOUGHTY, EXECUTIVE DIRECTOR, LEHIGH VALLEY 
INTERNATIONAL AIRPORT, ALLENTOWN, PA, ON BEHALF OF THE AIRPORTS 
              COUNCIL INTERNATIONAL--NORTH AMERICA

    Mr. Doughty. Thank you very much, Mr. Chairman, 
distinguished members of the committee. It is my pleasure to be 
here this morning to represent Lehigh-North Hampton Airport 
Authority as well as the Airports Council International-North 
America.
    There has been, as we all know, significant impact from the 
events of September 11th. Both our airport and other airports 
have seen tremendous drops in business and traffic as a result 
of that and also as a result of the restrictions that have been 
placed on airports.
    Lehigh Valley International is located in the Lehigh Valley 
between the cities of Allentown and Bethlehem which is about 50 
miles north of Philadelphia and 80 miles east of Newark. Our 
primary market area is about 2.5 million people and we have 
very important businesses such as Air Products and Chemicals, 
Bethlehem Steel, Mack Truck, Merck & Company, and many others 
large and small in the region that depend on our airport to 
provide service for them.
    Last year, Lehigh Valley handled about a little over one 
million passengers. It was a record for us last year. And our 
business continued to grow well into this year despite the fact 
that the economy was weakening. We have about 120 airport 
employees that work for the airport authority, and about 700 
employees generally working at the airport in airport-related 
and airline jobs there.
    The Airports Council International-North America, it is an 
organization representing local, regional and state governing 
bodies that own and operate commercial airports in the United 
States and Canada, of which the Lehigh-North Hampton Airport 
Authority is an active member, and I am an active participant 
having served as chairman of the association in 1993.
    There are three, really three basic ways that we have been 
affected as airports since September 11th. We have had 
immediate increases in operating costs as a result of the 
additional security requirements that have been placed and law 
enforcement requirements that have been placed on us by the 
federal government. There have been service reductions by the 
major airlines at nearly all the airports. It's been particular 
critical for small airports.
    That results in fewer travel options for people in our 
community and reduces the revenues that airports receive from 
airlines. Fewer passengers mean less revenue from parking 
concessions and other airport businesses, and to the community 
facilities that support airport operation. For Lehigh Valley 
International Airport, we estimate that over the next year we 
will see at least a $600,000 increase in costs--in airport 
operating costs, primarily security requirements. The Airports 
Council International estimates that nationally since--just in 
the period September 2001--before the period September 2001 to 
2002, additional security expenses will be $355 million. That 
is operations only.
    Our revenue losses, Lehigh Valley as an example, we believe 
will be about $1.2 million for the next year, and ACI member 
airports have lost $185 million for the period just between 
September 11th and September 22nd, and they estimate that 
airports combined will lose $4.9 billion in the next year, 
including capital investment losses. At airports, as you know, 
there are a number of businesses that support our operations, 
including concessions and other airline and airport supporting 
organizations. ACI-NA estimates a $2.3 billion loss from 
September 2001 to 2002 as a result of this reduction in 
business.
    There are several things that the federal government can do 
to aid airports, and I would just like to list a few. ACI has 
submitted proposals to Congress for assistance to airports. 
They include: broadening the rules relating to the AIP program, 
the Airport Improvement Program, and broadening the use of 
passenger facility charge revenues to cover some of the 
extraordinary costs that we will be experiencing. ACI has also 
recommended that we seek congressional approval for the 
increased cost, direct appropriations for the increased cost in 
security requirements at airports that were mandated by the 
FAA.
    I would point out that the $5 billion that was given 
directly to the airlines may not flow down through rates and 
charges to the airports. The airlines probably will not be 
excited by sharing that money with us because they have their 
own problems. They would like to see from airports, and we will 
begin reducing costs and have begun reducing our costs, they 
would like to see lower fees. The reality is we will probably 
have to charge higher fees, and there will be significant 
resistance from the carriers to make those payments. Therefore, 
we would appreciate, obviously, some action on the part of the 
federal government to reimburse airports for the direct cost of 
these security requirements.
    Finally, there are a number of things that have occurred in 
the last several months, additional requirements and various 
proposals for improvements to security. One of those was the 
deployment of the national guard troops. Airports would very 
much like to see a much broader role for the national guard, 
more flexibility in their use, which would aid us in taking 
care of certain security issues at airports that are currently 
being borne solely by airport police, and they are overworked 
and very much strained at the moment.
    Finally, in reference to the number of additional security 
proposals that are on the table, we would hope that Congress 
would take the time to make certain that these are rational and 
effective proposals, and are not just proposals that are 
designed to make people feel good. People will feel good and 
they will return to aviation if they are really secure, and we 
would hope that a great deal of thought is put in place to 
achieve those kinds of security improvements.
    Thank you very much, Mr. Chairman, for the opportunity to 
be here today.
    [Mr. Doughty's statement may be found in appendix.]
    Mr. Pence. Thank you, Mr. Doughty. We will look forward to 
questions from the Chair and other members present, and thank 
Congressman Toomey again for joining us for however long his 
schedule with markup permits.
    Our next witness to be recognized for five minutes is David 
Wartofsky.
    Mr. Wartofsky. Well pronounced.
    Mr. Pence. And David is partner and co-founder of Potomac 
Aviation Technology Corporation, a research and development 
marketing firm created to develop technology, federal 
approvals, manufacture and marketing of proprietary airport 
communications, weather and surveillance technologies 
nationwide. Essentially he works in the area of developing 
technology that brings artificial professional intelligence and 
communications into the aviation's communications environment, 
which is probably the sum total of my understanding of that 
topic.
    He has actually literally worked in the area of artificial 
intelligence since he was 12 years of age, and it is--he is 
also a private pilot of both fixed-wing, multi-engine and 
helicopter.
    And so Mr. Wartofsky, it is a pleasure to have you and your 
perspective here, and we recognize you for five minutes.

 STATEMENT OF DAVID WARTOFSKY, PARTNER, POTOMAC AIRFIELD, FORT 
 WASHINGTON, MD, ON BEHALF OF THE NATIONAL AIR TRANSPORTATION 
                             ASS'N

    Mr. Wartofsky. Okay, thank you very much. Even my in-laws 
do not quite understand what I do yet, and we have been married 
for 14 years.
    I wish to thank the NATA for asking me to speak and provide 
the venue for this discussion.
    A little background: I am David Wartofsky, owner and 
operater of perhaps one of the most controversial airports in 
the United States called the Potomac Airfield. It is the 
closest airport next to Washington, D.C. It is quite literally 
located between Washington National and Andrews Air Force Base.
    To give you a little snapshot of the setting, Potomac 
offers a sort of bucolic setting, minutes from D.C. for all the 
numerous small business and services that make up general 
aviation, of which there are many on the field. It's a smaller 
general aviation airport, 120-based aircraft, singles, light 
twins, propeller-driven aircraft. It is also an R&D lab for 
some remarkable airport technology that is affecting airports 
across the country.
    This is a wonderful location, usually. Since September 11th 
and to this day, Potomac Airfield remains under 100 percent 
airspace lock down. While the airport is technically open, any 
aircraft that are actually airborne will be shot down. This is 
akin to having a restaurant, that while technically open and 
serving a delightful brunch, has armed soldiers at the door 
with orders to shoot anyone trying to enter or exit. This has 
not been great for business.
    There are thousands of small businesses at airports like 
Potomac either still located within areas of airspace lock down 
or subject to some of the other bizarre constraints that have 
come since the events of the 11th. All of these businesses are 
withering on the vine and they are all actually withering 
rather rapidly.
    As I am sure the NATA and other organizations have given 
you lots of information and details on financial disaster, and 
what have you, what I am going to do is not take a few moments 
to read you more data, but rather I would like to give you a 
little background of my position and overview on the situation 
we are in.
    First off, obviously, we should thank the White House, NSC, 
FAA and DOD and whoever else was involved with efficiently 
locking down the airspace on the 11th. That was not an easy 
thing to do. It was the right move. And if you stop to think 
about it for a few minutes, it was a very tough move to make, 
my hat is off to all the people involved in that action.
    Metaphorically, since September 11th, the White House, NSC 
and government have been facing, in effect, a roomful of a 
thousand shouting people, all seeking urgently to have their 
own hardships addressed. Within the aviation industry, many 
organizations and individuals have been barking at the FAA, 
ultimately for the NSC to do something. Only recently have 
these organizations started to say what that something is.
    It is my own belief that some of the early, somewhat 
bizarre regulatory actions, and some still existing today, are 
in some manner an indication of the government's perhaps--
overeager willingness to try to do something in response to all 
of the barking; but without adequate time to understand or 
implement perhaps the most rational, well thought-out 
solutions. Somewhat expected and perhaps even embarrassing 
actions have been taken.
    There are basically two views:
    From industry, as these light aircraft cannot do much more 
damage than throwing a marshmallow at a window, basically let 
us get back to business as usual. There is no real security 
concern.
    From the defense standpoint, any act of terrorism can be 
destabilizing, including the throwing of marshmallows if thrown 
at the right window, in the right manner and at the right time. 
My apologies to the marshmallow industry.
    To implement rational, workable solutions is going to take 
a little time. Even these past recent few weeks the clamor has 
noticeably changed from a ``we want'' to ``here is how to fix 
it'' series of recommendations coming from industry. To this, I 
say hurrah; at long last the suggestions are beginning to 
replace complaints.
    The proposed legislation on your table today would offer 
some chance of survival for a portion of the businesses, 
families and dependents who are failing financially, and who 
are standing by as strong and as long as they can under the 
remaining airspace and operating constraints. They need to 
stand by while these operating constraints are being evaluated, 
primarily from a security standpoint, and you are providing a 
means for these small businesses to hold out.
    For the time it takes our government to basically fix the 
airspace it had to break up on September 11th, you can help 
both national security and public security, in effect, by 
encouraging and assisting those thousand shouting people. You 
can help them calm down and get into an orderly line. I believe 
this will allow the NSC, the FAA and others time to understand 
and to attempt to resolve the needs of these shouting people in 
an orderly and rational fashion. Their security will obviously 
be the first consideration, and their commercial viability the 
second.
    In the list of moral and ethical priorities for government, 
after national defense and the preservation of our freedoms by 
your own possible actions today, to help create order and 
maintain public security, you have an outstanding opportunity 
to serve your people and their government. This, I believe, is 
one of the highest callings of an elected body, and I encourage 
you to do your part.
    Thank you.
    [Mr. Wartofsky's statement may be found in appendix.]
    Mr. Pence. Thank you, Mr. Wartofsky. We look forward to 
hearing more about those marshmallows during the question and 
answer session.
    Our last witness on this panel is Mr. Quintin DeGroot. Did 
I pronounce that correctly?
    Mr. DeGroot. DeGroot, we go by.
    Mr. Pence. Thanks. Mr. DeGroot, I appreciate the 
correction. He is the owner and the operator of Spencer 
Avionics in Spencer, Iowa.
    Mr. DeGroot. That is correct.
    Mr. Pence. Has traveled a long distance to be with us 
today. A native of northwest Iowa, Mr. DeGroot worked most of 
his adolescence helping his father with his insulation 
business. He currently lives in Sanborn, Iowa with his wife and 
his four children.
    He flew his first airplane at age nine, and in 1982 joined 
the U.S. Army as a helicopter mechanic; graduate of Spartan 
School of Aeronautics in Tulsa in '87, and purchased Spencer 
Avionics from the previous owners in 1998, and recognized for 
his valuable practical perspective as we have heard from others 
for five minutes.

  STATEMENT OF QUINTIN DEGROOT, PRESIDENT AND OWNER, SPENCER 
 AVIONICS, SPENCER, IA FOR THE AIRCRAFT ELECTRONICS ASSOCIATION

    Mr. DeGroot. Thank you, Chairman Pence and members of the 
Subcommittee on Regulatory Reform and Oversight. I would like 
to thank you for this opportunity to testify before this 
committee on behalf of Spencer Avionics and the Aircraft 
Electronics Association.
    As New York and Washington continue to recover from the 
events on September 11th, I wish to express my deepest sympathy 
for the families and friends that have lost loved ones in this 
tragic event.
    As a result of the terrorist attacks, many aviation 
businesses nationwide have sufferedunprecedented financial 
hardships, hardships that are a direct result of the security measures 
put into place by the federal government.
    The Aircraft Electronics Association represents over 1,100 
aviation businesses that, like mine, specialize in avionics 
maintenance, installations and electronic systems for general 
aviation aircraft. AEA members have been engaged in every level 
of general aviation, although only nearly 75 percent of our 
memberships are small businesses having less than 10 people.
    Spencer Avionics is one of those businesses. While general 
aviation includes many large turbine-powered aircraft, we tend 
to specialize in smaller single-engine and light twin aircraft 
often flown under visual flight rules.
    I am a veteran and father of four children, and until three 
years ago I worked for someone else. I now own a small, four-
man shop that my wife and I operate. As a direct result of the 
grounding of all the general aviation aircraft, my shop 
suffered an immediate nine-day loss, exceeding $15,000, and 
continues to lose money because many of my customers do not 
have access to my shop due to the temporary restriction 
regarding the Class B airspace. As a small shop owner, I have 
had to cut my own personal pay by one-third in order to keep my 
technicians working and the cash flow flowing.
    We are far from New York City and the government security 
measures put in place following the terrorist attacks have had 
a direct effect on mine and other avionic shops' ability to 
operate. Like many AEA members, my shop draws customers from a 
relatively small radius of 250 miles. In my case, this radius 
includes the Minneapolis Class B airspace, which is closed to 
VFR flights at this time.
    While the government made significant progress in the first 
two weeks returning commercial aviation to normal operations, 
there has been little or no progress in the past two weeks 
getting general aviation and the small business that supports 
them back into operation.
    The current flight limitation exclude VFR into major 
metropolitan areas and U.S. travel of foreign aircraft. 
Airspace within the United States is divided into six separate 
categories. Class B is the highest classification of airspace, 
below 18,000 foot, with the highest degree of positive control 
of all airborne traffic. There are 28 designated Class B 
airspaces, typically located around the major airports in large 
cities. These Class B airspaces have been closed to VFR flights 
since September 11th. The businesses located within these 
airspaces have been unable to conduct VFR customers' 
operations.
    The AEA members rely on both domestic and international 
aviation customers. Domestically, the inability to receive 
aircraft from the customer and the inability to return the 
completed aircraft to the customer severely crippled the 
ability of small business to meet the demands of their 
customers at normal operating levels. Internationally, the 
United States maintenance facilities are recognized worldwide 
for their quality work they perform. For many international 
operators, these maintenance facilities are the facilities of 
their choice. The current ban prohibits international customers 
from delivering these aircraft to U.S. facilities for their 
scheduled and unscheduled maintenance.
    Like many AEA members, my insurance provider has notified 
me that my aviation insurance will increase dramatically as a 
direct result of the terrorist attack. My options are very 
limited in the aviation insurance market. There are only three 
companies that provide insurance for my shop. In the past two 
years my insurance has already increased 56 percent, though I 
have not had a claim against any insurance company.
    Since the events of September 11th, AEA members have seen 
on average a 45 percent decrease in their business with 
specific members suffering much more. I have described the 
losses that I have experienced in Iowa. Other AEA members have 
had similar and in some case worse losses than mine.
    We as a small business owners are not looking for some kind 
of a government subsidy. My dad always said if you are not part 
of the solution, you are part of the problem. It is not the 
government's job to run any business or bail it out of its own 
mismanagement. However, the government can help us survive the 
disaster on September 11th and the federal government's 
security measures implemented as a result of the disaster by 
tax relief or by making low interest loans available.
    To help the small aviation small business return to work, 
the association requests from this committee:
    One, encourage the FAA to develop a plan that would allow 
for delivery of U.S. registered aircraft to repair stations 
located in the 28 metropolitan areas, and hence Class B 
airspace;
    Two, to encourage the FAA to develop a plan to allow 
delivery of foreign registered aircraft to repair stations;
    Three, to expand the boundaries of the disaster area to 
include aviation businesses that incurred financial hardships 
as a direct result of the federal security measures put in 
place following the terrorist attacks in New York and 
Washington; and
    Four, to investigate, and if possible, stabilize insurance 
premiums charged to general aviation companies by the insurance 
industry.
    I appreciate the opportunity to testify before this 
subcommittee. On behalf of Spencer Avionics, my employees and 
the members of the Aircraft Electronics Association, thank you 
very much.
    [Mr. DeGroot's statement may be found in appendix.]
    Mr. Pence. Thank you, Mr. DeGroot.
    And we will commence with questions of the panel. The Chair 
will have a question for each of the witnesses, and then we 
will yield to the gentlelady from the Virgin Islands for any 
questions, and then we will do another round if we are up for 
it and they are up for it.
    Let me thank all of you for outstanding presentations, very 
informative and very helpful to my understanding in this area.
    Beginning with Congressman Coyne, you raised an issue that 
our last witness, Mr. DeGroot, also raised, having to do with 
expenses going up and specifically, and I do not remember from 
your testimony, it appears in my notes, if you specifically 
referenced insurance costs.
    If you can elaborate just briefly from your perspective how 
serious is the type of increase in aviation insurance. We are 
talking about or heard 200 percent suggested or hypothesized. 
Will it be that more or less otherwise? And what is driving 
that?
    Mr. Coyne. Thank you very much.
    First of all, I should explain that in aviation insurance 
there are different products that different aviation companies 
buy. These range from what is typically called the general 
liability, hangar keepers liability, hull insurance on 
aircraft, operational insurance, renter insurance, and war risk 
or terrorism insurance, just to name a few.
    Each of these products, each and everyone of them are 
expecting dramatic or have already experienced dramatic 
increases just in the past 30 days. The most extreme effect, as 
you might expect, has been on what is typically called war risk 
insurance.
    Of course, it is a little hard for me to understand what 
additional risk with regard to war or terrorism a facility in 
Iowa or Duluth, Minnesota, or St. Croix, Virgin Islands really 
faces.
    But really, I think, it is largely an issue of the 
insurance industry trying to spread the terribleloss that they 
have endured over the last 30 days among anybody that they can find--
anywhere they can find a wallet, a live wallet. And so we are expecting 
to see in the war risk insurance area increases of up to perhaps as 
much as a thousand percent.
    One specific example I can give you, one of our members had 
a premium of $2,300 for war risk insurance. The first week 
after the disaster they received a letter--as virtually 
everybody in aviation has done, I think, without exception--
from their insurance policy saying that their previous war risk 
insurance is now void. And if you want to get new war risk 
insurance, give us a call, and we will give you a quote if we 
can get you the insurance at all. The one that I was telling 
you about that was a $2,300 premium last year was able to get a 
quote of $57,000. So that is an incredible increase.
    Similarly, we typically are seeing increases in general 
liability of around 50 percent over the last 12 months versus 
this year. Hull insurance in some cases, not only is the 
premium being tripled or doubled, but the coverage is being cut 
in half. We might have been able to get a $10 million policy 
last year. We are lucky to get in some cases a $5 million 
policy. Some companies are only quoting a million dollars 
coverage. And the most extreme example that I have seen is one 
company that had a $50 million war risk insurance policy was 
reduced to $1 million, and the premium for it was $200,000.
    So we have very, very irrational market responses right now 
in insurance, and in many cases it is leading people to make 
the terrible decision to not carry insurance, which obviously 
does not help anybody, or in other cases making the decision to 
just go out of business.
    Mr. Pence. Thank you.
    Maureen Tarascio, your presentation about your experience 
at Republic Airport, I think I heard you right to say that 
there were 500 operations a day prior to----
    Ms. Tarascio. Almost 600 actually.
    Mr. Pence. Almost 600 a day down to 26.
    Ms. Tarascio. They were down to 26 until we opened on 
October 6th. We do have 40 percent operational status back at 
this moment from Saturday, but we are still 60 percent down. As 
I said, we still have restrictions. The VFR rental pilots, VFR-
91 cannot go in or out yet.
    Mr. Pence. Great, that is helpful.
    Let me ask you two very quick questions, if I can. Number 
one would be, how would you have characterizes the state of 
your business prior to September 11th? Was it a good year, 
mediocre? I grew up in a small business family, it's always a 
bad year. But I mean, now----
    Ms. Tarascio. For the flight school, we were very busy this 
summer.
    Mr. Pence. Okay.
    Ms. Tarascio. This was our busiest year. This was our first 
year that we completed a full year in our new facility, so we 
were very, very busy with the flight school. So of course, we 
went from being very busy in the flight training.
    The charter was on the slow side. That picked up a little 
bit since because people could not get around with the 
airlines.
    But as far as the flight school goes, of course, that went 
from being very busy to no activity.
    Mr. Pence. Would you characterize, based on conversations 
with colleagues and friends, would you characterize the health 
of general aviation around the country to be relatively the 
same as yours?
    Ms. Tarascio. Well, as far as I know, talking to other 
entities, everybody pretty much--well, I think everybody was 
closed down for at least a week around the country, and there 
were, I believe, 100 airports affected like myself that are 
still affected at this time around the country.
    But in talking to people, everyone took a very big hit. It 
is going to be slow coming back. We are still, like I said, not 
fully operational, and it is a real concern. There are many, 
many people that are at the point of thinking about closing 
their doors.
    Mr. Pence. Last question from the Chair, what do you think 
is the most effective thing that we can do?
    There has been some talk about legislation that has been 
proposed and is in some part the topic of this hearing.
    One of the things that we did in the--what gets called the 
airline bailout bill for the major commercial airlines was we 
addressed the issue of insurance, in part. Should the federal 
government become involved in providing or facilitating the 
provision of insurance? Or would it be more significant to see 
deferments of principal and interest payments on certain loans?
    Ms. Tarascio. Well, I think, first of all, if we could 
regulate. Unfortunately, I think that the insurance company is 
taking such a loss, they are going to pass this on to us. If we 
could regulate what the insurance company, cap it, maybe what 
they could charge us because it just seems that in times like 
this they are going to, of course increase their rates to the 
point where it won't be affordable for us to operate. That is 
one thing that we would like to see.
    The second thing is we are in contact with FEMA at Republic 
Airport. We have been considered--they brought Suffolk County 
into the FEMA package, but they are only talking loans. We 
really--we have kept our employees. I did not lay people off, 
but of course, it was very difficult. There were a lot of 
people laid off at Republic Airport. But we are looking for 
funding in form of grants. We would prefer to have the--of 
course, we want the grants because we had to keep the insurance 
payments going, the loan payments going, and all the other 
expenses to keep us operational, and of course, be ready to 
operate any moment when the airport was open.
    And I have to be honest with you. We were not told when the 
airport was going to open, so we were waiting for any day type 
of thing. And we just did not want to--did not want to lay our 
staff off so that were not ready to return to business.
    Mr. Pence. Okay. Mr. Doughty, during your testimony, I was 
trying to keep up with some of your recommendations from 
Airports Council International and others. You said that 
essentially from your perspective there were three ways that 
general aviation or smaller airports like Muncie, Indiana's 
airport that I represent have been affected. And additional 
operating costs, I caught, reduction of revenue was the other, 
but I missed--what is the third big pillar in that----
    Mr. Doughty. Well, in the case of, and I guess I just 
divided the loss of revenue into two categories.
    Mr. Pence. Okay.
    Mr. Doughty. Basically, it was in our case airline revenue 
loss. We are a small air carrier airport. We lose revenues from 
airline and loss of flight opportunities, loss of schedule. And 
in our case we may have lost 10-15 percent of our flights.
    Very small airports with only one airline could have lost 
all their service. The domino effect of that, obviously, is all 
the other ways you get revenue from those people, like the 
parking lot land the rental cars and all that.
    Mr. Pence. Okay.
    Mr. Doughty. That revenue is a secondary impact.
    Mr. Pence. And your thought about recommendations, which 
this committee is certainly very interested in, greater 
flexibility in the Airport Improvement Program to allow--could 
those resources be used to address some of the new security 
strictures being imposed on airports.
    Mr. Doughty. It could be, I think.
    Mr. Pence. You used the number of $600,000.
    Mr. Doughty. Mr. Chairman, I think it could be in a limited 
way by broadening those rules to allow airports to include 
additional security items that are not necessarily on the list 
of eligible items. And ACI has made a specific proposal on 
that.
    Also, the PFC revenue which we receive, which is the $4.50 
or $3, depending on what airport, from passengers, from each 
passenger, if that could be broadened. And there probably is 
more flexibility with that money to even include operating 
expenses being funded by PFCs as well.
    That would be helpful. It would not be a panacea by any 
means, but it would be helpful.
    Mr. Pence. Mr. Wartofsky, with others indicating in their 
testimony that they are maybe back to 40 percent, my heart 
really goes out to Potomac Airfield and to what you are dealing 
with, and obviously, a high national security area. I want to 
be very, very clear on your testimony because we did just 
reopen Reagan National Airport to some extent.
    Mr. Wartofsky. Right.
    Mr. Pence. Is it your view that a certain type of general 
aviation does not represent a significant security risk the way 
a large commercial airline does?
    And I want to be very cautious about not seeming flippant--
--
    Mr. Wartofsky. Sure.
    Mr. Pence [continuing]. Or suggesting that you were being 
flippant, but you have such a background in this area, I want 
to make sure I understand.
    Mr. Wartofsky. Absolutely. There are a couple of dimensions 
to it. Obviously, the day after this event I naturally asked a 
close friend who is in defense intelligence whether I should 
move my wife and kids to the Outer Banks, a logical question. 
One starts thinking about these things. We were talking about 
the practical threat that a light aircraft represents.
    The practical threat the light aircraft represents is in 
fact so limited by its payload, you might as well say the 
obvious, gas, biological or explosive, that these aircraft 
cannot carry enough to actually accomplish anything tactically 
significant.
    Another friend in the security industry, I guess you would 
call it that, made the counterpoint in another discussion, that 
any act, however trivial, can be highly destabilizing if it 
makes people scared.
    I believe that part of what the national defense and the 
National Security Agency are wrestling with is that 98 percent 
of the public has a perception of light aircraft, regardless of 
weight or size, perceive light aircraft as being something 
hazardous. There needs to be some kind of procedures that 
convey a sense of positive control within what are considered 
these high-risk areas, and there are a number of things being 
discussed now.
    One of the other issues is that historically the FAA, while 
it has had jurisdiction, has not actively managed the whole 
Part 91 question. The FAA's primary mission has obviously been 
airlines. And so, for example, one of the issues is a Cessna 
172 weighing 2,300 pounds is operating out of the same category 
as a corporate Gulfstream 3. And if you release one, you 
release both.
    One of the problems that is being discussed at National is 
how do you preclude a bin Laden airlines Gulfstream 3, owned by 
nominees, from instead of landing at runway one at National, 
instead it ends up doing a touch and go and a barrel roll into 
the White House. And so how do you draw a distinction between 
these things?
    I do not believe that there is any easy answer. While a 
number of the government agencies are trying to come up with 
solutions that, I believe the phrase is ``vetted by all the 
related trade groups,'' I do not think a solution can come that 
is going to make them all happy. You will never get them all 
approved. The FAA wants to be cautious to try and get everyone 
happy before they submit something, but I just do not think it 
is going to get there.
    The fastest way to implement things are actually 
procedural. There are procedural things discussed that would 
convey, in effect, an absolute positive control over aircraft 
before they depart. There are methods for doing that, that in 
effect can set an iron curtain around the 25 miles for anyone 
that is not already known, has not already been identified.
    Whether that solves the question of the Gulfstream 3 going 
into National Airport, I just do not know. It depends on, in 
effect, where you draw the lines. That is part of the problem; 
it is sort of all or nothing in the whole Part 91 world right 
now.
    There have been a number of things that have come out, 
these sort of weird 25 mile, then 18 miles, then 6,000 pounds, 
then 4,000 pound restrictions, and in a sense what people are 
doing is they are arguing about what weight of what bicycle 
should be permitted how close to the White House; it is really 
sort of irrelevant. And ultimately it is going to require some 
positive control procedures, which there are some actually 
rational and relatively easy to do, but there are some staffing 
questions really at the FAA flight service station level, and 
there are going to be some pissed off people, to put it 
bluntly.
    But I think the National Security Council has probably had 
good intentions here, but I think their mission is national 
security, not economic recovery. The only thing that is going 
to crack this open is a rational series of steps coming from 
the Defense Intelligence Agency that are acceptable both in 
terms of a security standpoint, and also in terms of 
reassurance to the general public.
    Mr. Pence. Thank you. That is helpful.
    I am going to come back to Mr. DeGroot, but I want to yield 
to Dr. Christian-Christensen, Congresswoman from the Virgin 
Islands, for any questions she may have.
    Ms. Christensen. Thank you, Mr. Chairman. And it is clear 
that the issue of the Class B airspace restrictions is one of 
the major ones that is of concern to everyone, and I would be 
happy to join with you in writing to or meeting with Secretary 
Minetta and the FAA administrator to explore that issue more.
    We did pass what some refer to as a bailout and others 
refer to as a financial stabilization package for airlines, and 
what it does is it provides funding to make up for the losses 
since September 11th, and also it would provide for any 
increases--to pay costs of increases in insurance to airlines.
    For those of you who deal specifically with aircraft, does 
it get to smaller airlines and people who do airline rentals at 
all?
    Mr. Coyne. The short answer to your question, 
Congresswoman, is no. It is possible theoretically for an 
airline not to pass any of the funds through, but to 
conceivably pass through some indemnification on war risk 
insurance through to a contractor, unfortunately, the airlines 
to this date really have not done that except in a very, very 
few limited occasions, and mostly only to their very largest 
contractors.
    But to the thousands and thousands of businesses across the 
country who fueled, let us say, an American Airlines flight 
that lands at St. Croix, that contractor is not getting any 
relief, not getting any funds, essentially has gotten nothing, 
zero, out of that $15 billion that was passed in that 
legislation.
    And of course, at the time we and everybody else in the 
industry came to Congress and said cannot we include in this 
legislation a paragraph, a sentence, a chapter that would 
provide somerelief to employees, to contractors, to others. And 
as you know at the time there was a great rush to do something 
immediately, and there was a lot of pressure to just sort of not open 
the bill for any amendments or anything.
    Ms. Christensen. Right.
    Mr. Coyne. And at the time most people that I talked to 
here in Congress said, well, there will be an opportunity next 
month for the Small Business Committee to deal with the 
concerns of small business, for the aviation subcommittee to 
maybe deal with other issues, tourism and so forth. And we here 
are really looking to you to provide that legislative product 
and output. And without it, I do not think we expect any relief 
from that earlier legislation at all.
    Ms. Christensen. Does anyone else want to respond? Okay.
    That opens up two other questions, referring one to the 
transportation committee and they are looking into the use of 
airport trust fund monies to provide some assistance to 
airport-related businesses.
    Mr. Coyne, or anyone else, what would be most helpful for 
the transportation committed to provide for you?
    Mr. Coyne. Well, certainly with regard to the expenditures 
that are going to be expected in the area of security the costs 
that these many businesses, whether it is a new badging or 
identification system, or a new electronic background checks, 
or new fences, or new screeners or whatever, it absolutely 
makes sense that the aviation trust fund should be used to 
finance these security expenditures, just as I am sure the 
airlines are expecting the aviation trust fund to pay for new 
security expenditures that they may face in terms of baggage 
screening or what have you.
    However, for the core issue, which is the losses that were 
endured, the airlines, of course, got $15 billion in grants and 
loans to cover what essentially was three days of being out of 
business because of federal action.
    Our industry, many of them are still out of business 
entirely, as David's case, and many others, because of--solely 
because of the actions of the federal government. And if there 
is an argument that the airlines should get $15 billion for 
three days of being out of business, what is the argument that 
is fair for people like these businesses who are still out of 
business and in many cases, I am sure in David's case there is 
not a single person anywhere in government that will tell him 
if he will be able to come back in business tomorrow, a month 
from now, a year from now, or ever.
    And so if they will not give us that answer, and they are 
the ones that have caused us to go out of business, and they 
gave all that money to the airlines, how can they not, and how 
can government not respond to these same businesses who are 
hurt much, much more severely?
    The airlines can go borrow money. They can go do all sorts 
of things. There is nothing, nothing, zero, that these 
businesses can do except reach into their own pockets and take 
money off the table that was going to their children or 
whatever to keep their businesses afloat. They are looking to 
government as the only hope for relief.
    Ms. Christensen. We had a hearing yesterday at the full 
committee with the Small Business Administrator, and one of the 
solutions that we are looking at is making affected businesses 
eligible for low-cost or no-cost economic injury disaster 
loans.
    How far would that go to help? Maybe somebody else.
    Mr. Coyne. Somebody else, yes.
    Mr. Wartofsky. Okay, I can give you a little reaction. We 
actually own the underlying airport, and then there are 
numerous service businesses on the field. How you connect those 
revenues to the service businesses on the field, I do not know, 
frankly. It is easy to identify. The general aviation industry, 
however, is split into far more layers than just the handful of 
airlines.
    Ms. Christensen. Right.
    Mr. Wartofsky. And how you actually try to cover all of 
those, how you would identify them. I think as a practical 
matter by the time you have figured it out a lot of their 
phones will be disconnected.
    Mr. DeGroot. I would just like to say that low-interest 
loans would help us get through this short time. I think 
general aviation will make a comeback eventually, but we need a 
bridge to gap--for this gap from the shutdown to where we can 
get our businesses back on their feet again. It does not 
necessarily have to be a no--I mean, a no-interest loan would 
be great, but I do not think the government can afford it.
    Ms. Christensen. If we were to reduce the interest rate, 
what might be a workable?
    Mr. DeGroot. One percent would be great. [Laughter.]
    No, but I think most businesses would be happy with maybe 
three to four percent. That would make it a manageable number 
for us to deal with on a monthly basis.
    Ms. Christensen. Okay. And the disaster loan is at about 
three or four--about four percent, if we were able to extend 
that.
    Mr. DeGroot. That would be great for my business 
personally. I do not know about David's business.
    Mr. Wartofsky. Yes.
    Mr. DeGroot. He needs to get flying again is what he needs.
    Ms. Christensen. Right.
    Mr. Wartofsky. The airspace is the critical thing. Right 
now the suspension of all airspace is sending a very strange 
message to people. It is perfectly reasonable to get back to 
your lives, but oh, no, oh, God, not around Washington, we will 
shoot you down.
    We saw about 20 aircraft depart the first night. The 
clearances were quite literally, and I was dealing with 
Washington departure, ``The aircraft must be off the ground 22 
minutes after the hour, and are voided 25 minutes after the 
hour. If it takes off 26 minutes after the hour, it will be 
shot down.''
    These procedures are terrifying people. I was at an FAA 
headquarters meeting, they are trying to figure out what can be 
done, and one of the things I mentioned is that if they just 
issue a press release that at least they are trying to address 
this, and try and reduce the level of terror which quite 
literally inadvertently has been caused by government action 
within the industry these kinds of things can go a long way.
    There are a lot of things the FAA and the DOT just do not 
have jurisdiction over now.
    Ms. Congresswoman, if I may, I would like to really stress 
these airspace issues one more time. We really have not talked 
about it much, and I know it is not normally the purview of 
this committee. But each and every individual in Congress can 
help solve this problem working with the White House, the FAA, 
DOT, as you mentioned.
    The situation that involves the Virgin Island is on the 
face of it absurd. It is merely absurd. It seems to me--I hate 
to say this but it seems to me that the FAA when they rushed to 
enact the airspace rules regarding foreign aircraft coming into 
the United States, they acted as though Puerto Rico and the 
Virgin Island were foreign countries. And they make it easier 
to get to the United States from the Bahamas----
    Ms. Christensen. Yes.
    Mr. Coyne [continuing]. Than they make it to get from the 
British Virgin Islands to St. Thomas whichis what, 15-25 miles, 
or just to get from Puerto Rico to St. Croix, both of which are part of 
the United States.
    Ms. Christensen. Exactly.
    Mr. Coyne. Somebody has got to go to the FAA and say that 
this is fundamentally wrong, stupid, and easily fixed tomorrow. 
They could issue a NOTAM tomorrow to deal with these 
international issues all around the United States that would 
solve this problem because it does not do anything to improve 
security at all.
    Mr. Wartofsky. If I may, I think actually the FAA 
understands that. The problem is that no one is paying any 
attention to the FAA either.
    Ms. Christensen. Okay.
    Ms. Tarascio. Can I say one thing about the----
    Ms. Christensen. Sure.
    Ms. Tarascio [continuing]. You were asking about the low-
interest loans.
    Like I said, we have been offered something by FEMA at 
Republic, and we had a meeting the other day, and the people 
that came were very disheartened. They were very upset. We have 
helicopter businesses that are not able to operate at all. We 
have, like I said, flight schools that we are still not fully 
operational right now. We are still not allowed a VFR-91. And 
everyone estimates that it is going to be about six months 
until we get back to normal status, normal operations.
    And for us to have to take a loan and repay money that we 
have lost in that time period, which is going to be great, I 
mean, like I said, we are losing $200,000 per day amongst all 
of us, it is just phenomenal for us to do that. We need to get 
funding to put is back where we need to be, and we need to get 
the airspace reopened so that we can start getting back the 
business that we have lost, otherwise it is a band-aid fix.
    Ms. Christensen. Right. And I hear urgency.
    Ms. Tarascio. Yes.
    Mr. Wartofsky. Yes.
    Mr. Pence. Before everything is lost.
    But one of the things that we are also proposing, I was 
just reminded, is that delaying the payments of those loans 
under--that would be 3011, under H.R. 3011, for at least a 
year.
    Do I still have a little bit of time?
    Mr. Pence. Most certainly.
    Mr. Wartofsky. Oh, I was just going to say, you know, the 
terms of the loans, the terms of the capital, or whatever, is 
almost secondary. One of the questions is simply administrating 
it.
    I might suggest that there, I believe, 14,000 airports in 
the United States, of which only 3,500 are eligible for AIP. In 
the meeting yesterday, I was informed that the FAA feels it is 
an administrative matter for them to decide that the other 
airports can be made eligible for AIP. Right now they are 
cutoff.
    I would also make the suggestion that the state aviation 
administrations, are in fact the closest agency to the airports 
and the operations within a state, and that rather than have 
the FAA manage this, which is used to dealing with airlines and 
commercial airports, that you actually get the state aviation 
administrations involved with this because they know what is 
going on at the grass roots level. The FAA is actually very far 
removed.
    Mr. Coyne. If I could make one final point very briefly.
    It has sounded, listening to us talk today, as though we 
are only trying to help these businesses for their own perhaps 
selfish need or self-centered need, but it is not that at all. 
I mean, if these businesses are allowed to go out of business, 
the whole community suffers.
    I mean, if Bulky Aviation is not there at--what is it, 
Alexander Hamilton Airport?
    Ms. Christensen. It is now Henry Rohlsen Airport.
    Mr. Coyne. Okay. If that is not allowed to exist there, 
then the ability of that community to have the benefits of our 
air transportation system are forever gone; same thing for all 
of these airports. So we are not just doing this for the 
benefit of the businesses that have faced bankruptcy, but for 
the broader disaster impact on the citizenry as a whole.
    Ms. Christensen. Thank you.
    I just wanted to--I did not have a question for Mr. 
Doughty, but I just wanted to say that I have been put under 
some pressure to appeal to my port authority executive director 
to lower fees, and you have helped me to understand why he is 
putting up the resistance. I thank you for helping me to 
understand the other side of the issue.
    Mr. Doughty. Airlines have actually asked us to put our 
bond ratings at risk, put our own business at risk to help them 
and lower fees to them. And that pressure is going to be 
severe, particularly on very small airports that may only have 
one airline, because that airline can simply say to the board 
we are pulling out if you do not give us 20 percent off the 
landing fee. And it is a difficult political situation for many 
small airports.
    Ms. Christensen. Yes.
    Mr. Chairman, I do not have any other questions. I just 
wanted to enter--from my small district, I have five letters 
dealing with small airlines and airline issues and Part 91 and 
Part----
    Mr. Doughty. That is alright, even the FAA finds those 
confusing.
    Ms. Christensen. Yes, and the B airspace. So I would like 
to enter them for the record.
    Mr. Pence. Without objection.
    Ms. Christensen. Thank you.
    [The information may be found in appendix.]
    Mr. Pence. Thank the gentlelady from the Virgin Island, and 
we will enter those into the record of this hearing.
    One final question for this panel before we take a five-
minute recess and reconvene with our second panel, to Mr. 
DeGroot who clearly, I think, traveled the farthest today and 
for which this Chair is very grateful.
    You are also a veteran?
    Mr. DeGroot. That is correct.
    Mr. Pence. And there has been a lot of talk about 
regulatory reform at the FAA to address the economic struggles 
that we have heard in evidence today. But any specific 
regulatory changes this subcommittee should look to encourage 
that would not compromise for your perspective as a veteran 
national security concerns?
    Mr. DeGroot. Well, when I was in Korea--I was talking to 
the other people here before this meeting--we had corridors 
that went over Seoul, and they worked for us in the military, 
and we also had private aircraft that had to fly down the same 
corridors.
    If we could get some kind of a wide corridor to at least 
get these guys out to a training area to do some flight or get 
out to get their VFRs completed. I mean, Minneapolis, there is 
nothing after Minneapolis besides my shop. [Laughter.]
    But if they get a corridor to come out of that Minneapolis 
or come into Minneapolis, I think that is something that the 
FAA or the ATC could control fairly easily and get these small 
aircraft flying.
    But if they have this fear that they are going to be shot 
down out of the sky if they go out of this corridor, I myself 
probably would not fly either. I am a pilot. So I think they 
have to make these corridors wide enough to where we can get 
the airplanes in and out, and not have the fear of doing 
something wrong at the same time.
    Mr. Pence. Okay, very good.
    Let me thank all of the panelists. I know I speak on behalf 
of Congresswoman Christian-Christensen when I say this has been 
very illuminating, and obviously each of you acquitted 
yourselves extremely well, and certainly motivated these 
members in this subcommittee to become very active in this 
debate.
    I will publicly say that I will take my colleague up on her 
offer to address an urgent letter regarding Class B airlines to 
the FAA and to the administration, and we will look forward to 
collecting more colleagues' signatures on that issue.
    With that, we will take a five-minute recess, and be back; 
ask our second panel to go ahead and head to the table, and we 
will be in recess for five minutes.
    [Whereupon, a recess was taken.]
    Mr. Pence. The hearing of the Subcommittee on Regulatory 
Reform and Oversight entitled September 11, 2001: Are American 
Small Businesses Still Grounded, we will reconvene after a 
brief recess.
    I thank the second panel for joining us, and I am anxious 
to hear your remarks. I trust most of you were in the room as 
we explained the ground rules of five minutes of remarks with 
an eye on the little light box in front of you. And both I and 
my colleague and any other colleagues who join us will reserve 
our questions until after each of the panelists have testified.
    I will make mention of the fact that we are anticipating 
votes after 12:15, in which event we may need to either recess 
or even possibly adjourn to accommodate what should be a busy 
day of votes on the major legislation at the Capitol.
    Bonnie Adams is our first witness in this panel, of 
Lewiston Travel Bureau. She is an active member of the American 
Society of Travel Agents; has owned and operated her own travel 
agency for the past 26 years. In addition to her work as 
president of the Lewiston Travel Bureau and member of the ASTA 
Subcommittee on Government Representation, Ms. Adams is a 
member of the Small Business Administration Maine Advisory 
Board. She has served as a White House delegate on small 
business, president of the Maine Chapter of ASTA, and chairman 
of the ASTA's National Legislation Committee.
    She brings enormous credentials and daily practical 
experience to the struggles that small businesses are facing in 
the wake of these events, and is recognized for five minutes of 
important testimony.

STATEMENT OF BONNIE ADAMS, PRESIDENT AND OWNER, LEWISTON TRAVEL 
 BUREAU, LEWISTON, MAINE, ON BEHALF OF THE AMERICAN SOCIETY OF 
                         TRAVEL AGENTS

    Ms. Adams. Thank you very much. Thank you, Mr. Chairman and 
Ms. Christensen, for the opportunity to speak to you on behalf 
of the American Society of Travel Agents and the nation's 
travel agents.
    I am a travel agent. I have owned and operated my own 
travel agency for the past 26 years. My agency is a prototype 
of the average American travel agency with about 3 million 
gross sales per year.
    Prior to September 11, I employed six full-time people, all 
actively engaged in the promotion and sale of travel services. 
Since September 11th, the agency has had a negative cash flow 
of $32,000. I continue to lose $4,000 a week.
    My story is typical of what is happening to travel agencies 
across the United States and in the territories. I have laid 
off three of my employees, and have not drawn a paycheck for 
myself since September 11th. I have plunged every penny I have 
into my agency just to keep my doors open.
    I am still in business in large part because I have been 
able to obtain the forbearance of others. My landlord has 
agreed to defer rent payments for three months. He gave me free 
lights and heat. My bank has deferred loan payments for two 
months. My local credit union agreed to defer my car payments.
    Mr. Chairman, unfortunately, all that generosity and 
cooperation is not enough. I have at best three weeks left to 
keep open, after which time I will lose my career of 33 years, 
my business, the roof over my head, the cars I drive, and every 
penny I had in savings.
    This is my story, but it could be anybody's story who owns 
a travel agency in the United States today. Indeed, many travel 
agencies across the country have been less fortunate than mine, 
and are already out of business.
    On September 11th, the travel agent industry was, just like 
the airlines, already struggling with a severe economic problem 
when the terrorist attacks brought a halt to the sale of travel 
in all forms. New business stopped and has not yet begun a 
significant recovery.
    The details of the financial losses are set out in the 
written testimony and the exhibits. For the period through the 
end of 2002, ASTA estimates the total loss for all product 
lines will exceed $4 billion.
    It took 18 months for travel to return to normal levels at 
the time of the Gulf War. This time, it can be expected that 
any modest rebounds in business will be dampened and that we 
will again approach that of the ground stop days as we enter 
new phases of our national response.
    The average number of agency employees in a location was 
six, just like my agency. In normal times, these small 
businesses handle an enormous volume of air travel. Through 
August of this year travel agencies sold more than 48 billion 
in airline tickets, accounting for 127 million airline sales 
transactions. This business has shrunk to almost nothing since 
September 11th.
    This is normally the peak season for holiday bookings. That 
business is at a standstill. Large group bookings made for 
future travel have cancelled. The details of a small sample of 
these stories are set out in Exhibit 1 to our written 
testimony.
    We continue to receive similar stories from around the 
country. Travel agents and at-home retailers of travel services 
number about 300,000. ASTA estimates job losses in the hundred 
thousand range if immediate action is not taken to help them.
    Travel agencies do not have cash reserves or other assets 
to use as collateral for regular bank loans. The federal 
government is where we have to turn. We have no place else. If 
we do not get an immediate cash infusion in the form of no-
interest or low-interest uncollateralized disaster loans that 
are below the current SBA Economic Injury Disaster loan level, 
we will all disappear and lose our assets and be forced into 
business and personal bankruptcy.
    We ask that such loans are industry-based versus regional 
or size. The loans should be based on ability to replay and 
have loan forgiveness for agencies on the verge of bankruptcy. 
We seek loan abatement on both interest and principal to help 
travel agents get back on their feet. I am pleased to say that 
these elements are contained in Representative Velazquez's bill 
H.R. 3011.
    As tragic as that is for us as individual Americans, 
failure to pass immediately such legislationpredicts an even 
larger tragedy.
    If we have learned nothing else in the past few weeks, the 
country has, we think, come to understand the way in which the 
entire economy depends upon air transportation and upon the 
travel and tourism sector generally. The impairment of the air 
transportation sector threatens to move swiftly from a ripple 
effect to a tidal wave of economic destruction sweeping across 
this entire country.
    If the public loses the ability to use the travel agency 
distribution system to access the air transportation system and 
the rest of the travel and tourism enterprise, the consequences 
will be certain and unavoidable. National economic recovery 
will be impaired for years to come by our failure to restore 
the confidence of the public in not only the security of 
travel, but also their confidence in the experience of 
obtaining and using travel services.
    Travel agencies, most all of whom are very small business, 
arrange 75 percent of air travel bought by Americans today. The 
public uses travel agencies because they provide what the 
public needs in the way of information, counseling and 
services. There is no practical or economic way the airlines or 
other travel sectors can duplicate this service.
    During the heartbreaking days immediately following 
September 11th attacks, American travel agencies were there for 
their clients as they were there for others as well. Across the 
country travel agents were in their offices trying to help many 
thousands of people stranded by the nationwide airport closure. 
Many of them provided free assistance to people who had bought 
their tickets on the internet had no one else to contact and no 
place to go for help. Travel agents performed these services; 
they were the only people who could, and at the same time they 
watched their businesses collapse. Many agencies report gross 
earnings for the week, including September 11th, of less than 
$50.
    It is a fact that in this unprecedented situation there was 
no substitute for the travel agent for tens of thousands of 
people who needed our help. The services of professional travel 
agents with expertise in travel options are going to be crucial 
to bring the public back to the airways. Consumers are going to 
want and need to talk to real people, preferably someone they 
know and trust with current knowledge of the system, the new 
rules and the requirements for achieving safe and fast travel.
    National economic recovery can be delayed for a very long 
time if travel agencies are not there to connect and serve the 
customer and the airline.
    Given the magnitude of the short-term losses and 
uncertainty of near-term recovery, we seek $4 billion in no 
interest or low interest, noncollateralized loans to be made 
available to travel agencies immediately. These funds will help 
assure that irreplaceable travel agency services will not be 
cut off to the public when they need them the most.
    Finally, ASTA thanks the members of Congress who have 
listened to the travel agency community in their time of need. 
Your immediate actions will help us get back on our feet, and 
we will help you get America moving again. ASTA appreciates the 
opportunity to present its views and remains at the committee's 
disposal to assist you in any way.
    [Ms. Adams' statement may be found in appendix.]
    Mr. Pence. The Chair thanks Ms. Adams for a very moving 
presentation, and appreciates the difficulty personally in 
traveling here from Maine in a time of real duress in your 
professional life. Very valuable. We appreciate it very much.
    We will move to our next witness and encourage some 
attention to the five-minute rule. I was not going to gavel Ms. 
Adams but I will gavel any one of you fellows. [Laughter.]
    And in the interest of fitting everyone in before we might 
have to go to vote. Bill Swift is the president of Business 
Traveler Services headquartered in Atlanta, Georgia. His 
company provides products and services at Hartsfield Atlanta 
International Airport, LaGuardia International and JFK.
    Mr. Swift has a 20-year track record in airport 
concessions, which is obviously an area of the small business 
sector profoundly impacted during these days. Prior to 
establishing his own business, he served in several senior 
positions with Dobbs Pascal Midfield Corporation with 
management responsibility for 105 concessions in Atlanta.
    He is testifying today on behalf of Airport Minority 
Advisory Council, the only trade association in the country 
that focuses specially on airport small business matters, and 
he is vice chairman of that organization currently.
    And William Swift is recognized for five minutes.

  STATEMENT OF WILLIAM H. SWIFT, PRESIDENT, BUSINESS TRAVELER 
SERVICES, INC., ATLANTA, GA, ON BEHALF OF THE AIRPORT MINORITY 
                        ADVISORY COUNCIL

    Mr. Swift. Thank you. Good morning, Chairman Pence, 
Congresswoman Christensen, and Linda Moore, Chair of AMAC.
    I am a business owner and CEO and president of Business 
Traveler Services. I have been involved with the airport 
industry for nearly 25 years, first as the director of 
purchasing for the City of Atlanta under Mayor Maynard Jackson; 
now as a concessionaire with operations at Hartsfield Atlanta 
International Airport, LaGuardia International Airport, JFK 
International Airport, Raleigh-Durham, Cleveland Hopkins, the 
two Houston airports, and Jacksonville, along with Augusta.
    I am also testifying today as the first vice chair of the 
Airport Minority Council know as AMAC. AMAC is the only 
organization in the country that has dedicated its sole mission 
for the last 13 years to ensuring that minority, women-owned 
and disadvantaged business enterprises participate in the 
economic opportunities at our nation's airports. Our members 
operate food, beverage, services, retail concessions, provide 
professional services and perform infrastructure development 
contracts at U.S. airports nationwide. I hope that I can 
impress upon you the urgency of the need for congressional 
action to help these businesses sustain during this period of 
crisis.
    For the record, Mr. Chairman, AMAC is supportive of H.R. 
3011, the bill introduced last week by your colleague 
Congresswoman Nydia Velazquez, the ranking member of the full 
Small Business Committee. We are very supportive of its purpose 
to help stabilize affected firms and appreciate the considering 
introducing legislation to address this issue.
    We are also aware that similar legislation has been 
introduced in the Senate separately by Senators Kerry and Bond, 
the chairman and ranking member, respectively, of the Senate 
Small Business Committee. We are most grateful for the 
recognition of the crisis affecting small firms; however, I 
stress that this is an emergency situation which requires 
prompt congressional action.
    Today, hundreds of small disadvantaged, women and minority-
owned businesses are in jeopardy of closing their doors as a 
consequence of sharply reduced sales. This is particularly the 
case for airport DBEs and other airport commercial tenants. The 
economic peril is a direct product of the federal shutdown of 
airports for a time, as well as the impact of new increased 
security measures, other procedures, not to mention the 
overhead costs associated with existingleases and contract 
arrangements and debt service.
    We do not question the necessity of the government's 
action. Indeed, to the contrary. AMAC members understand and 
strongly support the measures to enhance safety and confidence 
of the traveling public. However, it is very important for 
Congress to understand and acknowledge the effects of the 
federal government's action on airport small businesses. For 
this reason, the airport DBEs and commercial tenants merit 
federal assistance in the same way as airlines and airports.
    The AMAC members and the airport commercial tenants 
generally are an integral part of aviation and the airport 
industry. Collectively these businesses are major economic 
generator for airports, the communities in which they operate 
or are located. They provide employment, pay taxes, perform 
services and contribute to the efficient operation of airports, 
and provide vital services to traveling public.
    The AMAC is sympathetic and supportive of the airlines and 
airports, but not at the expense or on the backs of small 
businesses with locked in high rent guarantees. Thus, in AMAC's 
view, the survival of airport small businesses, in particular, 
DBE participation airport concessions contracts should be a 
priority concern of Congress.
    As you heard, airport operators are seeking federal 
financial assistance to help them weather the current crisis, 
and to help defray additional security operating costs. AMAC 
asks that you and other members of House Small Business 
Committee insist that any legislation providing relief for 
airport also include specific provisions for financial 
assistance to airport small and disadvantaged businesses and 
other commercial tenants.
    We believe that as a matter of sound public policy and 
equity that a portion of financial benefits accorded airports 
should be extended to airport DBEs and other airport commercial 
tenants--whether that assistance is provided through additional 
funds from the Airport & Airways Trust Fund, through increased 
flexibility in the use of passenger facility charge revenues, 
or through changes in federal tax laws.
    As a consideration of receiving additional federal funding 
or tax benefit, an airport operator must be required to 
implement a plan for assisting airport DBEs and commercial 
tenants.
    My written testimony offers several proposals and I will 
not state that.
    Mr. Chairman, I have owned and operated and managed airport 
concessions, including golf shops, newsstands, sports stores, 
restaurants, bookstores, business services for more than 20 
years. My current business, Business Traveler Services, 
provides internet access, work stations, ATMs, prepaid phone 
cards, concierge service to airport users. I can tell you from 
my personal knowledge and from talking to other business owners 
that the types of actions and assistance noted above would be 
very helpful.
    For example, three to six months of rent abatement would 
provide another infusion of capital to help these businesses 
cover their cost. Some of these airports have attempted to 
address this issue, but they have not taken a large enough 
step.
    Finally, Mr. Chairman, the general public has not regained 
its confidence in air travel. As a result, our revenues are at 
all time low and that trend will continue now that the war on 
terrorism has been. Our lease agreements are fixed rents and 
are based upon projected revenue streams. Clearly, the current 
state of air travel, new security requirements, decreased 
passenger traffic have made it nearly impossible for small or 
disadvantaged businesses to meet their fixed expenses.
    Therefore, AMAC is asking that Congress enact legislation 
that will provide immediate relief for airport DBEs and other 
commercial tenants. The House Small Business Committee has 
jurisdiction over SBA programs that can provide small and some 
emergency help, and we ask you to act urgently on legislation 
that makes airport businesses eligible for SBA economic 
disaster assistance.
    Thank you sir.
    [Mr. Swift's statement may be found in appendix.]
    Mr. Pence. Thank you, Mr. Swift, and without objection the 
Chair will enter your statement as you helpfully abbreviated 
parts into the record----
    Mr. Swift. Thank you.
    Mr. Pence [continuing]. Of the testimony today.
    Hector Torres is our next witness. He brings to this panel 
32 years of experience in the hospitality industry and hotel 
development, and has been very busy about promoting Washington, 
DC tourism, which apart from my commute into work is something 
I certainly appreciate.
    He is currently vice president of sales and marketing of 
Capital Hotels of Washington, DC, and I might add in addition 
to his business activities is also well known in this area as 
chairman of the board of a group known as Identity, which is an 
inter-city youth organization focusing on the Latino community.
    And it is an honor to have you here, Mr. Torres, and you 
are recognized for five minutes.

  STATEMENT OF HECTOR TORRES, VICE PRESIDENT, CAPITAL HOTELS, 
  WASHINGTON, DC, ON BEHALF OF THE HOTEL ASS'N. OF WASHINGTON

    Mr. Torres. Thank you very much, and good afternoon, 
Chairman Pence, distinguished members of the committee.
    I am actually very honored to have the opportunity to speak 
on behalf of 31 small independent hotels out of 83 member 
hotels of the Hotel Association of Washington, DC.
    My name, as earlier stated, is Hector Torres and I am vice 
president of Capital Hotels, Washington, DC. We own and manage 
two hotels, the Governor's House Hotel and the St. Gregory, 
both located in downtown Washington, DC, both members, of 
course, of Hotel Association.
    Like the rest of the nation, we have experienced in DC a 
major negative economic impact in the wake of the tragic events 
of September 11th. The impact is heightened due to the fact of 
the closing of the Reagan National Airport, extended closing of 
the airport, the front door, in fact, to our nation's capital.
    Because of the worldwide media to focus on our national 
capital, until the hospitality and business economy of the 
nation's capital is revived, perception to the world will be 
that our nation's economy remains crippled. As the nation's 
capital, Washington, DC will be the symbolic leaders of the 
nation's return to normalcy, revitalizing Washington, DC must 
be the first step in our nationwide recovery.
    Within the Washington metropolitan region, the hospitality 
industry is the largest private sector employer, comprising in 
excess of 3,000 businesses and 260,000 employees.
    If the Washington, DC hospitality industry does not 
recover, your favorite local restaurant, and even purveyors of 
food and other essential supplies to Congress itself will be at 
jeopardy, negatively impacted if not completely out of 
business. If you stopped at the St. Gregory these past weeks, 
you would see very few visitors, an empty lobby, and less in 
the past few weeks we have had to lay off a tremendous amount 
of people.
    This is equally true if you around the corner to the Red 
Sage Restaurant, for example. Theyhave had to curtail services, 
their time of opening, and have also had to experience tremendous 
layoffs.
    This is just merely a snapshot of what actually is pretty 
well commonplace in our nation's capitol and in the region. The 
trickle down effect is in fact incalculable.
    Reality: As Congresswoman Eleanor Holmes Norton has 
repeatedly expressed in the days after the opening of Reagan 
National Airport, we must not look at Reagan National's opening 
as a victory lap. It simply is the beginning. We need to resume 
full service in order to rid the perception that nationwide air 
travel is unsafe and to return tourists to our city and 
nationally.
    The hospitality industry normally supports 260,000 
individuals and their families. It pumps nearly $10 billion 
annually into our economy.
    The hospitality industry is losing over $10 million a day 
in our region. In the next 100 days we anticipate the loss of 
nearly $1 billion.
    Small businesses actually comprise of 90 percent of the 
business supporting tourism and are either related to tourism 
or dependent on tourism, and do not have the capitalization or 
cash reserves to survive this downturn.
    Metro DC hotels normally enjoy 80 percent occupancy this 
time of year. We are currently running at approximately 40 
percent.
    Metro restaurants have experienced massive layoffs and a 
dramatic downturn and revenues may see more than 50 percent 
revenue losses.
    Small hotels' occupancy has also dropped significantly, 
particularly as they cannot count on a national advertising 
campaign to support their losses in the form of advertising and 
market support. Loss in some cases amount to up to 50 percent o 
occupancy.
    On one group alone, the World Bank, our hotel, the St. 
Gregory, lost $100,000 in one week's time. It is--according to 
World Bank IMF, there were approximately 25 hotels 
participating directly or indirectly in this event. So you can 
imagine by calculating our small hotel $100,000 loss in one 
week's time, actually represented one-fifth of our total income 
for that given month.
    The human toll falls on all the individual losing jobs as 
well, those who earn salaries to support families and 
contribute to the economy of our region.
    Of the 10,500, and counting, jobs lost, many of them are 
Hispanic, blacks and of minority descent. Because they have 
actually lost their sense of basically dignity because they are 
now going back to a welfare-type situation, and the do not have 
any money or sources to be able to fund even insurance 
payments.
    DC currently has--the DC tourism corporation and Mayor 
Williams have committed $1 million to implement marketing and 
advertising, public relation, promotional activities and 
reestablishing Washington as a premier convention and visitor 
destination.
    The city and the Washington tourism corporation are 
collaborating with 29 businesses in the area as well to bring 
forth a campaign to attract business into our nation.
    We ask that Congress please help us in the process of 
helping the small businesses in support of grants and/or low-
interest loans to be able to support such unemployment benefits 
as COBRA, as well as to urge other vehicles within the 
government to support our plight.
    The rest of my document gives you some other strategic 
ideas that we could implement, and I thank you very much the 
Hotel Association for your kind attention.
    [Mr. Torres' statement may be found in appendix.]
    Mr. Pence. The Chair thanks Mr. Torres, and without 
objection we will see to it that your entire presentation is 
entered into the record.
    I am going to say David Chesebro?
    Mr. Chesebro. Chesebro.
    Mr. Pence. Chesebro. Thank you.
    Founded Daytona-Orlando Transit Service in 1982, beginning 
with three employees and three vehicles. Two decades later the 
company has grown to 42 employees and 14 vehicles that range 
from local shuttles to interstate motorcoaches, and has 
expanded and offer a wide range of service to include tour and 
charter development originating at least out of the Daytona 
Beach, Florida are, and the mainstay of DOTS has always been 
the Orlando International Airport shuttle. The company 
currently offers employees comprehensive benefits package which 
includes health care, dental, profit sharing.
    And David Chesebro currently serves, of course, as 
president and owner of that company, and brings a very 
important small business perspective to the current downturn in 
our travel economy, and is recognized for five minutes for that 
reason.

    STATEMENT OF DAVID CHESEBRO, PRESIDENT AND OWNER, DOTS 
MOTORCOACHES, DAYTONA BEACH, FL, ON BEHALF OF THE AMERICAN BUS 
                          ASSOCIATION

    Mr. Chesebro. Good afternoon, Mr. Chairman, and members of 
the committee.
    My name is David Chesebro, and I am president and the 
founder of DOTS Motorcoaches of Daytona Beach, Florida. I am 
pleased to be here and represent 3,400 members of the American 
Bus Association.
    To begin, I would first like to thank you, Mr. Chairman, 
for your leadership in convening this hearing and appreciate 
the opportunity to testify on this urgent matter.
    ABA members are equally diverse ranging from Greyhound Bus 
Lines, which provides service to 2,500 destinations, to my 
company which provides service to and from the Orlando 
International Airport. However, most of the ABA member 
companies are small businessmen and women alike.
    To give you an appreciation of what we do, I would like to 
take a minute to describe my company and the service we 
provide. From there, I will try to give the committee an 
appreciation of what the September 11th attacks on New York 
City and Pentagon and the consequent lack of travelers has done 
to my business as well as the motorcoach businesses all over 
the country.
    I founded DOTS in 1982, beginning with three employees and 
three vehicles. Nearly 20 years later the company has grown to 
42 employees, including 14 vehicles. Our services range from 
local shuttles to interstate trips on motorcoaches. Like all 
the private commercial bus industry, I receive no federal 
funding to support my company's operational structure.
    In addition to my shuttle service to and from the Orlando 
International Airport, I provide shuttle and tour service 
throughout the United States, including trips to Biloxi, 
Mississippi and Branson, Missouri.
    While these services have also suffered during the past 
month, it is the effect of the September 11th attacks on my 
airport shuttle service that forms the core of my testimony 
today.
    The mainstay of DOTS has always been the airport shuttle. 
It is approximately 75 to 80 percent of my business. DOTS grew 
steadily from three round-trips a day to its current operating 
15 hourly round trips daily to and from the Volusia County area 
to the Orlando Airport.
    To acquaint the committee with my post-September 11 
troubles, I would like to walk you through my operations. 
Normally at this time of the year I can count on shuttle gross 
receipts of approximately $78,000 per month, equal to $2,600 
per day based on a $25 one-way ticket to orfrom the airport.
    Since the attacks, DOTS' revenue has been down some 
$21,000. Against this I have to maintain the vehicles and make 
monthly payments on most of them. Since this is a great deal of 
revenue for a business which grosses $1.7 million a year, this 
figure includes shuttle, charter and tour business.
    Recently, I sent a memorandum to my employees, ask that 
they voluntarily take time off each week so that I could keep 
all part-time drivers on the payroll, and a copy of that is 
attached.
    The effect of the attack on DOTS is even worse than it 
sounds. Business is down--was down from December to July. Then 
in August, I had seen an increase in business I thought would 
be an indicator of a good autumn and holiday season. Of course, 
the events of September 11 eliminated that possibility.
    ABA members from California, Montana, Missouri, Florida, 
North Carolina, Louisiana told ABA of a one-week losses ranging 
from $20,000 into millions of dollars, and also cancellation 
rates of 30 to 80 percent. The cancellation includes trips 
planned for spring of 2002.
    Vectour, of Pennsylvania--the largest privately owned 
ground transportation company in North America--has a business 
that is more than 50 percent airport-related. It experienced an 
immediate drop of business of about 40 percent. This loss will 
cost the company almost 7 million in cash between now and the 
end of the winter.
    This series of cancellation points out an even greater 
problem. As I indicated, this time of the year is high season 
for many ABA operators engaged in charter and tour services, as 
well as those of us that serve airports close to major cities 
and United States tourist attractions. Any loss of cash flow, 
especially during peak times, affects the day-to-day operations 
as well as the operations into the future.
    Without these revenues, many motorcoach operators face a 
bleak winter and maybe the prospect of shutting their doors for 
good.
    The question for the committee and Congress is to decide 
how to ease the effects of the attacks on this segment of the 
transportation industry.
    In sum, the motorcoach industry seeks financial assistance 
of any sort until the spring and more normal transportation and 
travel patterns reassert themselves. One recovery suggestion 
within the purview of this committee is the expansion of access 
to small business economic injury disaster loans and loan 
guarantees.
    Under SBA regulations, businesses located within a declared 
disaster are eligible for financial assistance from this 
program. The nature of the motorcoach business is that our 
business is located wherever our customers travel. The industry 
must have access to these loans to foster recovery and loan 
guarantees to provide motivation for equipment lenders to work 
with bus owners to meet scheduled payments.
    No one doubts the American people will return to the skies 
and travel again. It is just a matter of time. However, until 
that day businesses affected by the attacks on us will have to 
have financial help in order to be in service when that day 
comes.
    We are looking to members of Congress to aid the bus 
industry, and indeed all of us in attaining this goal.
    Once again, thank you for the opportunity to be with you 
today, and I would be pleased to answer any questions you may 
have.
    [Mr. Chesebro's statement may be found in appendix.]
    Mr. Pence. Thank you, Mr. Chesebro.
    And we will break a bit with convention, and the gentlelady 
from the Virgin Islands and I will actually alternate questions 
to individual panelists as we believe we will be imminently 
called for a vote here after a quarter after, and I want to 
make sure that my colleague and I both have opportunities to 
answer questions.
    So with that, the Chair would direct the first question to 
Ms. Adams.
    You are on the front line of the travel industry as a 
travel agent. My question to you would be to rate in some way 
the severity of the current downturn. For instance, did your 
customers cancel short-term plans to travel, or have they 
cancelled their Thanksgiving and their Christmas travel plans? 
Can you give this committee some sense of the duration of the 
impact on our travel industry from your perspective?
    Ms. Adams. I would be glad to, and I would dare say I am a 
prototype for all travel agencies across the nation.
    After September 11th, it was immediate cancellations; 
immediate being defined in the next say 60 days. People just 
froze up, wanted refunds, cancelled package tours. After about 
two weeks, we started receiving cancellations on some of our 
groups for March and April into the Caribbean. We are in the 
northeast, they want to go there.
    Interestingly enough, we held our breath with the 
advancement of our nation's response on Sunday, and we indeed 
received the second wave of cancellations well into the future 
Tuesday and Wednesday of this week.
    So the answer to your question, Mr. Pence, would be yes on 
all the above. It is just whatever groups or individual leisure 
travel we had has disappeared. Corporate seems to also be at a 
standstill.
    Mr. Pence. Going forward, can you give the Chair an 
estimate of the number of months that you have seen plans 
cancelled?
    Ms. Adams. We cannot see that far, that's how far. 
December, it starts in December, and I will tell you that our 
season goes well after Easter, June, July. We have a group in 
July that was cruising that had to make some long-term 
commitments. That was under deposit with over 53 passengers, 
fairly reasonably large sale for us, and----
    Mr. Pence. Cancelled.
    Ms. Adams [continuing]. It fell apart immediately with 50 
percent. It came to a point of having so few we had to pull the 
plug on the whole thing.
    Mr. Pence. Well, the gentlelady from the Virgin Islands is 
recognized.
    Ms. Christensen. Thank you, Mr. Chairman.
    Before I ask a question, I just wanted to say how great it 
is to have such a diverse panel in front of us, and have the 
District of Columbia represented as well. It is not often that 
that happens at our committee hearings.
    Let's see, where would I start? I am going to ask Ms. Adams 
a question as well, although I wanted to say to Mr. Swift that 
this afternoon the Minority Business Task Force of the CBC will 
be meeting to take up specifically some of the issues that you 
raised, and we raised them with the SBA Administrator yesterday 
as well. We will continue to follow up with those issues. We 
had not focused in on airport businesses, but on minority and 
disadvantaged and women-owned businesses.
    Ms. Adams, would you explain to the committee why having 
access to a loan program that is based on ability to pay rather 
than collateral is so important?
    Ms. Adams. Currently, as most small businesses are service 
oriented, we have no hard assets in order to even obtain 
letters of credit. We need to collateralize our own personal 
property. We have nothing left to collateralize. And quite 
candidly, all of those loans foroperational expenses right now 
are maxed out.
    So the ability to repay would be vital to the formula for 
us. There is nothing left we can give you. We do not have a 
thing.
    Mr. Pence. The next question would be for Mr. Swift. During 
your testimony that I thought was very good and very 
informative, by the way, you made reference to the fact that 
lease agreements for most of the people that you are here 
representing are established on the basis of fixed rents.
    Can you give the subcommittee a number of the 
concessionaires may be in jeopardy of default on their 
agreements due to reduced sales? Give me a percentage of the 
industry based--because I find that--I had a different 
expectation about how those agreements might have been drafted 
based on overall sales and percentages. But if is a fixed rent 
agreement, it sounds to me like we could be in very serious 
trouble for these small business concessionaires?
    Mr. Swift. Absolutely. Let me address it a couple of ways.
    Number one, probably 90 percent of all contracts are with a 
fixed rent, but not only a fixed rent, but a guaranteed rent 
against a percentage, whichever is higher.
    Mr. Pence. Okay.
    Mr. Swift. So they are locked in, and these contracts are 
often five years or longer. So as in the case of my company, we 
just renewed our contract at Hartsfield for another five years 
with a CPI increase based on the average annual growth of the 
traffic at about five or six percent. Taking a hit of anywhere 
from 30 to 40 percent in traffic makes it quite difficult, 
excluding the fact that the meet or greeters are not going to 
the airport. They are now part of the mix of sales.
    So in that regard most operators are on the fixed rents. 
What used to be an average of 15 to 20 percent of your gross 
revenue was towards your rent, now for some of us it represents 
anywhere from 40 to 70 percent of your gross revenue because of 
the locked-in relationship to a fixed rent.
    Mr. Pence. The gentlelady from the Virgin Islands. Forgive 
me, but I was just very--I am stunned by that. Maybe one quick 
follow up if I could.
    Ms. Christensen. Sure.
    Mr. Pence. Is there any sense in your industry, your 
business or elsewhere around the country, that companies that 
own airports and operate facilities are working with vendors 
with these fixed--these fixed rent arrangements already? Has it 
been happening in the last 31 days or is the expectation there 
that they will just simply grind down?
    Mr. Swift. I can tell you this. Unfortunately, most of the 
relationships are with local government entities, and the speed 
at which they are able to move is 90 to 180 days.
    Mr. Pence. Okay.
    Mr. Swift. We need a fix right now.
    Mr. Pence. Okay.
    Mr. Swift. I will also say that out of 400 plus airports we 
know of two airports, DFW and the Reagan National, where they 
have taken immediate steps to say we are going to adjust the 
rent now rather than waiting six months.
    Mr. Pence. Two airports?
    Mr. Swift. Correct.
    Mr. Pence. Okay. Thank you.
    Ms. Christensen. Mr. Torres, I'm also a member of the 
Travel and Tourism Caucus Steering Committee, and we had some 
meetings with different groups, including the Travel Industry 
of America, who propose a tax credit for travel within the 
United States, and the 100 percent meal deduction. We had--let 
me see if I pronounce it--I'Ricci here----
    Mr. Torres. Right.
    Ms. Christensen [continuing]. Testifying as to the--
I'Ricci, from that restaurant, and some other proposals.
    Would those help the Washington, DC economy?
    Mr. Torres. Absolutely, but everything helps to be honest 
with you. Anything that is proactive that will support our 
case.
    However, one of the key things is for Congress to help us 
in the process of restoring full use of Reagan National 
Airport. As long as that airport is operating on a limited 
basis, the city will appear to the world as a crippled city. 
That is a message that we cannot afford to continue sending 
out. It is dangerous. There is no way that anyone will feel 
comfortable if the nation's capitol itself is inaccessible.
    Ms. Christensen. I got that message very clear.
    Mr. Pence. My next question would also be for Mr. Torres. 
Could you explain for the benefit of the subcommittee the 
General Service Administration's premier lodging program, and 
how specifically that would help small hotels like the one you 
operate in this time?
    Mr. Torres. Yes. Well, the premier lodging program, as you 
know, is a GSA program that actually evaluates and supports the 
marketing efforts hotels that are offering lodging to the 
government traveler. And in fact, the response to the program 
has been pretty well due to Washington hotels in over six 
months, and it was supposed to have been given to us as a 
decision this October. Unfortunately, that is delayed, and it 
is delayed almost to the point that we do not know exactly 
when.
    In fact, the way that it would help is it will support in a 
great way the marketing efforts of Washington, DC. In addition 
to that, it will give us, hopefully, an increase in rate. 
Washington, DC has experienced rate increases as far as the 
federal per diem. Last year it was one percent, and I have to 
say a poultry one percent as against the rest of the nation 
receiving increases of 25 percent such as cities like Boston 
that received up to a 50 percent increase in the rate.
    It helps our smaller hotels because generally the small 
hotels are the ones that open-arm--would welcome with open arms 
the government traveler. It helps the city entirely because it 
makes the government traveler more viable as a real source of 
business, and certainly we are competing, everybody competes 
effectively on that business because small hotels cannot handle 
the large conventions, and consequently work with the 
government very much in accommodating their traveling guests.
    Mr. Pence. Ms. Christian-Christensen.
    Ms. Christensen. Thank you.
    The concessionaire businesses, 8(a) businesses and so forth 
is one that is of great concern to the subcommittee and, of 
course, the Congressional Black Caucus.
    The businesses that you are describing, are they certified 
disadvantaged businesses?
    Mr. Swift. Yes.
    Ms. Christensen. Are any of them 8(a)?
    Mr. Swift. On the construction side, some of them are 
probably 8(a). But on the concession side of the coin, that is 
generally not required of them to be 8(a), but they are all 
certified as to be----
    Ms. Christensen. Just on a general level, have you been 
experiencing some of the difficulties that have always been 
coming to the committee with getting contracts, getting 
concessions and so forth?
    And we are looking at the Ataran being argued again at the 
end of this month. Do you want tomake some comments just 
generally on the state of disadvantaged and minority businesses?
    Mr. Swift. Certainly. Considering the fact that the focus 
of AMAC is in support of that level of participation for women 
and disadvantaged businesses, we see no immediate future for 
AMAC to go away. In fact, we think our job and our 
responsibility has been strengthened because the need is 
greater.
    Unfortunately, far too many airports have taken the 
opportunity not to make this part of the fabric of their 
institutions, so there is some battles that we have to deal 
with it. If it was comfortable and everyone went with the idea 
that it is good business to do business with everyone in your 
community, there would be no need for a firm or a company or an 
organization such as AMAC.
    Ms. Christensen. Let us hope that as we have to work 
towards rebuilding the entire economy in light of what happened 
we can do it in such a way that strengthens it across the board 
for all Americans. I think that is a real challenge for us, but 
I think it is something that we really need to pay attention to 
in this particular time when there may be a window, some 
opportunity to strengthen all businesses.
    Mr. Swift. If I may add, that is one of the elements of 
this crisis period. It has underscored the fact that we are all 
Americans. No one was left out of the crisis.
    Ms. Christensen. That is right. Thank you.
    I do not have any further questions, Mr. Chairman, at this 
time.
    Mr. Pence. Thank you.
    I had one quick question, and then I will recognize the 
gentlelady for any closing remarks she might have, and we will 
wrap up this panel and this hearing.
    Mr. Chesebro, I had a question there. From the standpoint 
of common sense, there was talk immediately after September 
11th about an increase--increase usership of buses, that 
traffic had possibly increased for Greyhound services, not 
necessarily for airport shuttles and the like, which would be 
impacted.
    Some of your testimony seems to fly in the face of that. As 
you are here not only on your own behalf but on behalf of the 
industry as a whole, what has been, taking into account impact 
on shuttle services like yours and others, the overall impact 
on the events of September 11th on the busing industry, in your 
judgment? Positive, negative or breakeven?
    Mr. Chesebro. Well, like I say, I have a hard time 
answering for Greyhound. The ABA would be more representative 
of that than I would.
    Mr. Pence. Right.
    Mr. Chesebro. As a whole, some support companies, as I 
noticed when I flew into Dulles yesterday, the Super Shuttle is 
reaping the profits, and a lot of the cab companies coming this 
way with Reagan being closed.
    Myself, it has impacted me and the companies in the 
Orlando, general central Florida area. I can speak on behalf of 
them. And in that retrospect because with the travel agent 
industry considered also, that revenue is down on everybody's 
behalf in that area.
    Now, some areas of the country, like I say, some busing 
into--some sections of the busing industry probably are 
profiting from it.
    Mr. Pence. Very good. Any closing remarks from my 
colleague?
    Ms. Christensen. You know, I did have one other question, 
Mr. Chairman, to Ms. Adams.
    After the airline bailout bill, did the airlines offer to 
return to the old ticket reimbursement system for travel 
agents?
    I know you are very much aware with the Virgin Islands 
problem with that and as it affects all travel agencies, but 
particularly ours.
    Ms. Adams. Unfortunately, they did not offer us anything if 
that is what you are asking. We were already hurting from an 
August 20th wound when they cut our commissions by 60 percent. 
So going into September 11th, we were in bad shape by 60 
percent.
    If you can imagine being a small business owner and getting 
a fax at four in the afternoon on a Thursday to say tomorrow 
your income for the airline tickets is cut by 60 percent, and 
then that was August 20th.
    We were limping, we were hurting, but we have tenacity with 
small business people, we were scraping by, and then we got 
clobbered on September 11th.
    And no, we have had no communication of such from the 
airlines.
    Ms. Christensen. Well, just in closing, as I was saying 
during the break, the ripple effects from September 11 continue 
to get wider and wider, and it is clear from yesterday's 
testimony and today's that, you know, we need to approach this 
with some sense of urgency, especially with small businesses 
because they do not have the ability to hold on and hang on 
much longer.
    So, you know, we appreciate you coming. We appreciate your 
testimony. And we remain committed to addressing the issues and 
making sure that our small businesses--small businesses of all 
Americans in this country get through this period and prosper 
in the future.
    Mr. Pence. I too want to thank the panel, both panels for 
really outstanding presentation, and also want to express 
appreciation to my colleague and good friend, the gentlelady 
from the Virgin Islands, for her ongoing commitment to the 
tourism industry as evidenced by a colossal commitment of her 
time today in this subcommittee.
    I also appreciate very much my colleague's observation of 
the diversity represented on this panel. I thought Mr. Swift's 
comments were very eloquent and very moving. One of the flower 
growing out of the ashes of September 11th is the realization 
that we as Americans are all in this together and the unity 
that we have experienced on Capitol Hill, I think, is simply an 
extension of the unity that we sensed around the country.
    I want to hope--as many of you and people you represent and 
some of those who testified here today are going through 
difficult times, I hope that you will leave Washington 
encouraged by the interest that you have seen evidenced here 
and that I am sure you will hear as you meet with 
representatives throughout the day or however long you are in 
the nation's capitol.
    And I also want to leave you with the knowledge that I hope 
this has been as encouraging to you as it has been informative 
to this subcommittee. You have by your testimony today enabled 
us all on this subcommittee to be much more aggressive, much 
more informed in our advocacy of the interests of the small 
business community in the wake of September 11th, and for that 
I am personally grateful and am grateful on behalf of the 
subcommittee.
    With that, we are in a very timely way adjourned.
    [Whereupon, at 12:30 p.m., the subcommittee was adjourned.]
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