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77–046 2002

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

(

(II)

COMMITTEE ON SMALL BUSINESS

DONALD MANZULLO, Illinois, Chairman

LARRY COMBEST, Texas

JOEL HEFLEY, Colorado

ROSCOE G. BARTLETT, Maryland

FRANK A. LOBIONDO, New Jersey

SUE W. KELLY, New York

STEVE CHABOT, Ohio

PATRICK J. TOOMEY, Pennsylvania

JIM DEMINT, South Carolina

JOHN R. THUNE, South Dakota

MICHAEL PENCE, Indiana

MIKE FERGUSON, New Jersey

DARRELL E. ISSA, California

SAM GRAVES, Missouri

EDWARD L. SCHROCK, Virginia

FELIX J. GRUCCI, JR., New York

TODD W. AKIN, Missouri

SHELLEY MOORE CAPITO, West Virginia

BILL SHUSTER, Pennsylvania

NYDIA M. VELA ́ ZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

DANNY K. DAVIS, Illinois

BILL PASCRELL, JR., New Jersey

DONNA M. CHRISTENSEN, Virgin Islands

ROBERT A. BRADY, Pennsylvania

TOM UDALL, New Mexico

STEPHANIE TUBBS JONES, Ohio

CHARLES A. GONZALEZ, Texas

DAVID D. PHELPS, Illinois

GRACE F. NAPOLITANO, California

BRIAN BAIRD, Washington

MARK UDALL, Colorado

JAMES R. LANGEVIN, Rhode Island

MIKE ROSS, Arkansas

BRAD CARSON, Oklahoma

ANI ́BAL 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

SUE KELLY, New York

SAM GRAVES, Missouri

ROSCOE BARTLETT, Maryland

TODD AKIN, Missouri

PAT TOOMEY, Pennsylvania

ROBERT BRADY, Pennsylvania

BILL PASCRELL, JR., New Jersey

CHARLES GONZALEZ, Texas

DAVID D. PHELPS, Illinois

JAMES P. LANGEVIN, Road Island

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico

BARRY PINELES, Professional Staff Member

(III)

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

(1)

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,

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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

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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-dependent businesses 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.

4

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 nocost 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.

5

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.

6

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

7

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

8

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

9

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 LehighNorthhampton 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

10

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

11

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

12

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

13

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 deVerDate 11-MAY-2000 01:29 Jan 18, 2002 Jkt 077046 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 E:\HR\OC\A046.XXX pfrm04 PsN: A046
14

pendents 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.

15

As a result of the terrorist attacks, many aviation businesses nationwide have suffered unprecedented 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 onethird 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

16

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.

17

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 terrible loss 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.

18

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.

19

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.

20

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.

21

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.

22

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 some relief 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 busiVerDate 11-MAY-2000 01:29 Jan 18, 2002 Jkt 077046 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 E:\HR\OC\A046.XXX pfrm04 PsN: A046
23

nesses 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

24

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 which is 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.

25

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——

26

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

27

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

28

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 Vela ́zquez’s bill H.R. 3011.

As tragic as that is for us as individual Americans, failure to

pass immediately such legislation predicts 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

29

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.

30

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 Vela ́zquez, 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 criVerDate 11-MAY-2000 01:29 Jan 18, 2002 Jkt 077046 PO 00000 Frm 00034 Fmt 6633 Sfmt 6602 E:\HR\OC\A046.XXX pfrm04 PsN: A046
31

sis affecting small firms; however, I stress that this is an emergency situation which requires prompt congressional action.

Today, hundreds of small disadvantaged, women and minorityowned 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

existing leases 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 acVerDate 11-MAY-2000 01:29 Jan 18, 2002 Jkt 077046 PO 00000 Frm 00035 Fmt 6633 Sfmt 6602 E:\HR\OC\A046.XXX pfrm04 PsN: A046
32

cess, 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 loVerDate 11-MAY-2000 01:29 Jan 18, 2002 Jkt 077046 PO 00000 Frm 00036 Fmt 6633 Sfmt 6602 E:\HR\OC\A046.XXX pfrm04 PsN: A046
33

cated 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. They have 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

34

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.

35

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 or from 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 parttime drivers on the payroll, and a copy of that is attached.

36

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

37

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.

38

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

for operational 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.

39

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

40

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 to make 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.

41

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 eviVerDate 11-MAY-2000 01:29 Jan 18, 2002 Jkt 077046 PO 00000 Frm 00045 Fmt 6633 Sfmt 6602 E:\HR\OC\A046.XXX pfrm04 PsN: A046
42

denced 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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