U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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

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

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

21–705 PDF 2006

THE FINANCIAL CONDITION OF THE

AVIATION TRUST FUND: ARE REFORMS NEEDED?

(109–16)

HEARING

BEFORE THE

SUBCOMMITTEE ON

AVIATION

OF THE

COMMITTEE ON

TRANSPORTATION AND

INFRASTRUCTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

MAY 4, 2005

Printed for the use of the

Committee on Transportation and Infrastructure

(
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-Chair

SHERWOOD L. BOEHLERT, New York

HOWARD COBLE, North Carolina

JOHN J. DUNCAN, JR., Tennessee

WAYNE T. GILCHREST, Maryland

JOHN L. MICA, Florida

PETER HOEKSTRA, Michigan

VERNON J. EHLERS, Michigan

SPENCER BACHUS, Alabama

STEVEN C. LATOURETTE, Ohio

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

ROBERT W. NEY, Ohio

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

GARY G. MILLER, California

ROBIN HAYES, North Carolina

ROB SIMMONS, Connecticut

HENRY E. BROWN, JR., South Carolina

TIMOTHY V. JOHNSON, Illinois

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

BILL SHUSTER, Pennsylvania

JOHN BOOZMAN, Arkansas

JIM GERLACH, Pennsylvania

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

TOM OSBORNE, Nebraska

KENNY MARCHANT, Texas

MICHAEL E. SODREL, Indiana

CHARLES W. DENT, Pennsylvania

TED POE, Texas

DAVID G. REICHERT, Washington

CONNIE MACK, Florida

JOHN R. ‘RANDY’ KUHL, JR., New York

LUIS G. FORTUN ̃ O, Puerto Rico

LYNN A. WESTMORELAND, Georgia

CHARLES W. BOUSTANY, JR., Louisiana

JEAN SCHMIDT, Ohio

JAMES L. OBERSTAR, Minnesota

NICK J. RAHALL, II, West Virginia

PETER A. DEFAZIO, Oregon

JERRY F. COSTELLO, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JERROLD NADLER, New York

CORRINE BROWN, Florida

BOB FILNER, California

EDDIE BERNICE JOHNSON, Texas

GENE TAYLOR, Mississippi

JUANITA MILLENDER-MCDONALD,

California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

LEONARD L. BOSWELL, Iowa

TIM HOLDEN, Pennsylvania

BRIAN BAIRD, Washington

SHELLEY BERKLEY, Nevada

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

JULIA CARSON, Indiana

TIMOTHY H. BISHOP, New York

MICHAEL H. MICHAUD, Maine

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

BRIAN HIGGINS, New York

RUSS CARNAHAN, Missouri

ALLYSON Y. SCHWARTZ, Pennsylvania

JOHN T. SALAZAR, Colorado

JOHN BARROW, Georgia

(II)
SUBCOMMITTEE ON AVIATION

JOHN L. MICA, Florida, Chairman

THOMAS E. PETRI, Wisconsin

HOWARD COBLE, North Carolina

JOHN J. DUNCAN, JR., Tennessee

VERNON J. EHLERS, Michigan

SPENCER BACHUS, Alabama

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

ROBERT W. NEY, Ohio

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

ROBIN HAYES, North Carolina

HENRY E. BROWN, JR., South Carolina

TIMOTHY V. JOHNSON, Illinois

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

JOHN BOOZMAN, Arkansas

JIM GERLACH, Pennsylvania

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

CHARLES W. DENT, Pennsylvania

TED POE, Texas

JOHN R. ‘RANDY’ KUHL, JR., New York,

Vice-Chair

LYNN A. WESTMORELAND, Georgia

DON YOUNG, Alaska

(Ex Officio)

JERRY F. COSTELLO, Illinois

LEONARD L. BOSWELL, Iowa

PETER A. DEFAZIO, Oregon

ELEANOR HOLMES NORTON, District of

Columbia

CORRINE BROWN, Florida

EDDIE BERNICE JOHNSON, Texas

JUANITA MILLENDER-MCDONALD,

California

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

TIM HOLDEN, Pennsylvania

SHELLEY BERKLEY, Nevada

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

BEN CHANDLER, Kentucky

RUSS CARNAHAN, Missouri

JOHN T. SALAZAR, Colorado

NICK J. RAHALL II, West Virginia

BOB FILNER, California

JAMES L. OBERSTAR, Minnesota

(Ex Officio)

(III)

(V)

CONTENTS

TESTIMONY

Page

Blakey, Hon. Marian C., Administrator, Federal Aviation Administration ....... 9

Bolen, Ed, President and Chief Executive Officer, National Business Aviation

Association, Inc. ................................................................................................... 75

Boyer, Phil, President Aircraft Owners and Pilots Association ........................... 75

Coyne, James K., President, National Air Transportation Association .............. 75

Dillingham, Dr. Gerald, Director, Physical Infrastructure Issues, U.S. Government Accountability Office .................................................................................. 9

Faberman, Edward P., Executive Director, Air Carrier Association of America .......................................................................................................................... 75

Marlin, Ruth E., Executive Vice President, National Air Traffic Controllers

Association ............................................................................................................ 75

May, James C., President and Chief Executive Officer, Air Transport Association of America, Inc. ............................................................................................. 75

Mead, Hon. Kenneth M., Inspector General, Unites States Department of

Transportation ...................................................................................................... 9

Plavin, David Z., President, Airports Council International-North America,

on behalf of Airports Council International-North America and American

Association of Airport Executives ....................................................................... 75

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Boswell, Hon. Leonard, of Iowa .............................................................................. 115

Carnahan, Hon. Russ, of Missouri ......................................................................... 126

Costello, Hon. Jerry F., of Illinois .......................................................................... 127

Holden, Hon. Tim, of Pennsylvania ....................................................................... 180

Millender-McDonald, Hon. Juanita, of California ................................................. 276

Oberstar, Hon. James L., of Minnesota ................................................................. 279

Porter, Hon. Jon, of Nevada ................................................................................... 291

PREPARED STATEMENTS SUBMITTED BY WITNESSES

Blakey, Hon. Marian C ........................................................................................... 88

Bolen, Ed .................................................................................................................. 104

Boyer, Phil ................................................................................................................ 117

Coyne, James K ....................................................................................................... 130

Dillingham, Dr. Gerald ........................................................................................... 140

Faberman, Edward P .............................................................................................. 173

Marlin, Ruth E. ........................................................................................................ 183

May, James C. .......................................................................................................... 241

Mead, Hon. Kenneth M ........................................................................................... 261

Plavin, David Z ........................................................................................................ 284

SUBMISSIONS FOR THE RECORD

Blakey, Hon. Marian C., Administrator, Federal Aviation Administration: ......

Response to a question from Rep. Costello ........................................................ 100

Response to a question from Rep. Oberstar ....................................................... 102

Dillingham, Dr. Gerald, Director, Physical Infrastructure Issues, U.S. Government Accountability Office, response to a question from Rep. Oberstar ......... 170

Mead, Hon. Kenneth M., Inspector General, U.S. Department of Transportation, Audit Report, Contract Towers: Observations on FAA’s Study of

Expanding the Program, AV-2000-079, Issued April 12, 2000 ......................... 32
Page

VI

ADDITION TO THE RECORD

Priddy, Ronald N., President, National Air Carrier Association, statement 292
(1)

THE FINANCIAL CONDITION OF THE AVIATION TRUST FUND: ARE REFORMS NEEDED?

Wednesday, May 4, 2005

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

AVIATION, WASHINGTON, D.C.

The committee met, pursuant to call, at 10:06 a.m., in room

2167, Rayburn House Office Building, Hon. John Mica [chairman

of the subcommittee] presiding.

Mr. MICA. I would like to call the House Aviation Subcommittee

hearing to order. I welcome everyone today. The order of business

is going to be opening statements by members, and then we have

two panels of witnesses. The subject of today’s hearing is the financial condition of the Aviation Trust Fund and what reforms are

needed. I will begin with my comments, and then yield to other

members.

Today’s hearing will focus, as I said, on the condition of the Aviation Trust Fund, in both the short term and also for the long term.

We have to ask ourselves some questions. One of them is, is our

current system of financing our Nation’s air traffic control system

and the Federal Aviation Administration broken?

Trust Fund revenues are down significantly from the levels that

were projected prior to the terrorist attacks of September 11, 2001.

The 9/11 attacks, combined with weak economic conditions and

lower airfares, resulted in three consecutive years of declining trust

fund revenues. It went from $10.5 billion in fiscal year 2000, to

$9.3 billion in fiscal year 2003.

Although revenues now appear to be on an upward trend once

again, the uncommitted cash balance in the Trust Fund has been

dramatically reduced, from $7.3 billion at the end of fiscal year

2001, to only $2.4 billion at the end of 2004.

This raises the short-term question, given the uncertainty surrounding these revenue projections and the possibility that revenues will be even less than currently forecast, what if anything

should be done now to ensure that the uncommitted cash balance

does not reach zero before the next aviation reauthorization bill,

which will take effect in fiscal year 2008?

There is also a long-term issue of how to best finance our aviation system needs for the future. The cost of modernizing our system and expanding capacity to meet future travel demand we know

will be significant. Yet, the Administration’s current budget proposes to cut funding for aviation capital investments and some

other critical areas.
2

As the Department of Transportation Inspector General Ken

Mead testified before this Subcommittee last month, the current

budget level for the FAA capital account is not sustainable. We will

hear from him again today.

With the funding level currently proposed by the Administration,

at the level they are proposing, there is little room for the FAA to

pay for both current systems and simultaneously take on any new

initiatives. This is not acceptable, I think, for anyone here.

The Transportation and Infrastructure Committee has long

worked to ensure that user revenues collected by the Transportation Trust Funds are actually made available to be invested for

the purposes for which they are collected.

The committee addressed this issue for the Aviation Trust Fund

most recently in AIR 21 and also in Vision 100, by requiring Trust

Fund revenues to first be used to fully fund the FAA’s capital programs before being used to pay any portion of the FAA’s operating

costs.

Unfortunately, the President’s budget has routinely ignored this

requirement by proposing to cut funding for FAA’s capital programs below the authorized levels, and use excessive amounts from

the Trust Fund balance, to pay for FAA operations. Clearly, we

need some reforms to ensure that aviation capital needs are not

shortchanged in a budget process that tends to defer long-term capital investments in order to meet short-term operating needs.

In preparation for the next reauthorization bill, when our current

aviation excise taxes must either be extended or replaced, Transportation Secretary Mineta and FAA Administrator Blakey have

called for a dialogue on alternative ways to finance our aviation

system in the future. Hopefully, we will hear some of those comments from the administrators today.

The FAA believes that certain industry trends, such as lower airfares and the use of smaller aircraft, will exacerbate the mismatch

between its workload and also its projected revenue for the future.

Cost-based user fees are often mentioned as one way to link aviation revenues more closely to FAA’s costs, and potentially to its

funding. Cost-based user fees have been recommended for the FAA

by various Commissions in the past, and most recently by the Mineta Commission, I believe, in 1997.

Last month, the Aviation Subcommittee held a hearing on how

other countries provide air traffic control services. Many countries

now rely on user fees for providing air navigation service to aircraft. In general, these countries use a formula based upon aircraft

weight and distance flown, as outlined in ICAO standards.

With the recommendations of the Mineta Commission, and the

widespread use of user fees in other countries, we probably should

take some time to review the possibility of converting to a user fee

system here in the United States. I am sure that will be part of

our discussion. As part of this process, we need to look at who is

paying what, and how what they are paying matches with the

FAA’s cost of providing services to each user group.

We also need to raise the question of what is the appropriate

General Fund contribution to the FAA’s budget. How much of what

FAA does is in the national interest versus for the benefit of indi-
3

vidual users? What services, if any, do policymakers wish to subsidize? These are all important questions.

We also need to look at the idea of bonding, which is seen by

some as an attractive way to modernize our air traffic control system without requiring the user to pay all of the investment up

front.

While this may make sense if the FAA had a well-defined investment plan that would provide to our aviation system users a rate

of return sufficient to repay the debt, it is by no means the only

‘‘silver bullet’’ to solve the problem.

It will not provide free money. There would likely be no budget

scoring advantage to this approach, compared to traditional appropriations, at least the way we now score it.

In addition, it would likely cost more to borrow funds in the private market than it would for the Treasury to finance the investments that are needed directly.

We need to ask many questions today, and hopefully get answers

from some of the witnesses we have before us. I commend the Department of Transportation and FAA Administrator Blakey for

helping start this dialogue, and I look forward to hearing the views

of all segments of the aviation industry who will be represented

and speak here today. I am pleased now to yield to our Ranking

Member, Mr. Costello.

Mr. COSTELLO. Mr. Chairman, thank you, and I want to thank

you for calling this important hearing today on the financial condition of the Aviation Trust Fund. I do have a lengthy statement that

I will submit for the record, and I do have some comments on today’s hearing.

First, there is no disagreement that the Trust Fund’s uncommitted balance has declined over the past few years. As you noted in

your opening statement, at the end of fiscal year 2000, the Trust

Fund’s uncommitted balance was a little more than $7 billion. At

the end of fiscal year 2004, the Trust Fund’s uncommitted balance

fell to just under $2.5 billion.

As Mr. Mead, the Inspector General, will testify here today,

Trust Fund revenue estimates for the last few years have been

overly optimistic. For fiscal year 2004, the actual receipts plus interest credited to the Trust Fund was 12 percent less than projected. The shortfall between projected revenues and actual revenues has been made up from the Trust Funds uncommitted balance.

A major question before the Subcommittee today is, are the

FAA’s revenue projections reliable? To its credit, the FAA has initiated an independent review of its aviation activity and revenue

forecast system. The downturn in passenger travel after September

11th clearly had an impact on the Trust Fund; and also changes

within the airline industry are affecting Trust Fund revenues, as

well as the FAA’s ability to forecast those revenues.

The growth of low cost carriers and fare reductions by legacy carriers have driven passenger ticket tax returns that account for

about 50 percent of annual trust fund revenue. The FAA is predicting that the Trust Fund revenue will increase over the next few

years. Yet even with this projected increase, the FAA believes that
4

revenues would be less than we forecast when Vision 100 was enacted in 2003.

I believe that Dr. Dillingham of the GAO will testify this morning that if revenues are 10 percent less than now projected under

the current law, the Trust Fund’s uncommitted balance would

reach zero by 2007. If traffic is less than expected or fares drop,

we will need to consider measures to address the shortfall, which

could include cutting the FAA’s programs, raising taxes, or obtaining a larger General Fund contribution.

As to the possibility of cutting the FAA’s programs, last month

we heard from Mr. Mead, the Inspector General. This subcommittee heard his testimony, and he clearly indicated that we cannot

continue to cut the FAA’s capital budget and transform the national airspace system for the 21st century.

Regarding the General Fund contribution, I strongly support the

provisions that Congress enacted in Air 21, particularly the guaranteed funding provisions and the Trust Fund in general contribution formula. The FAA’s programs should be fully funded at their

authorized levels. If the Trust Fund revenues fall short, the General Fund should continue whatever it takes to meet the authorized

levels.

Mr. Chairman, as you suggested in your opening statement,

there are a number of alternative financing ideas that have been

put on the table. One is the wholesale adoption of cost-based user

fee. While I am open to all ideas, I think the idea of switching to

a user fee system raises more questions than answers.

Additionally, some have suggested that Congress ought to consider alternative financing such as bonding. However, before Congress considers bonding authority, I believe the FAA should explain

precisely what it would purchase with this authority, and how the

authority will impact the Federal discretionary budget.

Mr. Chairman, these are important issues that we are dealing

with today for the future of aviation, and I want to thank you

again for calling this important hearing. I welcome our witnesses

who will be testifying today, and I look forward to hearing their

testimony.

Mr. MICA. I thank the gentleman. Mr. Coble?

Mr. COBLE. Mr. Chairman, I am plagued with an allergy, and I

think my voice would sound annoying. So I will waive an opening

statement.

Mr. MICA. Well, we will go to Ms. Kelly. I think she is in fine

voice.

Ms. KELLY. Thank you, Mr. Chairman, and I want to thank all

the witnesses. The aviation industry contributes $900 billion to the

United States economy every year. The skies over the United

States of America are the safest in the world, and I think it is crucial that we make the investment necessary to modernization and

infrastructure improvements, so that the rates of returns and the

success that we see now continue.

I am not sure that using the Trust Fund as the chief means of

funding for operating expenses is the best way to make an investment; nor am I convinced that altering the collection of fees would

not have a profound and detrimental impact on our General aviation system.
5

In her testimony, Administrator Blakey states that there is a

need for an open dialogue in regard to the future of the Trust

Fund. I could not agree more. I am delighted to see that statement

there.

It is critical that all aspects of the aviation industry, from commercial airlines to General aviation, to the controllers who make

our skies the safest in the world, have their voices heard on how

the monies will be collected and how they will be spent.

With two years remaining before the current authorization expires, the decision of the Administrator and Secretary Mineta to

listen to all the voices is a demonstration of sound judgment. I

hope they do indeed keep an open ear.

It seems that passenger levels are returning to our pre-9/11 levels, and the projections are for over one billion passengers per year

in the near future. So the decisions we make in the next couple of

years are going to have a significant impact on our ability to handle the new strain on that system.

Right now, two thirds of the world’s aviation dollars are spent

right here in America. I would like to keep it that way. So I look

forward to the testimony of all of our witnesses, and to hearing

their answers on how we are going to solve today’s problems, so we

do not have them tomorrow.

Thank you, and I yield back the balance of my time.

Mr. MICA. I thank the gentlelady. Ms. Tauscher?

Mr. TAUSCHER. Thank you, Mr. Chairman, and thank you for allowing me to make this brief statement this morning.

As the Chairman has already described, the Aviation Trust Fund

faces an unpredictable future. I look forward to today’s conversation about the current state of the trust fund, and what I am sure

will be a lively discussion of future reforms.

While most witnesses will discuss the financial health of the

Trust Fund and their ideas for ensuring its ability to fund aviation

needs into the future, I believe it is equally important to discuss

additional steps that the FAA must take to determine cash flow expenditures and priorities for present and future capital expenditures.

Before Congress makes any changes that would alter the Aviation Trust Fund funding formula, we must require the FAA to continue to thoroughly examine how to control costs and make decisions on projects which have been delayed for years.

For example, for several years, I have questioned the FAA’s procurement for modernization of terminal air traffic control facilities.

The cost of the program adopted by the FAA has now, according

to the DOT, reached over $2 billion, some $900 million over budget.

Beyond continuing to update program baselines for this project,

the FAA must make realistic assessments about its commitment to

programs with skyrocketing price tags. I believe that during his

testimony today, the Inspector General will speak more to the need

of the FAA to continue assessing its future requirements, before

additional revenue streams are explored. I thank him in advance

for bringing this important issue to the attention of the Subcommittee.

I would also like to thank Administrator Blakey for her willingness to continue to provide me and the Subcommittee with thor-
6

ough answers to our questions and for taking time to be with us

this morning.

Mr. Chairman, I thank you for the time and I yield back.

Mr. MICA. I thank the gentlelady. I now recognize the pilot from

North Carolina, Mr. Hayes.

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

the hearing today. It is vitally important that we maintain the balance with the system, as Mr. Costello, Ms. Kelly, and Ms. Tauscher

and others have said. As we look at the Trust Fund today, I think

it is very important that we do not get carried away with the idea

of user fees. I do not see exactly how that is going to get us anywhere.

I appreciate all the participants being here today. The fuel tax

and how that affects General aviation, and their ability to pay their

fare share into the system seems to be the way to go.

The Energy Bill, with more reasonable costs of energy, with cooperation between the airlines, I think we can achieve what we do

need to achieve and what we all are looking for. Again, I applaud

the FAA air traffic control system, providing the kind of safety, efficiency, and consistency that we all have come to know and, hopefully, appreciate.

I look forward to hearing the panelists today. Again, let us make

sure it stays fair and balanced. Thank you very much, Mr. Chairman, and I yield back.

Mr. MICA. I thank the gentleman. Ms. Norton?

Ms. NORTON. Thank you very much, Mr. Chairman, for helping

us, I hope early, to face the dilemma that confronts us with the

Aviation Trust Fund. When everyone deals with capital costs in the

Federal sector, from the Federal Government, you have got to take

yourself out of the real world and into the way we do it. The upfront funding of capital costs is done only here by the Federal Government.

I am on another committee, and I have to tell you that whereas

nobody in the real world would do real estate that way, that is the

way we do real estate in the District of Columbia. You have to authorize and appropriate the entire amount before you can put a

shovel in the ground.

I agree that if there is barring from the Treasury to be used for

capital costs, it obviously comes at a reduced cost. But I have to

ask, compared to what? I do not know if bonding fits. Frankly, I

am so distressed at the state of the Aviation Trust Fund, that I am

open to any and all ideas.

But one idea is this. Obviously, it seems to me, it is one that

would have to be off the table, given the pathetic, or should I say

to be polite about it, terrible state of major airlines in our country.

I am very pleased to see that regional and large airline representatives are going to be here to testify, so that we get a more

vivid picture. But the notion of increasing user fees, particularly at

this moment in time, would seem to be unthinkable.

It is like what this Congress says it will not do most of the time,

like increasing taxes. I just do not even see how that is a reasonable or practical alternative.

I do know this. If you were to think of the multiple ways in

which you define what a great power is, one of the ways would be
7

to look at its airline industry. When you see where ours is, you recognize that the decline of our airline industry has an effect on the

economy and on commerce in the United States, that a great power

simply cannot afford.

I think that we need some action to clarify this matter in what

I, Mr. Chairman, am the first to concede is a real dilemma. I think

we ought to be open to practical action that strengthens the airline

industry and strengths the Aviation Trust Fund. Thank you very

much, Mr. Chairman.

Mr. MICA. I thank the gentlelady. Mr. Poe?

Mr. POE. I appreciate you holding this hearing today, and I want

to thank the witnesses who are appearing.

The current statutory formula as expressed in the Aviation Investment Reform Act for the 21st Century requires that Trust

Fund revenues first be used to fully fund the FAA’s capital programs, such as the Airport Improvement Programs, facilities, and

equipment, at the authorized levels; and also fund research and development before being used to fund FAA operations.

Mr. Chairman, I represent the Greater Houston Area. Houston

is the fourth largest city in the United States; and our city’s airport

system has undertaken many major infrastructure improvements

over the last few years at George Bush Intercontinental Airport

and Hobby Airport, to meet dramatically increasing traffic demands. These include large capital investments, including new terminals, new runways, and other infrastructure improvements.

Airport improvements alone though cannot meet the projected

demands placed on the aviation infrastructure unless the pace of

the air traffic control modernization keeps up and the investments

in these facilities can be effectively utilized.

The peak arrival rate at Intercontinental Airport is capped at

147 flights per hour, and that level is already being reached during

peak operational periods. According to forecast, the peak arrival

rate per hour will rise to 220 by 2020.

The Houston air traffic system was created in 2001 as a vehicle

for funding a new Houston TRACON, terminal control facility, or

FAA facility that controls arriving and departing aircraft and traffic in a 50 mile area.

Both the old facility and the equipment are in dire need of replacement in order to meet the increasing demand. The facility’s

age and location make it unreliable, due to the fact that it is below

sea level and our last hurricane flooded the entire system.

It is also in a non-secure area, because it is close to a farm to

market road. In addition to the looming congestion problem, inadequacies of the current TRACON facility forced the FAA to use inefficient sequencing of traffic arriving in and departing from Houston airports. Frankly, this has contributed significantly to neighborhood noise complaints.

Monday night, I had a townhall meeting for over 300 people, who

were complaining about the FAA’s inability and lack of moving forward with the TRACON facility because of the noise. Funding for

the construction of a new TRACON facility has been approved and

appropriated by Congress over the last two fiscal years, and the

FAA has studied the issue for several years; yet, nothing has happened.
8

Even the City of Housing has allocated 100 acres of Texas land

free, at no cost to the Government, for construction of this facility.

However, the FAA is still not committed to beginning construction,

and no one knows when this will happen.

I, as well as many other members on both sides of the aisle from

the Houston area, believe strongly that this decision must be made.

Given that the current arrival rates at this airport are at the maximum levels during peak periods, another further delay in beginning construction will make it impossible for the airport system to

meet community air service growth needs, as well as responding to

the growing noise concerns by the numerous area residents.

So briefly, I would like to know what the timetable is for the

FAA’s decision on building the new TRACON for Bush Intercontinental Airport. Thank you, Mr. Chairman.

Mr. MICA. I thank the gentleman. Ms. Boswell?

Mr. BOSWELL. Thank you, Mr. Chairman, I appreciate you having this very timely meeting. If we think of the precarious condition that we find out Nation’s airline industry in, this is truly an

important and timely hearing to examine the condition of the Aviation Trust Fund.

It is important for us to take a moment and determine where we

have been, where we are, and where we are going with our aviation

system. I, like many members of this Subcommittee, am a strong

proponent of our Nation’s aviation infrastructure. To maintain our

first-rate system, adequate resources must be available.

Some have raised concerns about the future and how we can

maintain FAA operations and capital investments with our present

funding situation. The shrinking discretionary portion of the Federal budget raised great concern about our ability to maintain existing FAA operations and capital improvements.

There has been some discussion, but unfortunately it has been

minimal, of raising user fees on aviation users, both on passenger

and General aviation. In my opinion, this would be not only unwise, but harmful to our aviation system.

With our Nation’s airlines already hemorrhaging red ink, any additional fees would certainly hasten their demise. As a strong proponent of General aviation, I am an aircraft owner and a pilot myself. I maintain our GA users already pay a fair share for the use

of the system. I would strongly oppose any effort to change the fee

structure already in place. Thank you, Mr. Chairman.

Mr. MICA. I thank the gentleman. Do any other members have

opening statements?

[No response.]

Mr. MICA. If not, we will go right to our first panel of witnesses.

We welcome back some repeat offenders here. We have the Honorable Marion Blake, Administrator of FAA; the Honorable Kenneth

Mead, Inspector General, Department of Transportation; and Dr.

Gerald Dillingham, with GAO. They have changed it to Government Accountability Office. I will never get used to that.

We welcome all three of you back, and we look forward to your

testimony today. Let us hear first from Administrator Blakey; welcome, and you are recognized.
9

TESTIMONY OF THE HONORABLE MARIAN C. BLAKEY, ADMINISTRATOR, FEDERAL AVIATION ADMINISTRATION; THE HONORABLE KENNETH M. MEAD, INSPECTOR GENERAL, UNITED

STATES DEPARTMENT OF TRANSPORTATION; DR. GERALD

DILLINGHAM, DIRECTOR, PHYSICAL INFRASTRUCTURE

ISSUES, UNITED STATES GOVERNMENT ACCOUNTABILITY

OFFICE

Ms. BLAKEY. Thank you, Mr. Chairman, and I must tell you, I

very much appreciate the opportunity that you and Congressman

Costello have given us, and the members of the Subcommittee.

Thank you for the opportunity to be here.

I am here today because we have a problem with the Aviation

Trust Fund. As you know, the Trust Fund pays a large share of

the bills for the FAA to operate the National Airspace System.

A troubling gap has begun to emerge between the revenue that

comes in and what it costs to run the FAA. This has driven down

the Trust Fund’s uncommitted balance very sharply.

The taxes and fees that support the Trust Fund all expire in

2007. I would like to commend this Subcommittee for your foresight in recognizing the urgency of this matter.

The time we spend addressing these issue today will pay considerable dividends in the future. In fact, unfortunately, during the

last reauthorization in the mid-1990s, the debate lasted nearly two

years. The taxes and fees expired, and the aviation system lost

about $5 billion which, of course, was never recovered.

This time, there is very little cushion. Because of today’s higher

revenue and appropriation levels, the expiration of taxes without

replacement could be even more costly. So we cannot allow it to

happen.

For this reason, last week Secretary Mineta and I convened a

day and-a-half forum on the Trust Fund. More than 150 leaders

from Government, industry, and Wall Street gathered to discuss

the issues and make recommendations.

I brought along two charts to depict the problem at hand. As you

can see in chart number one here to my left, today there is a significant gap between the revenue coming into the Trust Fund and

the costs of what it takes to run the system.

There are three factors to consider. First, the excise taxes expire

in 2007. Second, airline prices are dropping, and that is largely

what fuels the Trust Fund. Number three, the shape of the industry itself is changing rapidly.

Despite our forecasts, we cannot be sure what the aviation industry will look like in the future, or the revenue it will generate. Because of a disconnect between the Trust Fund’s revenue stream

and our costs, the revenue generated for the Trust Fund is unlikely

to cover the FAA’s costs, particularly as they grow over time with

the volume of traffic increasing in the system.

The second chart over here to my right shows that the uncommitted balance in the Trust Fund continues to drop. You would

have to go all the way back to 1983 to find a lower balance in a

year when taxing authority did not expire.

In prior years, relatively higher ticket prices helped keep the

Trust Fund solvent, enabling the FAA to make investments for the

future, while operating the world’s safest transportation system.
10

But the chart points to an unfortunate and undeniable trend.

This is not going to change any time soon. Low cost carriers are

now the most significant driver of industry pricing. Because over

half of the Trust Fund receipts come from a 7.5 percent excise tax

on airline tickets, these lower fares decrease Trust Fund revenue

without any corresponding reduction in FAA workload.

In addition, the airlines are taking many more deliveries of

smaller aircraft. By 2008, we forecast that the United States regional jet fleet will be four times the size it was in 2000. Similarly,

the United States business jet fleet will be approximately 50 percent larger than its 2000 levels. This means more aircraft, but decreased revenue per aircraft, using the air traffic control system.

There are also implications for our certification activities, as well.

To date, there are 16 airlines waiting in the queue for certification.

That is 16 new carriers, which will mean increased duties for our

inspectors, who also have to oversee all those additional pilots,

planes, and crew.

The increased workload is further compounded by a new generation of UAVs and micro-jets, and they are coming at us. This increased workload does not factor in the simple and direct costs of

our safe, but aging, infrastructure, as a number of you have noted

this morning. Estimated replacement costs of all of our assets right

now is $32 billion. Of course, this does not address the looming

need to move to the next generation system.

As this Committee well knows, we have made great strides in operating the FAA like a business, and conserving everywhere we

know to. We have a new financial and cost accounting system, and

I am very proud of the hard work and the success we have had at

cutting costs. But I do not think we can get to be where we need

to be, from the standpoint of this picture.

We are consolidating HR and accounting. We have increased our

productivity. We dropped over 1,300 staff in the ATO last year

alone. We contracted out the network of flight service stations,

which were costing us approximately $500 million per year to operate. Unfortunately, those facilities had become very old, and the

equipment was outdated. We will save the taxpayer $2.2 billion by

that.

But cost cutting alone will not enable us to close the existing gap

between the revenue stream into the Trust Fund and FAA costs.

This presents a very unattractive list of options.

Do we cut services, such as air traffic control, certification, inspection? Instead of buying new equipment when we need to, do we

just retain and try to maintain the aging infrastructure?

Now there are those who would still like to believe that the future of the Trust Fund is not in trouble; or at the very least, it is

not as bad as it seems. They say our revenues will increase as passengers make their way through the turnstiles more than ever before, and somehow it is all going to be okay.

But unfortunately, the funding gap is very real. In our recent

forecast, just as has been noted this morning, our forecasts have

been too rosey. Given the deficit and other issues of national and

international concern pulling at the General Fund, we cannot plan

a greater share of the General Fund, a greater slice of that pie, is

going solve our problems.
11

The reality is that the General Fund is tight, very tight. The Administration supports its use for part of the systems cost. But it

just is not our answer to our long-term needs. We have to explore

funding options that are in the long-term best interests of the aviation industry and the FAA.

As you are aware, just last December, Secretary Mineta launched

the plan for America’s next generation air transportation system;

a system that Europe and others are already moving out smartly

on. It aligns the revenues, resources, and plans of seven different

Government groups.

But certainly, no one thinks that the Trust Fund, as it is constituted now, can pay to make the capital investments for the next

generation system. So the fair question remains, how can we afford

it? The answer, equally plain, is that we cannot afford not to.

In closing, I cannot overstate what has become all too clear. The

FAA needs a consistent, stable revenue stream, one that is fair to

all users of the system, and one that is not tied to the price of an

airline ticket; a revenue stream that reflects our actual costs to

provide the service.

Now look, at this point, I am not endorsing new taxes or user

fees. But we must address the gap that exists between our costs

and our revenues. It is the only way we will be able to operate and

maintain the world’s safest system with the capacity our economy

needs. To be ready for tomorrow, we have got to start on this

today. Thank you for doing so.

Mr. MICA. Thank you for your testimony. We heard some partial

bad news, and now we will get the really bad news from Mr. Mead;

welcome, go right ahead.

Mr. MEAD. I would just say, for Secretary Mineta, Administrator

Blakey, and this Subcommittee, you are taking an important step

by starting to address this issue now. It is a couple years in advance of the reauthorization. There are very contentious issues. It

is good to start thinking about them.

I would like to speak first about the financial shape of the FAA.

For as long as I have been associated with this issue, the big issue

has focused on the increasing revenues in the Trust Fund, and why

are they not being spent? The build up of big uncommitted balances was the focus of the debate.

That is no longer the case. Like the airlines, the FAA now faces

a significantly changed landscape. Air traffic levels continue to

show improvement, but expected Trust Fund revenues are not materializing. FAA in 2001 estimated over $14 billion in 2005, but current pro- jections indicate collections of about $11 billion. That is $3 billion

less than FAA expected.

A chief reason for this, as has already been pointed out, is the

7.5 percent ticket tax yield, especially for business fares. A frame

of reference, in March of 2000, the average cost of a ticket for a

1,000 mile flight was $150. In March of this year, the same ticket

was about $118. So that is a pretty big drop.

A lot of people think that that is a permanent change. FAA’s

budget, meanwhile, is remaining relatively flat, about $14 billion.

Within that amount, FAA’s operations account, which is mostly

staff, salaries, and so forth, has seen back-to-back increases.
12

At the same time, the airport account and the capital account,

have seen reductions of a half billion hit each. As we testified last

month, the current level of capital funding is not sustainable. Why

is this? It is because long-delayed ACT projects have experienced

so much cost growth of nearly $5 billion over original estimates,

that there is little room for new initiatives.

Growth in the operations account, a high salary base, and the

need to hire additional controllers to replace those that are retiring, are also major contributing factors.

So taken together, those factors explain why most of FAA’s efforts now focus just on keeping the shop running. That is also why

there is so much discussion about how to finance air traffic management initiatives.

I would like to speak to controlling costs and determining requirements. I see four pre-conditions for determining the extent of

the financial shortfall and whether additional revenue streams are

needed.

First, FAA needs to determine its current cash flow requirement

for what is already on its plate, and make decisions on big modernization programs that have been long delayed like STARS.

Second, FAA needs to determine what the agency can do, in addition to what it is already doing, to control costs and curb waste and

efficiencies. We outlined a number these things before the Subcommittee last month, Mr. Chairman. Among them was getting a

firm control on huge indefinite quantity contracts, valued at over

$2 billion, and taking proactive steps with the new $2 billion program that we have placed to replace computer and hardware platforms at en route centers. Actually, it is the computer brain that

runs high altitude air traffic.

Regarding support contracts, we have got serious concerns over

exactly how some contractor work is differing from the work that

FAA employees do, but at much greater cost to the Government;

sometimes double.

Third is getting FAA’s cost accounting system in place and a

labor distribution system. That is a must-have for anybody that

wants to operate like a business. Taxpayers have already paid

more than $50 million for this, and the system has been delayed

for years.

But I am very pleased to report that FAA is making very real,

significant progress here. This is a very meaningful change from

the past, and it is a tribute to the commitment of Administrator

Blakey and her team.

Fourth is determining the funding requirements for the next generation ATC system; what capabilities will be pursued, and when

they can be brought in line. If more dollars are needed, the banker

needs to be told how much, when, and for what. FAA expects to

have this information later this year.

Let me talk about financial options for a moment. I think once

the FAA takes these four steps, Congress and the Administration

will be in a better position to judge exactly what the financial requirements are and explore options.

None of these options are painless. I will speak first to the General Fund. Over the past 10 years, the General Fund has provided,

on average, about 21 percent of FAA’s budget. General Fund con-
13

tributions for FAA’s budgets have dropped sharply, however, from

$3.2 billion in 2003, to $1.6 billion estimated for 2006. The general

fund will represent 11 percent of FAA’s FY 2006 budget. So that

is a pretty big shift.

Given the competition for Federal funds from other Federal programs and the current Federal deficit, it is going to be a heavy lift

to expect a General Fund increase beyond what has historically

been provided.

I do think, though, that the debate on financing would be much

better informed if the specific level of funding from the General

Fund was identified for planning purposes.

Taxes, the ticket and the segment tax combined, make up about

70 percent of Trust Fund revenues. As was noted in the National

Civil Aviation Review Commission Report in 1997, there has been

controversy about the equity of the current system, and whether all

users are paying their fair share.

Even if higher tax rates were a consideration, the airlines contend that they cannot pass on any tax increases to the flying public. I think Administrator Blakey has pointed out in her testimony

quite well that the current tax structure really does not correlate

well with the cost of providing air traffic services. And she is right.

User fees, this is not a new idea, either. Efforts to adopt user

fees have met with stiff opposition from some quarters in the past.

Today, we are facing the same debate, but the landscape is somewhat different.

First, FAA is facing a much bleaker revenue forecast. Second,

they are much closer to having a cost accounting system in place

than they were the last time this subject came up. But the contentious issues of who should pay what, and whether each stakeholder

is paying their fair share remain unresolved issues.

In bonds and/or borrowing, I think this is a somewhat radioactive

subject, but I might as well bring it up. Bonding and borrowing,

this would allow FAA to sell bonds on the capital markets. This is

not a new idea, either. It too was recommended in 1997 by National Civil Aviation Review Commission. The idea here is that

bonding would give FAA the ability to raise large amounts of capital up front, and accelerate Air Traffic Modernization programs.

But granting FAA any type of borrowing authority is going to require legislation and consideration of complex budget scoring

issues, as well as impacts on the Federal deficit.

There are two basic bonding models. The first does not impose

any accountability, really, on the person borrowing the money. The

second one does.

The first, we call the Amtrak model, because it was a proposal

based several years ago in connection with Amtrak and inner city

passenger rail. Under this construct, bonds would be sold to the

capital markets, with a portion of the bond proceeds set aside to

repay the principal for 25 years.

You put it in a bank account or a high interest-bearing bank account, and by the time the bond matures, you have enough money

to pay back the face value. But rather than cash, investors would

be given a tax credit, to provide the return which is guaranteed by

the Government. A variant of this model is to pay cash and dedicate an existing tax for that purpose.
14

A serious problem with this construct, however, is that there is

little or no incentive for improving accountability. The investment

is essentially guaranteed. There are no incentives for cost control

or delivering a project on a budget or on time. The idea here ought

not to be just simply to give FAA more money, but to use funds

wisely with a direct link to airspace users.

That brings me to the second construct for bonding. This is more

akin to what happens in the private sector. Bonds would be issued

in the public markets. This type of bonding scenario is almost a

natural element of a financing system based on cost-based user

fees. Because the fees would provide a bondable stream of revenues, they could be adjusted up or down.

There is also a built-in accountability factor here. Namely, there

would be an oversight board that would set fees, not the FAA. This

arrangement would provide powerful incentives from users to deter

the cost growth and schedule slips that could be translated into

higher fees.

Finally, there is peak hour pricing. This whole debate about FAA

financing needs to be joined with the issue of peak hour pricing at

airports such as La Guardia. It presents difficult policy issues.

First and foremost is whether Congress should allow peak hour

pricing to begin with. If so, the questions become who sets the fees?

Who gets the funds? Does the airport get them? Does the FAA get

them, or does some combination of the two get them? What will the

funds be used for and what would their impact be on service to

smaller communities? Thank you, Mr. Chairman.

Mr. MICA. Thank you, and now we will hear from Dr. Dillingham

with the GAO.

Mr. DILLINGHAM. Thank you, Mr. Chairman, Mr. Costello, and

members of the Subcommittee. As most of you know, the Trust

Fund was established in 1970 to help fund the development of a

National Airport and Airway System. This graphic shows that the

revenues for the Trust Fund are derived from a series of taxes paid

by passengers and airlines.

The majority of those revenues come from the tax on airline tickets and the fee charged for each flight segment. When we look at

the Trust Fund revenues over time, we see that revenues have fluctuated from year to year, but have generally trended upward.

This graphic shows that during 1981 and 1982, the amount of revenue coming into the Fund was about $500 million. This was

lowest amount in the Fund’s history, and was due in part to the

lapsing of the aviation taxes.

The dip you see on the graph for 1996, again, reflects the lapsing

of the aviation taxes. In 1999, you can see that the revenues flowing into the Trust Fund total about $11 billion, which was the largest amount in the Fund’s history. After 1999, the amount of revenue started to trend downward.

There are several key factors that contributed to this decline in

revenues. First was a dramatic drop in passenger boardings, that

was exacerbated by 9/11 and the SARS outbreak. Another significant factor was the increased growth of low-cost carriers and fare

reductions by the legacy carriers.

Now I would like to turn to how the Trust Fund revenues were

expended. In this 2004 example of the Trust Fund expenditures,
15

operations accounted for 43 percent. AIP and F&E accounted for 29

and 27 percent, respectively.

This graph, which shows historical trends in Trust Fund revenues and expenditures, indicates that the amount of money flowing

out of the Trust Fund to FAA’s major accounts has generally increased each year; and that between 2002 and 2004, expenditures

exceeded revenues.

This graph shows that the principle reasons for the increase in

Trust Fund expenditures are the increases in AIP grants shown in

blue, and the increases in the amount of FAA operations that were

funded by the Trust Fund that are shown in red. AIP has increased

from about $1.5 billion, in 1998, to $3.5 billion today.

This graph shows the operations budget over time, with the

Trust Fund contributions shown in red, and the General Fund contributions shown in blue. It shows that from the time the Trust

Fund was established, it has paid some portion of FAA’s operations.

It also shows that in 1972 and in 2000, the Fund provided 100

percent of the cost of operations, and is expected to cover about 63

percent in 2005.

As a result of the changes in revenues and expenditures, this

graph shows that the size of the Fund’s uncommitted balance has

started to decrease substantially. It shows that the uncommitted

balance decreased from $7.3 billion in 2001, to $4.8 billion in 2002,

and has continued to decrease by about $1 billion each year since.

Now I want to focused on the aspects of our work that focus on

the projected outlook of the Trust Fund from 2006 and beyond. We

examined the possible outcome of the Trust Fund under Vision 100

authorization and the President’s 2006 budget proposal. Our preliminary findings indicate that the Trust Fund will have sufficient

revenue to fund authorized spending and end each year with an

uncommitted balance through 2007.

This is true both under Vision 100’s scenario shown in blue, and

the President’s 2006 budget proposal, which is shown in yellow. It

is important to note that these Trust Fund projections are very

much dependent upon achieving forecasted traffic levels and air

fares.

As you can see in this next graph, during four out of the last five

years, FAA has over estimated the revenues going into the Trust

Fund. During 2003 and 2004, the actual revenues fell short of forecasted revenues by almost $1 billion each year.

To take this circumstance into account, we also conducted a sensitivity analysis, wherein we examined the future of the Trust

Fund under alternative scenarios. For this analysis, we assumed

five and ten percent less tax revenues going into the Fund.

The preliminary results of that analysis shows that if revenues

were five percent lower than the projected level, the Trust Fund’s

uncommitted balance would fall to less than $1.5 billion, under

both the President’s proposal and Vision 100, in 2006 and 2007. If

revenues were 10 percent lower than the projected level, the Fund’s

uncommitted balance would reach zero in 2006, under the President’s proposal; and in 2007, under Vision 100.

The question that remains is, how do projected revenues beyond

2007, compare with projected costs for development, operation, and
16

maintenance of the Nation’s ATC system. FAA projects a five year

cumulative $8.2 billion shortfall for the ATO; $5 billion for the operations account; and $3.2 billion for the capital account.

If this is accurate or even close to accurate, it presents a tremendous challenge for FAA and the Congress. Congress and FAA will

have to address not only the revenue side, but also the cost sides

of the ledger.

On the revenue side, there are several options being discussed,

as we discussed this morning, that range from a version of the status quo with excise taxes, to some form of bonding, to a cost-based

user fee system. We are currently examining some of these options

in our ongoing work for this Committee.

On the cost side, the cost control initiatives that FAA has thus

far identified do not even begin to close the $8.2 billion gap.

We believe that a critical first step should be the development of

a strategic business plan for ATC modernization, that would also

include initiatives that focus on big ticket cost savings, such as the

greater use of CTI graduates to fill the controller ranks, elimination of redundant ground-based NAV aids, and facility consolidation.

Mr. Chairman, in the final analysis, we believe that the discussion about how to finance FAA and its operations beyond 2007

must not only focus on how to provide more money, but also on cost

control improving the management of its operations. Thank you,

Mr. Chairman.

Mr. MICA. Thank you, and I thank all of our witnesses for their

testimony. We will start with some questions, and I have a couple

to begin with.

First of all, Mr. Mead, in reviewing who pays what, as far as

funds into the Trust Fund and paying for FAA services, I think you

testified that the General Fund is paid, on average, 21 percent. I

look at that as being fairly consistent.

When you look at General aviation and commercial aviation, and

maybe the military or others, what users are paying their fare

share, in your estimation, and who should be paying more or less?

Mr. MEAD. Well, that is a tough question to answer, determining

if users are paying their fair share. I can tell you that commercial

aviation accounts for approximately 65 to 67 percent of flight activity. They are paying a little over 90 percent of the revenues coming

into the Trust Fund, through various taxes. There is the ticket tax.

There is another one called the rural airport tax. There is another

one called the way-build tax.

There is also a commercial jet fuel tax, international departure/

arrivals tax and a frequent flyer tax. When you add these taxes up,

it is a little over 90 percent.

Mr. MICA. So commercial aviation is paying a fair share, you believe?

Mr. MEAD. I think they are.

Mr. MICA. So we do not need Mr. May to testify later?

Mr. MEAD. No, I think he can discuss these issues much more

eloquently than I can.

Mr. MICA. Okay, let us get into General aviation.

Mr. MEAD. There are a number of issues about General aviation.

Basically, General aviation and jet fuel is generating about 1.92
17

percent of the Trust Fund Revenues. That is on the fuel tax, which

yields about $178 million.

But there are a lot of questions as to whether or not some portion of the General aviation business share is actually being counted by the IRS as part of other taxes.

Why is that? Well, for example, with commercial jet fuel tax,

some of those taxes are actually being paid by users that would

qualify as General aviation. But in actuality, the Internal Revenue

Service, the way they count it, does not stratify it between the regular commercial airlines and General aviation. So there is some

question there.

Secondly, the United States aviation system was basically set up

for the airlines. It was not set up for the general aviators, and the

General aviation people state they are incremental users of the system.

Mr. MICA. Well, as to use of the system and cost and contribution, you are still saying commercial aviation pays it share and

more, in your estimation.

Mr. MEAD. Yes.

Mr. MICA. General aviation probably has many more planes in

the sky and is paying a smaller share. Is that a general conclusion?

Mr. MEAD. Yes, I think that is arithmetically obvious. We did an

analysis of operations at the en route centers, control towers, and

of IFR operations. We tried to back out of that, as much as we

could, the non-business General aviation user.

What you end up with is, in the en route center, 57 percent of

operations, were commercial carriers. The commuter air taxis were

another 21 percent. General aviation, and this would mostly be

business use, was about 18 percent. The military was a smaller figure and has to be handled quite differently.

When we reviewed control tower operations, about 20 percent

were air carrier, 27 percent were commuter air taxis, and 42 percent were General aviation.

Mr. MICA. When you say air taxi, what is your definition?

Mr. MEAD. Well, commuters air taxis, I meant for hire.

Mr. MICA. That would also include your business jets?

Mr. MEAD. No, that would not.

Mr. MICA. All right, I am trying to get some idea on who is using

the system and who is paying into the system. I have a quick question for Administrator Blakey. For costs, one of your biggest costs

is labor. I think you had an agreement back in 1998, and I think

you expected some costs in 1998 as far as labor.

As the air traffic control force, what has been your actual experience and cost to the system, as opposed to what was anticipated,

based on your original projections?

Ms. BLAKEY. The original projection of cost increase of that initial contract, over three years, it was expected to increase costs by

about $200 million. The actual costs were a $1.1 billion increase.

So it was very significantly under-estimated, in terms of what the

cost of the controller contract would be.

Over time, we have seen controller compensation go up 70 percent. So there is no question about the fact that it is a significant

part of the aviation systems operation costs.
18

Mr. MICA. I will sort of conclude here because I want other members to speak, but I have a number of questions. One of the things

that we have seen as testimony today is that the current core revenue stream is based on basically passenger ticket taxes and percentages.

We have also seen sort of the beginning of a discount industry.

I predicted that we would see even more discount carriers, and

probably lower prices. Actually, I think it has taken place much

more rapidly than I anticipated.

This is a list that I had the staff print out of European discount

carriers. This is about eight pages of European discount carriers,

and I think we are headed probably to see commercial passenger

service even more on a discounted basis than the traditional legacy

carriers. I think everybody agrees that that is going to also drop

our revenues and create more of a problem, Ms. Blakey.

You said, and I took this down, you are ‘‘not endorsing taxes or

user fees,’’ but you said the ‘‘ticket tax does not work.’’

Ms. BLAKEY. The ticket tax is absolutely unrelated to the costs

of the service. There may have been a time when there was a

somewhat closer alignment, but it might as well be pegged to the

price of milk these days.

As we noted, there is the fall in yield, the fall in ticket prices,

and the move to a much smaller aircraft. The front page of the

New York Times this morning was noting that the major carriers

are moving much more to point to point flying, to smaller cities.

That all goes to smaller size aircraft, but it costs us the same

amount to move that aircraft, regardless of whether it has got 50

people on board or 200.

So all of those are the trends, and as I mentioned, we have got

16 applicants for airline certification in the queue right now. I

would suspect a lot of those are low cost carriers who want to get

into the business.

Mr. MICA. That is not to mention the micro-jets and other increases in air tax-type services.

Ms. BLAKEY. The first of the very small micro-jets are expected

to be certified next year, and the production delivery schedules are

literally thousands a year.

Mr. MICA. Well, I will turn to Mr. Mead, quickly, and Mr.

Dillingham, if you want to comment, and then I need to go to other

members.

Mr. MEAD. I think it is an important point that, in today’s environment, you have the legacy carriers and the discount carriers.

The legacy carriers’ fares for the foreseeable future, are going to be

very competitive and may trend downward. There are going to be

conversions. If you apply that 7.5 percent against a lower based

ticket price, the arithmetic is pretty simple.

Secondly, there really is not a correlation between a fully loaded

plane of one type, whose fares are cheaper, and a fully loaded plane

of the same type. Yet, the costs they impose on the air traffic control system are fundamentally the same.

Mr. DILLINGHAM. Yes, we agree that what we are seeing now is

that cost and revenue are, in fact, diverging. However, we just

want to reiterate that with all the discussion about bringing in new
19

sources of revenues, that the other side has to be looked at, too,

and that significant cost savings have to be a part of this mix.

Mr. MICA. Thank you, I have more question, but Mr. Holden is

waiting.

Mr. HOLDEN. Thank you, Mr. Chairman, and thank you for holding this hearing today. I thank the panel for their testimony.

As you highlighted, we are facing challenges in the near future

here as we try to balance our cost savings versus cuts in services

and, of course, maintaining our attention towards safety.

Administrator Blakey, I would just like to follow-up on one of the

proposals that I had a chance to talk to Mr. Chu about a few weeks

ago when he testified here, about the proposal to close the air traffic towers at 42 airports across the country.

Mr. Chu told me that it was in the infancy of the study, and it

was going to be progressing over the next 30 to 45 days. I am just

curious if you can tell me where that study is at right now.

Ms. BLAKEY. Certainly. We are doing very careful analysis of the

specific circumstances of all of those 42 airports.

I would stress that this is a process that the FAA has undertaken for years and years. It is done on an annual basis. It is an

attempt to keep our costs in line with service. So when traffic figures drop in certain towers, it only makes sense to not staff those

towers during the midnight shift, if there is no one flying in, or virtually no one.

So that is really at the hub of this. We did not do it for a number

of years. Because we thought that traffic coming back after 9/11

would change things, and we wanted to give everyone a breather.

We will get that analysis done, I would suggest to you, within

the next 30 days. I think his estimate was probably about right.

We will certainly be consulting with any members whose towers

are affected.

Mr. HOLDEN. I appreciate that, Administrator. I believe Mr. Chu

said that the savings would be about one tenth of one percent of

the entire budget. So I think he might have used the figure of $5

million or $4 million.

Ms. BLAKEY. That is probably right. What I would caution

though about this is that you understand the FAA’s circumstances

are such that to ignore millions of dollars of savings is not something we can afford to do. This Committee and others are urging

us to look everywhere we can for cost savings. A number of the

suggestions that have been made this morning, frankly, would save

less than that.

So it is something that I have to do, to look everywhere we can

for incremental savings. This review has been something that has

been standard for the FAA for many, many years.

Mr. HOLDEN. I understand that and appreciate that, and I realize you are going to hear 42 different stories. But I would just like

to give you one of those 42.

Harrisburg International Airport is responsible for the airspace

at two nuclear power plants, Three Mile Island and Peach Bottom,

as well as being a major diversion airport for Philadelphia, Dulles,

and Reagan. So I understand and appreciate that you will be in

consultation with me as it progresses. But I know they will take

all those factors into consideration.
20

Ms. BLAKEY. We will, and I also will point out that when towers

have their traffic increase, then we also move back to staff them.

So there is flexibility in this.

Mr. HOLDEN. Thank you, I yield back, Mr. Chairman.

Mr. MICA. Mr. Hayes?

Mr. HAYES. Thank you, Mr. Chairman. I feel like I need to clarify

just a little bit. Mr. Mead had a good answer and the Chairman

asked a good question. I think we need to focus on the fact that

every time the airline cranks up, they use the system. That is fine.

They should, because that is what they are there for.

There are thousands, I think, of General aviation airplanes, who

never use any part of the system whatsoever, except the air, which

is still free. But every time they buy a gallon of gas, they do pay

into the system. So just to clarify, it was a good answer, but we

just did not get all the details in there.

Administrator Blakey, again, thanks for your wonderful service.

Certification offices have recently been informing our largest repair

station facilities that approvals on projects will slow dramatically

because of budgetary constraints. This has caused great concern

among key members of the community. They have put millions of

dollars into these projects, only to find out that approval may take

weeks and even months before taking place.

Is the staffing situation at the FAA bringing aircraft certification

approvals on million dollars projects to a halt, or have we got that

under control?

Ms. BLAKEY. Well, certainly, we do not plan to bring any projects

that we can foresee, Congressman Hayes, to a halt. The question

is, how slow is the queue? How long will you have to be in the line?

I think that probably everyone on this Committee would agree

that when it is a choice between new projects and overseeing the

ongoing safety of the system, of the carriers of the existing facilities, the latteer has to be the first priority. We have to maintain

safety first then proceed, as new facilities and new products want

certification. We are doing the best we can to cover that.

I would point out that we are projecting right now that we will

be down 300 people in our AVS area, which is where certification

is. I would also point out that a lot of this is a result of the unfunded pay increases, and the recision. These are things that I realize this Committee is not responsible for. But those are the effects it does have. So we are doing the best we know how to, to

meet those new requests, but they are new.

Mr. HOLDEN. I appreciate that comment. I think it is important

that what you have also said there is that we have a responsibility

to make sure that through the Appropriations process you have the

funds that you need.

I have one more editorial comment, if I may. You talk about

thousands of very light jets. If we do not get the insurance industry

on board, there is not going to be anybody that can get insurance

fly the darn things. So thank you again, and I yield back.

Mr. MEAD. Mr. Chairman, may I follow up on a point that Congressman Hayes was inquiring about, the 300 people that Ms.

Blakey was referring to.

I think you should be aware that a lot of attention is focusing

on hiring a significant number of controllers to replace those that
21

are going to retire. This is a legitimate concern because these retirements are going to occur and FAA has planned for this.

But at the same time, the safety inspection work force is going

to lose 300 people. The FY 2006 budget does not propose to replace

these people. Frankly, I have some concerns about that.

Mr. HAYES. That is a good point to keep in front of us. All of the

members of committee are vitally concerned with safety first. We

would be more than happy to work on behalf of safety as it relates

to the overall air space and the FAA. Thank you, Mr. Chairman.

Mr. MICA. Ms. Norton?

Ms. NORTON. Thank you, Mr. Chairman. For this panel, I really

have a question going to the possible long-term changes in the airline industry and how we can confront that at the same time as

we confront the Trust Fund.

My question is really based on the correlation your testimony has

shown between the Trust Fund and economic conditions in the airline industry. In fact, if we look at this industry over time, we see

an industry that is almost cyclical. It is a roller coaster industry

that is historically based on economic conditions in the country.

When things got better, people began to travel more. Things improved in the industry.

We recognize there are lots of reasons that people do not have

to travel as much any more. Among them, of course, are vast

changes that are like an earthquake under us, because the occur

every day in technology.

My question really goes to the extent to which you believe what

we are seeing in the airline industry is truly structural. That is to

say, everybody knows that there is downsizing. We see every line

looking like a discount airline. That certainly tells us something.

Are we seeing structural changes in the airline industry today?

If so, when will this stabilize? Is this going to stabilize soon? I cannot imagine that the industry is going to go down to nothing. At

some point, when excess carriers are weeded out; at some point

when you have discounted as much as you can discount to be competitive, surely this would stop. That may be at some low level that

none of us want to contemplate it.

But I want to ask you, are we seeing something structurally different from the up and down of the airline industry, and is there

any sense of long-term projections recognizing, of course, how completely unpredictable and untrustful such long-term projections

often are; but given the nature of this industry, somebody, it seems

to me, must be studying whether something very different is happening to this industry, and if so, what the nature of that change

is.

Ms. BLAKEY. Everything we see, from the standpoint of our economic work in forecasting, says that there are very fundamental

changes in the industry, and that it will not go back to the good

old days.

Ms. NORTON. Well, I know that. The question is, what is it going

to go back to?

Ms. BLAKEY. I think, appropriately, of course, our concern is really this dramatic change in the fleet mix and dramatic change in

traffic, et cetera. But the Inspector General has done studies on

this.
22

Mr. MEAD. Thanks, that was nice.

[Laughter.]

Mr. MEAD. The legacy carriers, including U.S. Air, Northwest

Airlines, UAL, and Delta, are still trying to get their costs down.

They are still not turning a profit. It is going to be awhile before

they get their costs down.

However as they get their costs though and lower their fares,

they are going to become very similar in cost structure to the discount carriers.

When that happens, I think there is going to be a powerful dynamic unleashed in the industry. The network carriers have the

power of a network. The low cost carriers do not have as many

hubs.

I know a lot of people think that what we are seeing is a permanent structural change. But I think once the cost structures are

more aligned, you may see fares start to creep back up again.

Right now, one of the big phenomenon is the very sharp reductions in business fares. We have seen this consistently since 2001.

But I think there may come a time, four or five years from now,

when we see the cost structures of the big carriers more aligned

with those of the low cost carriers. Then you will see some changes

in the fares. There will be upward movement in those fares.

Ms. NORTON. Of course, that would mean other kinds of changes,

as well, in traditional carriers.

Mr. MEAD. Also, I think you are going to see, as Administrator

Blakey pointed out, a lot more point-to-point service. But hubs are

probably here to stay.

Ms. NORTON. Finally, just let me say, I do not know how the

changes in technology factor into this, and whether business travel

will continue to be what is has been in the past. But if these

changes are structural, and what you have just said says to me,

you know, most airlines are going to be low cost airlines, I regard

that as a structural change.

If these changes are structural, then it does seem to me that we

have to confront the possibility that we will need structural

changes in the Trust Fund, as well. Thank you very much, Mr.

Chairman.

Mr. MICA. Mr. Graves?

Mr. GRAVES. Thank you, Mr. Chairman. I want to go back to

what was pointed out, and Congressman Hayes briefly touched on

it, on the number of GA aircraft that are out there. This is obviously being looked at as the great pot that we are going to pull

money from to pay for the system, to an extent.

I keep hearing it in the industry. I hear the rumors talked about.

I hear the talk of charging any flight service used, whether it is

weather or whatever the case may be, or even takeoffs and landings. I do not know what is being looked at.

But I do know that we seem to be looking at that area. Congressman Hayes pointed out, too, that the vast majority of those GA aircraft are not using the system, to be quite honest with you. I mean,

they are flying underneath the controlled airspace when they are

going into a congested area. They are just doing VFR stuff.

They are not necessarily filing flight plans. They are not checking the weather. They are very low cost users of the air. I am curi-
23

ous, do you have any idea what the percentage of GA is out there

that are using the system; any one of you?

Ms. BLAKEY. Congressman Hayes, we have done certainly some

studies on that. If you are talking about the folks who are just flying VFR without using the system, those are not as directly

tracked as they are, of course, if they are filing flight plans and flying IFR, et cetera.

What I can assure you is this. We are doing a cost allocation

study. Because we really do believe it is important to look very

carefully at those things, and look at issues of equity across the

system.

So we are going to be analyzing the fleet mix. We are going to

be analyzing a variety of factors to really understand what the

costs are that are imposed all up and down the system. Of course,

GA is comprised of a wide variety of users, as well.

So the person who uses the system for personal travel, if you

will, for individual weekend recreation, is very different obviously

than those that are using it for business purposes with very high

performance aircraft. So all of that needs to be updated and analyzed, and I will assure you, we will do that.

Mr. MEAD. I think the biggest service that could be done in response to your question is to take the General aviation chunk,

which is fairly large, and break it into pieces. There are groups

who are very casual users of the system. They are not doing IFR

approaches. They are not using air traffic control. Then there are

higher end users. I do not think the two ought to be lumped together for purposes of analyzing the issues you are raising.

Mr. GRAVES. But they are being lumped together, unfortunately,

in talking about, you know, where we can go to find some more

money and in user fees.

In fact, it seems to me that if you do start taxing the use of flight

service, if you start taxing on calling in to get a weather report, or

takeoffs and landings, that is going to create a safety problem, in

and of itself. Because a lot of those casual pilots are going to forego

that weather report, or they are going to, if the weather is marginal, a lot of times they do not use weather anyway but they will

call in if the weather is marginal, well, they may forget that. Or

even practicing their landings, take-offs and landings, if you are

doing some sort of a user fee on take-offs and landings, well, it is

cheaper just not to do them. And then you get into a safety situation. It would seem that it is completely the wrong direction to go.

I think the perfect user fee is the fuel tax system that we have

now. If you are flying, you are burning fuel, and you are obviously

paying into the system. In fact, it can be argued that GA is paying,

for what they are getting, is paying a lot into the system because

they are burning fuel. But it disturbs me considerably this talk

about going to user fees for general aviation, because I would say

the vast majority of GA out there is those folks who are not taxing

the system, who are not using the system a whole lot. It really concerns me.

I do have a historical question I want to ask. It seems to me

when we first came up with the Trust Fund we were trying to get

GA off the big airports. We wanted to come up with a secondary

airport system to relieve our airports, I think was the actual term.
24

In fact, I remember looking at an article or a picture back in the

1970s of I think it was a TWA 747 on hold because it seems like

it was a twin Barren was landing, and that was the problem with

the system. So we created this Trust Fund to build infrastructure,

to improve infrastructure which was off of the major hub airports

and get GA out of the way.

We seem to be moving away from what the original intent was,

which was infrastructure, and obviously moving to a point where

it is paying more and more of what you all are doing. It seems to

me like we have got to get back on track on where it needs to be

and use the Trust Fund for what it was originally intended to be

used for.

Ms. BLAKEY. One thing I think is important to understand, Congressman Graves, because I do appreciate the need to make certain

that there are airports that the general aviation community can

use, there has been a dramatic increase in AIP funding over the

last four or five years. When you look at the increase in funding,

it is very significant, a bit over a billion to last year it was $3.5

billion. This year in the fiscal year 2006 budget, we are still proposing $3 billion, and a very, very significant amount of that goes to

small airports. So it really is important to understand how much

that has really changed the landscape from that standpoint.

The other thing I would say is this. We are certainly very sensitive to the issue of safety. And the idea of avoiding important

safety benefits in the system is something that we are going to be

very careful about. It is important though to note that, just as an

example, the figures that I have heard AOPA use about the fuel

tax, for example, when we were discussing the issue of flight service stations, the GA community contributes about $60 million in

terms of the fuel tax. The cost of flight service stations as they

have been set up to this point was well over $500 million, and they

are, of course, for the general aviation community. And even as we

are driving the cost of flight service stations down—as you know,

of course, we are moving with Lockheed-Martin who going to be

providing that service at considerably less cost—the two simply do

not match up. So there are certainly issues here that I think we

all just need to be aware of.

But we are going to be looking for the best possible way of aligning the cost of the system for everyone in a equitable way, in the

simplest possible way as well. So that is one reason why I do not

think we should rush to judgment about user fees or excise taxes

or any particular structure yet.

Mr. MEAD. You are correct in saying that the original design of

the Aviation Trust Fund was for air traffic control and airport infrastructure. The operations in the original design would be handled through the General Fund. This is why it is so important for

the Committee to get a handle on what the assumed level of General Fund contribution should be for the next reauthorization period. You are dealing with swings of $2 or $3 billion. That is quite

a bit of money.

Mr. GRAVES. In closing real quick, I am glad you are not set, and

I would implore you, I think user fees are the wrong way to go. We

need to work together to figure out a way to do this. I would like

to get us back on track and moving more towards GR for oper-
25

ations, figure out how we can do that, but we can come up with

something. User fees are not the way to go, I do not think. Thank

you, Mr. Chairman.

Mr. KUHL. Mr. Boswell?

Mr. BOSWELL. Thank you, Mr. Chairman. I would like to associate myself with the remarks that my colleague, Mr. Graves, made.

Administrator Blakey, you recommended the FAA take some steps

to control cost and determine the future requirements before they

explore new revenues, and I appreciate that, including making decisions on necessary ATC modernization projects. What progress

are you making? Can you give us a little update?

Ms. BLAKEY. We have been making I think really quite remarkable progress in terms of cost-savings. Some of the figures that are

used about the overruns in cost, when you look at those and the

facts on the major capital investment programs, usually go back to

baselines in the 1980s. When you look at what we have been doing

of late, we are doing a very strong job in making sure that our

major acquisitions projects are coming in on schedule and on budget. Last year more than 80 percent were within 10 percent, which,

considering again how much work we had to do on this, is really

a very strong track record. Major projects like ERAM, for example,

which is the central system for the Air Traffic Control system, is

on time and on budget. So I would point those things out.

There are a number of other cost-savings that we are working

very hard on in terms of things that we know can help control our

costs. The very ideas that the General Accounting Office has recommended, that Dr. Dillingham has suggested, we are moving on

all of those. I think it is important to note, though, that some of

these are very hard to do if you want to have significant cost-savings. Facility consolidations mean, obviously, that choices are made

that sometime can be very politically difficult to do. So I would simply call the Committee’s attention to the fact that this is not all

within the control of the FAA.

I would be happy though to enumerate a number of other costsavings, if it would be helpful. I have got a whole sheet here.

Mr. BOSWELL. You might just cover a couple.

Ms. BLAKEY. All right. I would be happy to. Essentially, we have

made a part of the FAA’s business plan and our flight plan the requirement that there has to be cost reduction activities in every

single one of our lines of business. Of course I noted the A-76 process, which is saving the taxpayers $2.2 billion in terms of the move

to have Lockheed-Martin provide the flight service station function

for us. We are consolidating accounting personnel, and implementing a centrally managed cost control program that we are putting

in place this year for a variety of costs that the FAA has from the

standpoint of IT and administrative costs. We also, of course, have

a very strong contract tower program, which again is a cost-saving

function there.

I could also tick down things such as consolidating our regional

service units within the ATO, reducing management layers from 11

to 6, shifting the control of traffic in terms of these midnight shifts

where we do not have a cost justification for staffing in towers

where there really is no activity going on, and removing Navaids,

nondirectional beacons. This is a question of aging infrastructure
26

out there that really is not contributing, from a cost-benefit standpoint, to the system. So I think that when you begin to look at a

variety of things like that, there is no question about the fact that

we will be saving costs, as well as in things such as reducing the

time it takes to train our controllers. That is a part of the plan that

we put forward to Congress in December. We are very optimistic

about making real progress with that.

Mr. BOSWELL. Thank you very much. I suspect that Mr. Phil

Boyer will have some information on Mr. Graves’ questions that

were asked earlier about a number of VFR activities going on that

is not in use in all these things. Thank you, Mr. Chairman. I appreciate it.

Mr. MICA. [Presiding] Mr. Poe?

Mr. POE. Thank you, Mr. Chairman. In my opening statement I

asked a question about the Houston TRACON. Also, just for your

information, Congressman Culberson and McCall, also in the area,

the three of us have written a letter asking when this is going to

be built, at least started. I just want some assurance that within

the next 30 days or so we get an answer. Okay?

Ms. BLAKEY. I will be happy to get back to you with the real

timetable on that. It is obviously a very important facility and we

appreciate that.

Mr. POE. Okay. The second thing was we have heard a lot of

comments about money, which is really I guess the root of all

things, evil and otherwise. Continental is the hub, Intercontinental

Airport in Houston, and Southwest has a tremendous facility at the

Hobby Airport on the other side of town. Airline consumers are

paying 26 percent of a ticket price is taxes that goes to different

projects, and the airlines are paying about 35 percent income tax

plus fuel taxes, which is understandable why they are in trouble.

Of course my concern, as everybody’s is, is we want to keep them

flying. We do not want them going broke and then somebody having to bail them out, which is usually the taxpayer.

It is an interesting phenomenon it seems that raising ticket

prices does not work because the consumer finds a different alternative to flying. The best example is Continental flies Houston-Dallas, Houston-San Antonio, Houston-Austin, very close, and it

reaches a market price where the consumer says I am not going

to fly, I will just get in my old pickup truck and drive. And then

the airline industry hurts when the price goes up for those little

short hauls. Maybe that phenomenon does not work in other businesses, but it does work in the airline industry. So raising prices

to cover taxes may not be the answer.

So I hope we can find an answer to the problem. We look to you

to give us some concrete, definite answers to keep our airlines flying, safety is important as well. I appreciate your being here and

I just wanted to make those comments about the TRACON and especially our airlines. So, thank you, all of you.

Mr. MICA. Thank you. Ms. Berkley?

Ms. BERKLEY. Thank you very much, Mr. Chairman. I want to

thank all of your for giving us your testimony. I appreciate it very

much. It was sobering, to say the least, and I recognize the challenges that we have. I am not sure that it is your responsibility to

come up with the solutions. But perhaps together we can come up
27

with a way to keep airline prices down, not put all of the rest of

our airlines in bankruptcy, and be able to provide safety for our flying public.

Last month, McCarren Airport, which is the airport in the Las

Vegas area, had its busiest month on record, with 3.9 million passengers. Local officials, as you know, are moving forward with

plans to accommodate the growth in the number of passengers, increasing the number of gates, and the county is also working on

its plan to build the Ivan Paugh Airport that was passed a couple

of sessions ago. It is my hope that the FAA will work with Randy

Walker and our local officials to meet the tremendous needs of

Southern Nevada. We just had another mega hotel come on line

last week with over 3,000 rooms. We have 9,000 other rooms in

some stage of development. For each one of those rooms, we are

going to have thousands and thousands of people pouring into the

Las Vegas valley and most of them are coming through McCarren

Airport. So your help with that, as always, is greatly appreciated.

Ms. Blakey, I really want to thank you for your help in moving

forward with the new Air Traffic Control tower at McCarren, and

the improved runway conditions in North Las Vegas Airport which

were a very serious problem for us. I do have a question for you

regarding Air Traffic Control operations. I was sitting in this very

seat and you were sitting there when we were discussing privatization and the contracting out of 71 FAA air traffic control towers.

That was a subject of considerable debate in the 2003 reauthorization bill. One of those towers, North Las Vegas, is in my district.

The one year moratorium on contracting expired last October. Does

the Agency have any plans on contracting out the FAA air traffic

control facilities as part of this cost-saving opportunity?

Ms. BLAKEY. There are no current plans in terms of converting

air traffic control towers currently at this point. I think it is fair

to say that if the FAA is urged by this Committee and everyone

else to look for ways to save costs, it is important to take into account where we can do so. The fact is, of course, when you are looking at comparable facilities, a comparable contract tower versus a

federally staffed tower saves $900,000 a year. So it is worth understanding that. But I have no plans at the moment.

Ms. BERKLEY. Well thank you for that. But let me ask you a question. When we say that it saves $900,000 for the FAA, but

somehow, someway, someone is going to pay for that service. So for

the flying public, do they not ultimately get the cost of privatizing

the air traffic control system passed on to them?

Ms. BLAKEY. No, not at all. They get the exact same service

whether a Federal controller is speaking to the pilot or a controller

that is hired through a contractor. There is no difference, nor is

there any difference in the cost.

Ms. BERKLEY. How do we pay for that service? Who ultimately

pays the salaries of the air traffic controllers that are working for

a private company as opposed to the FAA?

Ms. BLAKEY. They are paid through the FAA. In other words, the

FAA pays.

Ms. BERKLEY. Then how do we save $900,000?

Ms. BLAKEY. Because, significantly, the salaries are much less in

a contract facility than they are in a federally-staffed facility. They
28

also handle staffing differently than we do. And most of these, of

course, are lower activity towers, VFR, et cetera, so in some cases,

of course, there are differences in complexity as well.

Ms. BERKLEY. I would be very concerned if somebody that is a

professional and can command a certain salary level would be so

willing to work for a company and get so much less for their services. It seems to me that the FAA does a very good job, and the

Government has a responsibility to provide the flying public with

assurances that the air traffic controllers in this country are the

best that they can possibly be. And I feel more comfortable myself

knowing that the air traffic control system is under the FAA and

Federal auspices.

Ms. BLAKEY. Both are under the FAA. Both are overseen by the

FAA. Both forms of towers operate to the exact same requirements

and standards and are audited. Candidly, the safety record of the

contract towers is certainly as good as those of Federal towers. So

there is no difference in either safety or service at all.

Ms. BERKLEY. Well, do not think we need to debate. We could debate this in private. But then why do they accept so much less pay?

Ms. BLAKEY. The salaries are fair salaries that are offered by the

contractors. They often hire former FAA controllers, they hire

former military controllers, and they have competitive salaries. The

FAA salary structure for Federal controllers is very high. The average FAA Federal controller makes over $150,000 a year with salary

and benefits.

Ms. BERKLEY. Okay. With all candor, I think they are worth

every penny of that. And when I am flying every week, I like to

know that we have got the best possible air traffic controllers in

those towers. Thank you very much. I appreciate your help in Las

Vegas more than you will ever know. Thanks a lot.

Mr. MICA. I thank the gentlelady. Mr. Duncan?

Mr. DUNCAN. Thank you, Mr. Chairman, and thank you for calling this very important hearing. I am sorry that appointments and

then a hearing in another subcommittee which affected a plant employing several hundred people in my district has caused me to

have to be in and out of this. And I have got to speak at a luncheon

at noon, so, unfortunately, I am not going to be able to stay for all

of the next panel.

I guess I only what to ask this or say this. We have heard a lot

of testimony here this morning and we will hear some more from

the next panel about the problem. But what we need is more testimony about the solution. Administrator Blakey, I did hear your testimony and you mentioned that meeting that you called with was

it 150 leaders from the industry and all the parties affected. I am

wondering, was that more of just calling attention to the problems,

or do you feel like there were some good recommendations out of

that? Do you that you need to continue that, to get all these parties

together and discuss all these things to see is there a middle

ground here, is there a compromise solution between those who

want higher user fees and those who do not want them, or those

who are opposed to higher fuel taxes? It looks like we have got to

do something.

Ms. BLAKEY. Congressman Duncan, I will tell you, we have had

very good feedback from that forum on the Trust Fund because it
29

was genuinely arranged to give the entire stakeholder community

an opportunity to talk together and explore options. We had a

number of panelists come in who talked about different systems,

both within the U.S. Government. For example, the Food and Drug

Administration, and TVA were there, as well as experts from

abroad, talking about the way they have set their systems up and

the pros and cons. But we also discussed options that were independent of other models.

I think what I sense coming out of that is we should certainly

not rush to a solution here. It is very complex and complicated, and

I think there are things we simply do not know right now that are

important to analyze. But I do believe that there is a growing

awareness that our costs and revenues need to be better aligned.

For a system that will go into place instead of taxes and fees, whatever it may be--the last one was in place for ten years--with that

prospect in front of us, it is very important at this point that we

look at something that will create the right incentives both for the

FAA to control its costs, as well as for the user community to take

account of what the services cost.

There is a real difference between want and need. I think we do

need to have, therefore, a better alignment between the cost of the

service and the revenue coming in. Plus, I think there is a genuine

consensus out there that it is very important that the revenues address the kind of capital investment that the next generation system will require. The answer to bringing down our costs is a system that can handle three times the traffic with a much greater

degree of technology involvement, so that you bring the unit costs

down which lower the costs for all of the users. Certainly, that is

something that I think the airline community, in particular, would

support. So how to get there, that piece we do not know yet.

Mr. DUNCAN. Well I know it is going to be very difficult to get

there. But I also do not think there is anybody that has looked into

this at all that has to hear much more about what the problem is.

We just need to get down to the recommendations and the solutions that hopefully will be as fair as possible to the largest number. Thank you very much.

Mr. MICA. Thank you. Ms. Millender-McDonald?

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman and

Ranking Member, for such a really informative hearing. I would

like to ask unanimous consent that I put my full statement in the

record.

Mr. MICA. Without objection, so ordered.

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman.

Ms. Blakey, getting back to the question that Ms. Berkley asked

of you with reference to the considerable debate last year on the

reauthorization, 2003. One of those towers of the 71 that FAA is

contemplating it seems contracting out or privatization, I suppose,

is that of my Long Beach Airport. Long Beach is the 30th busiest

airport in the Nation. Again, I am not sure that I understood your

answer to the question that she raised, and that was, do you have

any plans on contracting out of the FAA air traffic control facilities?

Ms. BLAKEY. I would actually point out that list of 71 is not my

list. This is a list that the Inspector General, who is sitting right
30

next to me, developed. So the specifics on the towers that are on

that list and why, I would refer to him at this point.

It should tell you something that I honestly cannot even tell you

about the specifics on Long Beach right now. It has been that long

since I have looked at that list. So I would repeat what I said to

her, which is that we have no current plans to convert those towers.

Ms. MILLENDER-MCDONALD. In other words, the 71 towers that

are on the list was really initiated by the Inspector General.

Inspector General, how did you come about with that list?

Mr. MEAD. Your airport is not on the list and that list is not

ours--it was a list that FAA put together in the late 1990’s. We anchored our studym which was done at the request of Congress, on

FAA’s list.

Ms. MILLENDER-MCDONALD. It is not?

Mr. MEAD. It is not among the 71.

Ms. MILLENDER-MCDONALD. Well thank God for that.

Mr. MEAD. The list of 71 is a list of VFR towers that are currently staffed by FAA controllers and is comparable in levels of activity to those airports that are staffed by contract controllers, that

are under contract with FAA to provide air traffic control services.

But Long Beach is not in the 71.

Ms. MILLENDER-MCDONALD. I heard just a couple of months ago

that there were some towers that were going to be closed down late

at night into early morning. Is that a report that is accurate? And

if so, why are we doing that when many of us are flying two and

three times a week in the air and we do not wish to see any towers

being closed down during a certain period? Was that a fair report?

Ms. BLAKEY. Earlier this winter, a list of I believe it was 42, if

I am recalling correctly, 41 or 42 towers was put out by the news

media as ones that the FAA is looking at because the fact is that,

between roughly midnight and 5:00 a.m., they have very little traffic. This is a routine analysis that the FAA has done for many

years on an annual basis. When traffic falls to so low at night that

the Maytag repairman would look busy, it only makes sense to consider whether or not you need to have personnel from midnight to

5:00 a.m. in the tower. It does not mean that the airport does not

have service. What it means is that the control of aircraft coming

in passes to the nearby TRACON. So there is no reduction in service when that happens.

It is a routine analysis. It is one that is going on right now. We

discussed a bit earlier today the fact that it is hard to be absolutely

predictive about how long it will take, but we are doing the analysis on a case by case basis at each one of those airports to see if

there are mitigating factors in terms of National Guard activity or

certain other kinds of things that might call for us to continue to

keep personnel on that limited shift. Otherwise, the tower is open

and things remain the same. But this is an analysis, as I say, we

do routinely year-in and year-out. We stopped doing it from 9/11

on because we knew traffic had dropped so much during that very

unusual time that we let a few years go by before we did it again

because we wanted to give all these airports a chance for the traffic

to come back.
31

Ms. MILLENDER-MCDONALD. Thank you so much. Ms. Blakey, in

your testimony you stated that over the past four years the FAA’s

revenue projection has been overly optimistic due to the events of

September 11 and structural changes in the airline industry. Have

your forecasting methodologies been appropriately adjusted to account for these issues, because there are some aviation groups that

believe until FAA can accurately predict or project its cost-to-needs

there cannot be reforms made to a system that may or may not be

in trouble

Ms. BLAKEY. I am glad you asked that, because forecasting is

something that is certainly critical and yet is extremely hard to do.

As you look at any of the forecasts that are being done by Wall

Street, the major corporate entities who have huge interests in

this, getting that right is something that is extremely hard. And

I will tell you, you are quite right that the FAA’s forecasting models have been too rosy. The revenue has not come in as we had projected. In some cases it has been off as much as 11 percent a year.

So we are doing an analysis right now and bringing in outside consulting help to help us develop a better forecasting model, a way

of projecting those revenues.

The FAA’s costs, of course, also are ones that you have to adjust

on the basis of forecasted traffic. So we are trying to get that right

as well as. We are doing everything we know to do to bring down

our costs, such as the things we just talked about, about reducing

staffing where you do not have traffic on a midnight shift, to try

to do everything we can to get our costs as low as possible.

Ms. MILLENDER-MCDONALD. Thank you so very much. Mr. Inspector General, I would like to see your revised list of 71 airports.

Will you please send that to my office?

Mr. MEAD. Yes. Let me clarify for the record. I misspoke. Long

Beach is on the list of 71.

Ms. MILLENDER-MCDONALD. Aha.

Mr. MEAD. I misspoke. We felt, after our analysis, that the airport was not sufficiently comparable to the contract tower airports

to be considered for contracting out.

Ms. MILLENDER-MCDONALD. Are you saying Long Beach is not

comparable to the other airports?

Mr. MEAD. It is a very busy place, as you pointed out.

Ms. MILLENDER-MCDONALD. It is busy, yes.

Mr. MEAD. There are about 31 in the country that are quite comparable and that airport is not one of them. That is what I should

have said. It is in the list of 71, but we do not feel it is sufficiently

comparable.

Ms. MILLENDER-MCDONALD. And comparable is defined as what?

Mr. MEAD. Well, by level of activity. There is a lot of activity at

that airport.

Ms. MILLENDER-MCDONALD. There is a lot of activity, sir. Can

you provide for me your report on that and the methodology by

which these airports were placed on the list?

Mr. MEAD. I will be glad to.

[The information received follows:]
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63

Ms. MILLENDER-MCDONALD. Thank you. I guess that is it, Mr.

Chairman. Thank you.

Mr. MICA. Mr. Ehlers?

Mr. EHLERS. No questions.

Mr. MICA. Mr. Ehlers yields to me for just a second. Let me just

continue with you, Mr. Mead, on this question of the airports and

contract tower airports. Were there not two studies conducted, one

back in 2000 or pre-2000, of looking at those contract towers?

Mr. MEAD. Yes, we have.

Mr. MICA. And some folks were not satisfied with the results

that showed that it would cost less money and actually they performed just as safe, if not safer? That was the first finding.

Mr. MEAD. That is correct.

Mr. MICA. And so we asked for another review. Is that correct?

Mr. MEAD. Yes.

Mr. MICA. Were the findings similar or dissimilar?

Mr. MEAD. They were very similar except that the cost savings

had increased from the prior report.

Mr. MICA. So we would have had safer operations on that review.

And not all of the 71 are in included in that category. But again,

you made a determination on a smaller number that would save

money and be as safe, if not safer, with that configuration.

Mr. MEAD. I would say as safe.

Mr. MICA. Would you make certain that the Member’s inquiry

get copies of that report.

Ms. Blakey, you are here singing the blues about money. Why

have you not taken action—and we had an agreement before the

last election on those towers. Why have you not taken an action to

institute the changes and get those contract towers underway and

save money and make them safer? You will really like that question.

Ms. BLAKEY. As we all recall, this was a matter of some controversy for the last reauthorization.

Mr. MICA. But we had a letter that was only good through the

last election. Again, I know where you can save some money. I

hope you take another look at that.

Ms. BLAKEY. I will take it under advisement.

Mr. MICA. Thank you for yielding, Mr. Ehlers. Did you want your

time back?

Mr. EHLERS. Reclaiming my time very briefly. I would just want

to reassure my good friend and colleague, Ms. Millender-McDonald,

about the airports being closed from midnight to 5:00 a.m. I represent Grand Rapids, Michigan. It has a busy airport, approximately 2 million passengers a year, which puts it in a sizeable category, and that airport is closed—I am sorry, not the airport, the

tower is closed during the night and it is operated out of Chicago

TRACON. We have had no incidents, no particular complaints. I,

myself, have flown in there with another pilot at that hour and it

is handled just as if they were right there in the tower. And so,

it is a safe procedure. With that, I yield back.

Ms. MILLENDER-MCDONALD. It gives me great comfort.

Mr. MICA. At great risk, I recognize Mr. DeFazio. Welcome, sir.

Mr. DEFAZIO. Thank you, Mr. Chairman. I have been here for a

while. I guess we have got to back up to kind of the beginning here.
64

I would just like to ask each of the three panelists, is 21 percent

precisely or even in any sort of calculated way the amount of operating costs of the system that should be paid by the General Fund?

How do we apportion that? Why is it 21 percent? It used to be a

lot more. Anybody have an idea? Have we ever done a cost-benefit

analysis on what is the cost of controlling the national airspace,

what is the benefit to people who do not fly but who get packages

or mail that is flown, what is the cost of all the network to the

business community. Have we ever looked at it in that way and

said, gee, what would be a fair amount to be paid out of the General Fund, since the original idea was the General Fund would pay

most everything?

Ms. BLAKEY. There have been a number of studies along those

lines and I think it is fair to say that they vary somewhat. But

they all point to the fact that while there is benefit, without question, to our economy and to the general taxpayer, that is usually

calculated differently. For example, NCARC, the study commission

that, before becoming Secretary Mineta, Congressman Mineta

chaired back in 1997, suggested a figure of about 30 percent of the

cost of the aviation system should be borne out of the General

Fund. And that accounted for things such as you are suggesting,

along with public use aircraft and military aircraft. But I would

point out, at that point, they were also taking into account security,

because at that point that was covered under the FAA. Now, obviously, security is a different set of costs and it is handled differently. But it was 30 percent at that point. That is one study on

this.

Mr. DEFAZIO. Yes, pre-9/11. A lot of parameters have changed

since then. Okay. Thank you.

Anybody else have an idea? Mr. Mead?

Mr. MEAD. Yes. The 20 percent that I quoted in the testimony,

or 21 percent, is simply an arithmetic average of what has happened over the past decade. In some years, such as the last year

of the last Administration, they did not tap the General Fund. But

the contribution was about $3 billion in 2002-2003, and now it is

around 11 percent, which would be a very low percentage.

Ms. Blakey is correct that the Mineta Commission in 1997 did

posit a figure.

Mr. DEFAZIO. She said 30 percent. We will go with that for now.

But my point is, it seems like kind of a departure point for this discussion about Trust Fund depletion, because that, in part, depends

upon how much burden the General Fund is carrying, how quickly

the Trust Fund will deplete, in addition to the other factors that

have been mentioned. It seems to me that is something the Committee needs to visit and we need to have some significant discussion of, what is a proper commitment, not just under the pressures

of the annual budget process, what are we going to be able to

squeeze out, but what is a proper contribution from the General

Fund, whether we made it an entitlement or something else. So

that is one thing.

The second thing is acquisitions. Ms. Blakey, a lot of this certainly predates you. But I have been known to say that the only

agency of the Federal Government worse at acquisition than the

Pentagon is the FAA. I appreciate some of the earlier questions
65

and your testimony saying you think you are beginning to get a

handle on the en route system and other parts of this. But that has

been just a huge cost contributor. And if we went back to the beginning of the discussion when I came in, which is, well, gee, should

we have a way to borrow money so we could capitalize things up

front? If we had capitalized what was originally proposed for air

traffic control, we would have a lot of junk on our hands that did

not work right that we would have spent a whole lot more money

for. It was not just your typical Pentagon procurement where you

have something that might work and you drag it out, we had something that did not work and we had to cancel the contract, start

another system, et cetera.

So I would really hope that, again, before we look at long-term

commitment, substantial borrowing and funding, that we have a

really good handle on the acquisitions process, which I am not totally confident we have because I hear ongoing problems. Anybody

want to comment on that? Mr. Mead?

Mr. MEAD. Yes. I think that point is well taken. I would say, one,

there have been a number of these big acquisitions where, frankly,

the cost increases had not been communicated to the Congress or

the aviation community. I give credit to Administrator Blakey and

her team for recognizing that the cost of these acquisitions were

much more than people were being led to believe.

Number two, there are a lot of programs that are still hanging

fire. For example, STARS is one that has gone up about 194 percent in cost and has been delayed for years. The WAAS system has

gone up to 274 percent and has been delayed by 12 years. So I do

think there is additional work that may be done. Also in my statement I refer to support contracts.

Mr. DEFAZIO. I was going to ask a question about that. I wish

you would expand on that because I thought that was a very interesting point on Page 6, where you say, over $2 billion for 100 contractors. How does government work differ from contract work done

by employees at substantially higher costs to the Government? Because everyone thinks contracting out saves money. You give a specific example. Actually, I have heard from a number of people that

a lot of contracting out actually does not save money but it does

at least include profits. So someone makes money. Could you expand on that?

Mr. MEAD. Yes. We are very concerned about these contracts because they are not handled in a centralized way by FAA. It seems

like a very large number of people can tap these contracts and just

order work to be done. We have found examples where they have

multiple contractors who charge multiple and different rates for

the same services. We have found situations where one day a person is an FAA employee getting paid $109,000 a year, and the next

day the employee is sitting in the same place, doing the same work

as a contractor and the contractor is getting $206,000. This seems

to be an example of poor cost control. I think FAA needs to get a

handle on these contracts, handle them centrally, and perform a

cost analysis before they contract out under them.

Mr. DEFAZIO. I will ask Ms. Blakey in a moment for a response,

and that would be my last, Mr. Chairman. But just on that, in addition to the $206,000 cost for the former $109,000 employee, I as-
66

sume that we have not fully funded benefits and retirement. So we

would have an ongoing cost for benefits and retirement for that employee who is now working for a private contractor at twice the cost

of a full-time Federal employee. Is that correct? So maybe it would

be more than $209,000 if you apportion those costs.

Mr. MEAD. Well, that would be so. I do not think that example

we are using is an isolated example either.

Mr. DEFAZIO. Ms. Blakey, could you just briefly respond to that?

Ms. BLAKEY. I certainly would agree with the Inspector General

that this is an area that is important for us to drill down on. We

are doing that and we are analyzing specifically the contracts that

he is referencing here.

I would point this out. The FAA since 1993 has dropped its total

workforce by 16 percent. There was a tremendous amount of pressure both from this Congress and elsewhere to drop the full-time

Federal employees, and that was done. That was accompanied,

however, by the expansion of these kinds of service delivery contracts, where you are able to use the expertise of engineers, of people with tremendous experience on an as needed basis. It is certainly the case that when you use them on a spot basis, they cost

more than that same salaried individual internally, but you do not

have the overall carrying costs of them year-in and year-out if you

are able to use them judiciously. That is the theory behind this,

and certainly that has been the trend in the FAA, as I say, for

more than decade.

Mr. DEFAZIO. But again, if you look at the fact that now, if that

is a former FAA employee, you are having to budget for their ongoing benefits and retirement costs and the new contract which costs

more. I have heard this in other agencies; it is not unique to you.

And I think you are pointing out this was a stupid measure adopted by Congress and the Administration, which is let us use FTE

limits as opposed to looking at how we can do things more efficiently. Just putting words in your mouth, and you certainly did

not say that, for your minders who are listening. You were very

good at defending the Administration here. Thank you, Mr. Chairman.

Mr. MICA. I thank the gentleman. Further questions? Mr.

Costello?

Mr. COSTELLO. Mr. Chairman, thank you. I apologize, I had to

duck out to go offer an amendment at a markup. My first question

was just covered by my friend from Oregon, the former Ranking

Member. I am glad that you had both Mr. Mead and the Administrator elaborate on the record.

In your testimony earlier, Administrator Blakey, you said that

you need a consistent and reliable revenue stream. I do not think

anyone would argue with that. But Mr. Mead, you have said in

your written testimony that before we take action on this revenue

stream and any action to change the current system as far as revenue is concerned, the FAA needs to take steps to control costs and

determine future requirements before new revenue streams are explored. It seems to me that you are suggesting that the FAA needs

to get their act together as far as developing plans for the air traffic control modernization and other things before the Congress
67

takes action as far as new revenue streams. I want to give you a

chance to elaborate on that.

Mr. MEAD. Yes is the answer. I think FAA is doing a lot. The

FAA today is very meaningfully engaged in cost control. I do not

want to paint the picture that the glass as even approaching half

empty. But I laid out four preconditions in our testimony and I

think FAA can do those successfully in the next couple of years. It

is almost like putting a cart before the horse in a way to talk about

borrowing, adjusting taxes, or transitioning to user fees, or whatever, before FAA knows what its requirements are. But at the

same time, I think it is very healthy to begin the debate now about

what the implications are for these different alternatives.

Mr. COSTELLO. I think everyone agrees, including the FAA, that

the FAA has over-estimated revenue into the Trust Fund. I wonder, Mr. Mead, if you have found the FAA has now taken action

to correct that so that they will have better projections in the future? Obviously, the Chairman and I mentioned a number of factors as to why the Trust Fund revenue is down—9/11, the legacy

air carriers reducing their prices to compete with the new entries

in the low-cost air carriers. But I wonder, are you seeing progress?

Do we expect in the future that the FAA will be able to give us

better projections than they have in the past?

Mr. MEAD. I think they are working on it, as Administrator

Blakey outlined. I would say that they are a lot better in forecasting with some precision the level of aircraft activity, but they are

not as good in forecasting the level of estimated revenue.

Ms. BLAKEY. That would assume we know the future business

models of the airlines as well as we know the nature of air taxis

and all of these new systems coming on board. I wish we had a

crystal ball. Part of this is an art, not a science.

Mr. COSTELLO. Let me follow up with you, Administrator Blakey.

I think the Inspector General has pointed out that you have, in

particular, made some progress in that regard and some other

issues as well. But you make the point in your prepared statement

that the Aviation Trust Fund is directly tied to the fortune of the

aviation industry. Would that not be the same case with user fees?

Would that not be directly tied to the fortune of the aviation industry just as the system is currently today?

Ms. BLAKEY. Certainly there should be a strong correlation between the services that are required and the fortune of the industry. If aviation activity dropped, presumably the costs would then

drop, although it takes us a bit of time to adjust an air traffic system down. But if we assume that there is going to be increased activity, which almost every forecast I have seen says there will be,

it is just the shape of that activity that is difficult to know, and

to see that you need to bring the cost of the service in line with

the revenues coming. Any business would run that way.

We are trying our best to run the FAA like a business. And I

think it is really important to note that when you do that, the user

community, the customer base, has to take into account what the

services cost. That gives a much stronger set of incentives to help

us control our costs and be accountable for what is really necessary

and important in the system. It puts a direct link there where

there is no link right now. And so we have a customer base, if you
68

will, that does not have to take into account in any way what the

costs of the requirements are. Again, you do not run a business

that. And I think we can do a lot better job of aligning those things

because it provides incentives for us to control our costs that are

not there now.

Mr. COSTELLO. I see my time is up. But let me ask a final question. I am looking at a publication here that I am hoping is wrong.

It suggests actually that the FAA intends to dissolve the Trust

Fund at the end of the current authorization in 2007. I am assuming that is incorrect, but I would like for you on the record to comment.

Ms. BLAKEY. There is a frightening thought. No. In fact, what I

would say simply is this, following up on the discussion with the

Inspector General, we feel great urgency because we believe that

a viable, healthy Trust Fund is important. Those taxes and fees expire undeniably in September of 2007. And what we do believe is

that it is certainly important for us to be able to project our costs,

to have the kind of accuracy that our new cost accounting systems

allow, and project the capital expenditures that the next generation

system will require. But that is not, in my estimation, a rationale

for us not to move forward very aggressively in this debate about

what to put in place in terms of the new system, because we have

no choice. If this follows the authorizations it has in the past, it

will be for 10 years. And I must tell you, with the kinds of investments we are talking about, others around the world are not stopping. The Europeans, in particular, are moving ahead with capital

investments and a next generation system, and that if we do not,

it will leave us in the dust.

Mr. COSTELLO. Do I take that that the answer is, no, that you

have not made a decision to dissolve the Trust Fund and move to

something else?

Ms. BLAKEY. That is correct.

Mr. COSTELLO. Very good. Thank you. Thank you, Mr. Chairman.

Mr. MICA. Other members have questions for this panel? I have

just a couple of things for the record. Nobody likes to cut and slash

and save money more than me. We have eliminated some 1,400 positions, Mr. Chew testified recently, in FAA. One of the things that

concerns me, as I am getting complaints about certification falling

behind, Ms. Blakey, is where are we—I have got a meeting that I

have asked Mr. Costello to participate with me in tomorrow—

where are we on the question of adequately staffing our certification?

Ms. BLAKEY. We are concerned about this as well. We have a

very strong commitment to trying to bring new products to market

and to try to provide all the benefits that that does economically.

But the harsh reality is that we expect this year we will be down

300 people in our safety oversight. The first priority has to be for

the operational safety of the existing system. And unfortunately,

the queue for those who want to bring new products to market,

that line is getting longer.

Mr. MICA. Well, we are going to have to do something. With the

meeting that we have tomorrow with Mr. Sabatini, we are going to

have to find some solution. This Subcommittee is going to have to

act. Because it begins affecting our economic base. We are losing
69

market share in aviation manufacturing. If we cannot provide certification services to manufacturers of equipment, it makes us noncompetitive; you become an unreliable vendor, and that is the

quickest way you lose markets. So we are going to need a good

analysis of what it will take, where we need to put the bucks, and

how we can get us to a competitive status. So that is one question.

Dr. Dillingham, you talked about the CTI graduates, about saving money. I know we now pay people to go to school to become

an air traffic controller, we pay them a salary while they are going

to school. We contract all this out. We have a big operation in

Oklahoma City. People who go to school end up going through

Oklahoma City in a repetitive manner. Did I hear you say we could

save some money? Because we are here looking at how we can

make this thing work.

Mr. DILLINGHAM. Yes. The idea of allowing appropriate CTI graduates to go straight to on the job training is a way to save a significant amount of money, maybe not in the scope of $12 billion, but

when you are talking about a few million dollars every year or

more depending on how frequently that situation is used, it will be

a part of the savings that can be obtained.

Mr. MICA. Actually, the new controllers will be earning less

money, will start at a lower compensation. We have a core, in fact,

our vast majority of air traffic controllers are older. Somebody

handed me this earnings of various Federal employees. After Associate Justices of the United States, the top 100 FAA controllers

earn an average $199,000 each. So entry level beginning would be

a lot less and we are going to have a lot more folks to replace. So

the more folks we replace, we would actually be saving money in

salaries. The guys get pretty expensive when they hang around, do

they not?

Mr. DILLINGHAM. Yes, sir.

Mr. COSTELLO. Mr. Chairman, I wonder if you might yield.

Mr. MICA. I am always willing to yield.

Mr. COSTELLO. Let me just say, and I know that you have a passion for attempting to save money whenever we can, as I do, but

I think that when we are talking about the lives of the travelling

public that safety has to be the number one issue. I am not disagreeing with everything you said, but I am saying that if we really wanted to save a lot of money, we could contract out the whole

system and maybe—I was just in Shanghai a couple of months ago

and I am sure we could get air traffic controllers from China for

a dollar an hour. But the fact is that we have a responsibility to

the travelling public that when they get on an aircraft that the

FAA has done everything they possibly can to make certain that

we have the best trained and the best, most efficient air traffic controllers and other people in the system handling their safety. We

talk a lot about saving money, and I am as interested as you are

in saving money, but the number one issue the public needs to understand is that we are trying to protect their safety.

Mr. MICA. I thank the gentleman. Reclaiming my time. I would

agree with you 100 percent. I do not think anyone on this side has

advocated hiring chinese air traffic controllers at $25 a month. But

I think we can look at some efficiencies and economies, some that

have been highlighted by the incredible Inspector General on sev-
70

eral occasions, and also GAO, Mr. Dillingham, have given us some

good suggestions. And I know implementation is difficult. Ms.

Blakey has her hands full and then some.

Let me yield now, if I may, to Mr. Oberstar.

Mr. OBERSTAR. Thank you, Mr. Chairman. And thanks to our

panel for being very long-suffering. You have spent a long time at

the witness table. That is the way it used to be around this Committee, we spent a long time in hearings where we plumbed the

issues in depth, and it is important to do that.

Just a parenthetical comment on air traffic controller training.

We were doing very, very well with the Twin Cities school that cost

less per student compared to the Oklahoma City facility, had a

greater success rate, greater retention rate, in the 90 percent

range, but was cut out of the supplemental funding by the Appropriations Committee. Nothing to do with FAA or the Administration budget, just the Chairman of that Appropriations Subcommittee happened to be from Oklahoma at the time and felt that under

the budget limitations it was better to shift those dollars into Oklahoma City instead of saving dollars and training more controllers,

and better, at the Twin Cities facility. Nothing I did not say on the

House floor, by the way, at the time of the appropriations.

Well, we are, in a sense, where we have been for the last 20

years, talking about the viability of the Aviation Trust Fund financing mechanism of a variable cost of air traffic control, what

percentage of operations cost should come out of the Trust Fund

and how much out of General Revenues. It is hard to pick an area

that we have not already plumbed at one time or another in hearings over the last 20 years. There is, however, I think a qualitative

change, not just a quantitative, but a qualitative change in the nature of funding of the Aviation Trust Fund and that is due to the

consequences in aviation subsequent to September 11. Aviation

changed dramatically—huge new costs were saddled on the system,

travellers have changed the way they schedule their travel, how

much they are willing to pay for their travel, and there has been

an additional factor, which is the access through the Internet to

fare selection by travellers who in some instances are able to find

a lower fare on the Internet than airlines are offering on their own

internal CRS. That has an affect on the revenue going into the

Aviation Trust Fund.

Let me start with my pet peeve, which is that the AIP fund was

raided to the tune of $1.059 billion for security in the aftermath of

September 11. And PFCs paid out by airports were raided to the

tune of $316 million to pay for security installations that should

have come out of General Revenues. I think the General Revenue

fund of the United States, defense appropriations, or whatever

ought to reimburse aviation for the costs incurred to install newer,

more costly security facilities at airports which aviation has diverted from capacity requirements that now are beginning to choke

our airports again. I do not ask you for a comment on that, I know

for Administrator Blakey, she has probably got a gag order to talk

about anything like that. I know this from long experience that you

are not going to comment on that, and I do not ask you to. That

is something that should be done in all rightness and fairness.
71

What we have seen on the operations cost of things is an increase in the amount that has come out of the Aviation Trust

Fund. There was a slight decline, but it went in fiscal year 2001

to nearly 83 percent coming out of the Trust Fund, it was a high

of 92 percent, GAO has it somewhat higher in an estimate prepared by GAO; in 2003, it was 76 percent; in 2004, it was 78 percent, this year it is estimated at 79 percent. We used to have a figure of about 10 to 15 percent of that cost was to be paid by DoD

for services provided by the air traffic control system for service to

military aviation. Somewhat down because there is less military

aviation. But it really raises the question, what is the threshold at

which the Aviation Trust Fund should support operations which

are of general benefit to the public compared to the General Fund

that ought to cover such costs? Mr. Mead?

Mr. MEAD. Well, I think the best guide, as we were referring to

this earlier, is the Mineta Commission report from 1997. The report discussed went into General Fund issue in considerable detail

because they realized that the fluctuations in the contributions

that are made by the General Fund had a big bearing on what you

have to set the taxes at. Historically, over the last 10 years, it has

been about 20 percent. I do not know what the magic formula is.

But I think as a practical matter, it is probably a pretty heavy lift

in the deficit environment that we are in to expect more than that.

This year, though, the General Fund projection for 2006 is 11 percent, which is half of what the historical average has been over the

past decade. So for my purposes, I guess I would take the average,

say it is about 20 or 21 percent, try to work on a more scientific,

deliberative way of divining what the General contribution ought

to be. But I think you need one. If you are going to go down to 11

percent and hold that constant for the period of the next reauthorization, you really are talking about a pretty significant tax problem.

Mr. OBERSTAR. Yes. Now Ms. Blakey, from a policy standpoint,

aviation represents 9 percent of our Gross Domestic Product, from

a policy standpoint, do you not think that the General Fund ought

to bear a significantly greater proportion of cost of operating the

system than it does today? And what debate is there, if there is

any, within the Administration or in your discussions with OMB on

this subject?

Ms. BLAKEY. The discussions with OMB in terms of the Trust

Fund really have not really engaged yet. Again, we are really trying to listen to the stakeholder community to explore options and

really to look at this carefully and thoroughly before trying to go

to specific proposals.

I can say this. That in looking at this historically, I do not think

there is any question about this Administration’s commitment to

the fact that aviation provides a sizeable benefit to the overall

economy, no question about it, and the President’s budget has supported that consistently. So at this stage of the game, it is all a

question of ′′calculating′′ the how much, because there also are

other industries who contribute enormously to the economy as well

where you have these same debates going on. At this stage of the

game, I think what we can do is look at historically what other

studies have said about what the public benefit is and try to derive
72

good information from that. For example, I mentioned the fact that

the NCARC study said roughly their view was about 30 percent of

the overall FAA operating costs should be borne by the General

Fund. But that did include security. When you drill down, the latest cost allocation study in 1995 that talked about the issues of

military, public use aircraft, benefits to the public such as safety

oversight, certification, and those kinds of costs all lumping in, it

actually came down to more like 15 percent. So there are wide

variances there and I would just simply say we will do our best to

study that.

Mr. OBERSTAR. I think it is important for the Administration, for

certainly the OMB folks who drive these numbers, to think more

substantively about the effect of aviation on our economy and what

contribution the General Revenues of the Government ought to

give back to aviation for the economic multiplier effect that it creates within our economy. Twenty-five years ago, that was 50 percent; that is, General Revenue paid 50 percent of those costs. And

I plead guilty to ratcheting it up to 75 percent when we negotiated

an agreement to eliminate the trigger that Congress had enacted,

that if you do not appropriate the full amount authorized for AIP,

then you cannot spend above fifty cents on the dollar for operating

costs of the air traffic control system. In order to release money

held back in the Trust Fund and to move ahead with a high authorization level and the PFC, we eliminated the trigger, ratcheted

the contribution from General Fund up to 75 percent. But that has

been a moving target ever since. We need to get some clarity on

that.

One of the issues I think that airlines may reference in their testimony, I have not read it yet, is the fuel tax, the 4.3 cent fuel tax,

and that this should be restored to the airlines. That generates

roughly $530 million a year, for last year it was $534.3 million.

What affect would there be on the Aviation Trust Fund if the 4.3

cents were repealed and returned to the airlines?

Ms. BLAKEY. Well, as I am looking at the overall allocation of

fees that came into the Trust Fund in 2004, the commercial fuel

tax contributed approximately 6 percent of the overall Trust Fund.

Mr. OBERSTAR. Is there a multiplier effect that would follow if that 4.3 cents were repealed, or is it just a loss of $534 million that

we are not likely to make up anywhere else?

Mr. MEAD. No, it would not be made up anywhere else. I do not

see how it would be. You already have a problem with the revenue

being optimistically forecasted and not materializing. If you knock

out 6 percent more a year, the airlines probably would like that,

but that 6 percent is going to have to be made up somewhere. You

can hit up the General Fund perhaps.

Mr. OBERSTAR. The ticket tax is a percentage of value, unlike the

fuel tax at the pump for surface transportation. The advantage of

that is in a rising economy you generate more revenues. The idea

of that Trust Fund percentage tax in 1970-72, when it was established and in 1972 adjusted, was that a rising economy will provide

more revenue to meet the needs of airport infrastructure. It was

originally intended to be a fund for the hard side—the runway,

taxiway, and the parking apron side of aviation. Then it was expanded to cover the F&E account. Then further expanded to cover
73

operations. What would happen to operations of the FAA if we said

all those revenues just go into the hard side of aviation?

Mr. MEAD. If that happened, FAA would have to come up with another $6 billion. The General Fund, if it picks up what the President’s budget is estimating, would pick up $1.6 billion. When your

salaries and operations costs are exceeding well over half your

budget, and your budget is $14 billion, it would definitely increase

the amount that you could apply to capital and to airports. In other

words, the half a billion hits that those accounts have taken would

be restored and then some. You would be spending more on F&E

and AIP.

Mr. OBERSTAR. And where would you get that $6 billion to spend

on F&E and on operations?

Mr. MEAD. Well, you would have to hit up the General Fund,

which would be general income tax dollars.

Mr. OBERSTAR. Do you think that is a possibility, Ms. Blakey?

Ms. BLAKEY. I can only look at it historically and tell you I certainly would not make that projection. I do not see anything in either the history of the use of the General Fund and the Aviation

Trust Fund, over the course of 15 years, I might point out, as well

as the current climate of Federal budget deficits that says the General Fund is a place that you can go for additional funding. And

if you should eliminate the Trust Fund for operational costs, just

this year alone you would be cutting out 63 percent of our operating budget. I would conjecture it would be almost impossible to run

the system. I cannot imagine what a system would look like if we

were operating on that kind budget.

Mr. OBERSTAR. From both of you a very candid, honest answer.

I am sure Dr. Dillingham would concur. GAO has reviewed this for

many years. What I am getting at is the range of options is extremely limited.

Mr. MEAD. That is right.

Mr. OBERSTAR. If you shifted from the ticket tax as a percentage

of the value of the ticket to a fee—now we have been that road before in 1990 and 1991, revisited later in 1994-95. At that time, I

characterized the ATC user fee as a cash register in the sky—you

pass a certain point, ching, it goes up, you get a charge, pass another, ching, it goes up again. But is that the option for us, to ensure an increase in revenue is to tie all of the services to aviation

to a precise formulaic fee-based system, that is, a charge imposed

equivalent to the value of the service for which the charge is imposed? That is OMB’s definition of a fee. Dr. Dillingham, what do

you think about this?

Mr. DILLINGHAM. Mr. Oberstar, the questions that you are raising about the options, and the winners and losers associated with

them is part of the work that we currently have underway for this

Committee.

Mr. OBERSTAR. I did not like the fee idea eight or ten years ago

and I do not like it much better today. But if we are going to assure the investments we need to make in the continuing modernization of the air traffic control system, then we have to think

very creatively about means of financing it in addition to all the

work of each of you, Ms. Blakey at FAA, General Mead, Dr.

Dillingham, on showing aviation, the Congress, appropriations
74

committees, how to control and contain costs. But there is a point

at which you still have to make those investments.

Mr. MEAD. Mr. Oberstar, we do have a problem here. There is

going to be a serious mismatch between the revenues and the costs.

There is a serious debate about how much the General Fund

should be contributing. We cannot live with this swing of somewhere between 9 percent and 30 percent. You cannot make forecasts that way. But one thing I think would be useful. FAA has

made a lot of progress since the last time you and I went around

this axle on user fees. The Mineta Commission came out with its

report and, you recall, it recommended cost-based user fees. Then

everybody said, well, they cannot do that because they do not have

a cost accounting system.

Mr. OBERSTAR. Right.

Mr. MEAD. A number of years went by, and $58 million later

they almost have one. I give tribute to Administrator Blakey for

that. A cost accounting system does two things. One, it tells you

where you are spending your money and for what. The other thing

it ought to be able to do is tell you is the cost that is being imposed

by the various users on the system. Maybe in the months ahead,

FAA could provide you that information plus the methodology for

arriving at it. It would form a basis for discussion as to what would

happen if you went down a user fee path, what would happen if

you went down a tax path, what if you want to structure taxes so

they roughly correlate with the consumption of use by the various

users in the aviation community.

Mr. OBERSTAR. Well there are eight sources of revenue now for

the Aviation Trust Fund and they are apparently inadequate in a

declining fashion to support the needs of the system, even though

use is rebounding and you would think that benefits also would be.

The initial concept of a fee or tax would be tied to the increasing

value of the system is no longer a valid concept and we have to

rethink it. That is part of the work charged to GAO, and we look

forward to that coming report.

Mr. Chairman, this is just the beginning and the continuation of

an extensive dialogue that we have to have in a very constructive

way about this most important treasure to our national economy,

of all of transportation and in all the world. I keep saying this, a

billion people travelled by air last year, two-thirds of them travelled in the U.S. airspace. No wonder every carrier in the world

wants to get into our airspace. This is the most important airspace

in the world and the most complex. The Southern California

TRACON handles more operations than all of Europe combined.

That is a huge responsibility. Just think of that as we go forward.

Thank you very much.

Mr. MICA. I thank you. I have about forty more minutes of questions for each of you.

[Laughter.]

Mr. MICA. But I am going to let this panel go. We may have

some additional questions we will submit and ask you to respond

in writing for the record. Thank each of you for your testimony. We

look forward to working with you as we address the challenge of

funding our Trust Fund and funding the aviation system and FAA.
75

So thank you again for being with us. We will excuse you at this

time.

I now call our second panel. The second panel consists of Mr.

David Plavin, he is president of the Airports Council InternationalNorth America, and appearing on behalf of American Association

of Airport Executives; Mr. James May, president and CEO of Air

Transport Association; Mr. Edward Faberman, executive director of

the Air Carrier Association of America; Ms. Ruth Marlin, executive

vice president of National Air Traffic Controllers Association; Mr.

James Coyne, president of the National Air Transportation Association; Mr. Phil Boyer, president of the Aircraft Owners and Pilots

Association; and last but not least, Mr. Ed Bolen, president and

CEO of the National Business Aviation Association.

I think all of you have been before the Subcommittee before. We

are going to limit you to five minutes apiece. You will see the signal to stop on the timer. If you have lengthy statements or additional information you would like to have entered as part of the

record, just request so through the Chair.

With those introductions, let me recognize first David Plavin,

president of the Airports Council International-North America.

Welcome, sir, and you are recognized.

TESTIMONY OF DAVID Z. PLAVIN, PRESIDENT, AIRPORTS

COUNCIL INTERNATIONAL-NORTH AMERICA, APPEARING

ON BEHALF OF ACI-NA AND AMERICAN ASSOCIATION OF

AIRPORT EXECUTIVES; JAMES C. MAY, PRESIDENT AND

CHIEF EXECUTIVE OFFICER, AIR TRANSPORT ASSOCIATION

OF AMERICA, INC.; EDWARD P. FABERMAN, EXECUTIVE DIRECTOR, AIR CARRIER ASSOCIATION OF AMERICA; RUTH E.

MARLIN, EXECUTIVE VICE PRESIDENT, NATIONAL AIR TRAFFIC CONTROLLERS ASSOCIATION; JAMES K. COYNE, PRESIDENT, NATIONAL AIR TRANSPORTATION ASSOCIATION; PHIL

BOYER, PRESIDENT AIRCRAFT OWNERS AND PILOTS ASSOCIATION; ED BOLEN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL BUSINESS AVIATION ASSOCIATION, INC.

Mr. PLAVIN. Thank you, Mr. Chairman. I am here today on behalf of ACI and AAAE and we have got a written statement that

I propose to submit for the record.

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

part of the record. Please proceed.

Mr. PLAVIN. There is a lot of stuff in there. Thank you for having

gone through most of it already today, so I will not bore you with

repeating it. I did want to raise a couple of points that I thought

would be useful to highlight, however.

It is obvious that everybody agrees that the Trust Fund is broken

and that we need more money than the Trust Fund is now providing or that the combination of the Trust Fund and the General

Fund are providing. Let me focus on airports, if I may, for obvious

reasons. I am not really exactly sure why but the Administration

seems to contend that $3 billion, which is a $500 million reduction,

is adequate. They seem to point to the idea that there has been a

reduction in their calculation of the National Plan for Integrated

Airport Systems, the well-known NPIAS. ACI does a lot of work on

projecting capital needs for airports, and (a) we do not think that
76

the NPIAS is nearly adequately reflecting the amount of AIP-eligible funding, never mind the issues relating to things that are not

AIP-eligible. Our view is that it is at least 25 percent understated.

But the fact is that even if you accept the $39.5 billion that the

FAA projects, that still leaves you a dramatic gap, as always, between the acknowledged needs and the Federal funding level.

I am not persuaded, for example, that we have really adequately

addressed the various issues. Everybody seems to agree we need

more money. But at the same time, we are able to say there cannot

be any more General Fund contribution, ticket taxes are bad, user

fees, even if they are tied to real cost and even though actually our

system is entirely reliant on user fees, are bad. It sort of reminds

me of an old Monty Python routine where they sit together as the

town council and decide to levy a tax on all foreigners living

abroad. It strikes me that this is really what we are faced with.

And ultimately, it is a political decision, in the best sense of that

word, and we would be prepared to work with you to try to get to

that political decision.

First, we, I would argue, should maintain the balance between

the Trust Fund revenue and General Fund contributions. Unfortunately, we have depleted the Trust Fund over a long period of time,

as Mr. Oberstar and Mr. Duncan pointed out, to strengthen the air

traffic operations, but at the expense of its original purpose, which

was to make capital investment in the system.

We believe that we need to reevaluate the roles of Government

and industry, to eliminate outdated regulations both for air traffic

control and for airport operations. We think those raise the cost of

doing business, particularly in planning and building new capacity.

We believe that permitting the establishment of a responsive operating framework can unleash innovation and save resources. And

I think we need to think creatively about a broader range of options.

We should allow airports to voluntarily change their participation in the AIP program, for example, in exchange for additional

financing and management flexibility. That would allow airports to

operate in a more business-like fashion and to work with the FAA

to provide some of the things that will be needed in order to make

the system function properly.

We believe that in the short term there is some creative financing alternatives that are available that come closer to meeting the

demonstrated investment needs while allowing the many partners

in the aviation system, Government and private, to work out the

long term fix. And we are ready to play our part in that solution.

Additionally, we believe that Congress should consider

unfettering local authority for raising and using airport funding to

promote better local and national solutions and potentially free resources for airports and the FAA’s capital account that rely on AIP,

and for airports, particularly smaller ones, that rely on AIP as

their sole or near sole source of capital development funding.

We have got a number of other ideas. We have outlined them in

our testimony and we would love to discuss them with you, including changes in the rules that govern airport bonds, which are the

source of the vast majority of the overall capital development resources that airports use.
77

Finally, we believe that there is the need to look at the way

users pay for the system. We have had a user funded system, we

have always had a user funded system. We believe that if user

funds can be more appropriately identified with the costs and the

needs of the system, that could be a very positive way for the system to respond to the growing demands that everybody says are

out there. Thank you, Mr. Chairman.

Mr. MICA. Thank you. We will hear now from Mr. May, president

and CEO of Air Transport Association. Welcome. You are recognized.

Mr. MAY. Thank you, Mr. Chairman. You know, I was struck in

preparing for today’s hearing by how long we have been considering serious reform of the Airport and Airway Trust Fund and with

it addressing associated FAA and air traffic management issues.

ATA has been on this issue since at least 1984. We had the

Balyle’s Commission in the 1990s, the Reinventing GovernmentUSA Air Traffic Service proposal in the mid-1990s, Secretary Mineta’s NCARC in 1997, and on and on. And the same message

came through in each—we need to run air traffic service more like

a business with a clear understanding of cost, we need to provide

predictable funding with consistent with service demands, we need

to provide the management tools and clear authority to get the job

done, and we need accountability for performance. Lot of discussion. Lot of agreement. But little change. And that is not to say we

have not made progress. AIR-21 led to the ATO. Russ Chew and

his ATO team have been making some very real progress, and it

has been talked about today. The very fact that they are going to

be able to do a real honest to goodness cost analysis system is

going to add by a factor of 1000 to this debate.

But I am a firm believer in the critical mass theory of Government. I guess that is a polite way of saying that things have to get

really fouled up before we get serious about fixing them. And when

it comes to Trust Fund reauthorization and the associated issues,

I honestly think critical mass is at hand. For reasons I will not belabor here, the commercial passenger industry is on its back. And

even the successful carriers are suffering. The Trust Fund revenues

per aircraft are down, reflecting what the public is willing to pay

to fly. Air traffic operations are climbing and with them delays, reflecting not simply the commercial industry’s use of regional jets,

but also the substantial influx of business aviation. The air traffic

organization is confronting by the need for multi-billion dollar

wholesale replacement, replacement of its aging and often outmoded infrastructure. Airport funding is totally out of sync with

system demand. And now we are looking out to 2017 and asking

this Congress how best to redesign the funding and operation of

the critical infrastructure, because getting it right is essential to

aviation, a cornerstone of the Nation’s economy. To me, that is critical mass.

So what is it we want? We have talked about the problems. What

are our suggestions? We want an air traffic organization that is

run like a business, to understand its costs and to have the imperative to spend smart to improve efficiency. We want the necessary

infrastructure reform to allow consolidation that will drive this efficiency while continuing to improve safety performance. We want an
78

air traffic control system capable of adapting to the same market

forces that impact its customers.

How do we get there? Here are some principles to guide our decisions.

First, we must assure a dynamic funding stream reflecting system use through an equitable, transparent, proportional, cost-based

mechanism where users pay for the service they consume. I know

there is a lot of talk today about user fees. But let us be honest,

this system has been funded with user fees since its inception.

They may be called ticket taxes or segment fees or something else,

but it is a user fee. Commercial aviation can no longer be expected

to fund over 90 percent of a system cost while it is only roughly

60 percent a system user.

Second, I think you need to empower the ATO to make decisions

regarding system consolidation, cost controls, productivity gains,

with the understanding that business decision-makers must be

held accountable. The debate over privatized towers and closing

down systems overnight just on this Committee is emblematic of

the kinds of political input that exists to those decisions, and you

have got to give ATO the power and authority to make them, make

them stick, and go forward, or otherwise we are forever lost.

Third, we need to eliminate funding and earmarks for FAA legacy programs which do not have an identifiable funding stream

from the users benefitting from these programs.

Fourth, we need to distinguished between FAA and ATO programs, that includes airport infrastructure funding, which are provided for public policy purposes. Those should be funded in great

part through a General Fund contribution. In contrast, services

which are consumed by system users in the aviation business

should be supported by those users.

Fifth, we need to think creatively about the best types of management structure for the ATO in order to enhance its management opportunities and consider, with appropriate safeguards, alternative funding mechanisms, including bonding, for long term investments.

Our bottom line is this. We can no longer expect to take billions

of dollars out of the commercial airline industry to subsidize other

system users or to support tangentially related public policies.

Mr. Chairman, we have the critical mass for change, and I hope

this Committee will help us provide the leadership to make it happen. Thank you.

Mr. MICA. Thank you. We will now recognize Mr. Edward

Faberman, executive director of the Air Carrier Association of

America. Welcome, and you are recognized.

Mr. FABERMAN. Thank you. Mr. Chairman, I ask that my full

comments be made part of the record.

Mr. MICA. Without objection, so ordered.

Mr. FABERMAN. Thank you. Chairman Mica, Ranking Member

Costello, Congressman Oberstar, it is a pleasure to appear before

you today to discuss an issue that is critical to the economic growth

of communities throughout this country and the expansion of airline service. That issue is the funding of the Airport and Airway

Trust Fund. This issue is essential for job and economic growth in
79

communities throughout the country. Therefore, it is important

that we do not discourage passengers from traveling.

Secretary Mineta recently said, ‘‘Demand for low fare service is

strong and growing stronger. We think that the changes underway

now are the kind of market-based, cost competition that the architects of deregulation thought would happen 25 years ago.’’ It is important that this continue. American travelers throughout this

country want more service options.

It is important that all who place demand on the FAA pay their

fair share of the cost they create for the FAA, and that we identify

where that demand is coming from. As we consider changes to the

funding mechanism for the FAA, we must also emphasize that

other costs for the airline industry continue to increase. For example, security. In addition to security fees, carriers are routinely, almost on a weekly basis, asked to pay for construction to add new

security equipment at airports, to add new staffing, and to do other

things, including pay costs for delayed or cancelled flights because

of security problems. Many of those things were supposed to have

been paid for by TSA. A lot of airports in this country are collecting

lower fees, lower PFCs, for example, because of fewer people traveling through those airports. Therefore, in many cases, our rentals

and other airport charges are increasing. The air traffic control system is facing additional delays and congestion. These costs are also

adding up.

A number of these problems are caused by an increase in the

number of flights, even though many of those aircraft have fewer

people on them than they have in the past. One of the comments

we have heard frequently, and we have heard it today, is that due

to lower fares the Government is not receiving the amount of fees

and taxes as collected in the past. I would say that airlines try to

charge fares that are reasonable, try to charge fares that bring in

the most for them and the communities they serve. It has been an

historical issue. However, I will also say that with lower fares,

more people are traveling. And in many cases, we would rather

have people fly four or five times a month than only fly once a

month. We also note that in this economy, if you increase your

fares by even 5 to 10 percent, a large percentage of people may not

fly.

To allow entry and to assure the future health and growth of the

air traffic control system, we recommend that future FAA and ATC

funding be based on a number of principles:

One, the FAA needs to continue to take steps to reduce costs. We

are convinced that under the leadership of Administrator Blakey

those issues are being looked at closely. But they need to happen

and they need to continue to happen.

Due to the enormous impact that commercial air service has on

the Nation’s economy, the General Fund must continue to help

fund the ATC system. We believe that percentage should increase

above where it has been in the last few years, and we think there

are good reasons for that to happen.

Again, all operators must pay for the system based upon the cost

they impose on the system. We note that we hopefully, I will use

the word hopefully, will see general aviation even return to National Airport. However, we believe that if they are landing at Na-
80

tional Airport right before one of our planes, then they should contribute the same amount of money that our planes are contributing.

Finally, we think the FAA also needs to look carefully at causes

of significant delays in the system. And if those delays are caused

by major rescheduling, major additions in traffic, then this has to

be reviewed and those who have caused those problems should also

contribute more to the system.

We need to move forward with this review but we must be very

careful not to block competitive opportunities. I thank you again for

focusing on issues that impact true airline competition. We agree

that this is only a first step and we are prepared to continuously

work with you. The founders of deregulation would not have it any

other way. Thank you.

Mr. MICA. Thank you. We will now hear from Ruth Marlin, executive vice president with the National Air Traffic Controllers Association. Welcome, and you are recognized.

Ms. MARLIN. Thank you. I have also submitted a written statement for the record.

Mr. MICA. The entire statement will be made part of the record.

Please proceed.

Ms. MARLIN. Good afternoon Chairman Mica, Congressman

Costello, and members of the Subcommittee. I want to thank you

for this opportunity to appear before you today to discuss the financial condition of the Aviation Trust Fund. This is a very important

issue for the future of aviation in this country.

I am Ruth Marlin, the executive vice president of the National

Air Traffic Controllers Association, and I represent nearly 20,000

FAA employees across 19 different professions.

For 30 years the Airport and Airway Trust Fund has been used

to fund capital improvements in aviation, investing in airports, air

traffic control facilities and equipment, and research and development. This funding structure has served our Nation well and it has

continued to grow with the demands placed on the system.

It is an accepted fact that while the Trust Fund revenue experienced a temporary period of decline from 2000 through 2003, that

those revenues rebounded in 2004. And even the most pessimistic

indicators point to continued growth in Trust Fund revenues. However, that has not stopped opponents of the current structure from

attempting to manufacture a crisis.

Revenues are closely tied to the volume of air travel. They are

passenger-driven. The FAA predicts a record 718 million people

will travel this year and that number is expected to grow to one

billion by 2015. Under the current structure of the Trust Fund,

even if average air fares were only $100, the increase in the number of travelers alone would account for an additional $3 billion a

year in Trust Fund revenue.

Critics of our system are quick to mention yield, seat miles, user

fees, unit of production, all of these as possible revenue indicators.

But NATCA believes that a critical safety function like air traffic

control is better served by not attempting to obfuscate the funding

discussion with corporate market choices. While more aircraft flying with more empty seats may cause yield to go down, we are not

talking about leg room here. We are talking about funding our na-
81

tional aviation infrastructure and operating air traffic control, an

essential safety function.

Ironically, the last time the Trust Fund was due for reauthorization the debate focused on addressing the increasing Trust Fund

surpluses. For decades the Trust Fund surplus has been an issue

of considerable controversy, leading to legislation increasing expenditures. Now, a few short years later, some Government and industry officials suggest that reducing the surplus is no longer desirable. Additionally, it is being used as evidence for their allegation

that the fund is structurally deficient.

NATCA maintains that the Aviation Trust Fund surpluses have

provided a valuable source of stability, allowing our national aviation investment to continue through the periods of brief revenue

decline. And we made sure that program cuts were not made today

that would curb tomorrow’s economic growth. There have been dramatic fluctuations in the use of the Trust Fund to fund normal operations costs, and I think this morning’s panel talked to that a

great deal.

But NATCA is not asserting that more money is needed to fund

the FAA or the operations budget. We understand the strains on

the Federal budget. However, while we do not think that large increases from the General Fund are needed, we also do not believe

that major cuts are appropriate. For four of the eight years since

the Trust Fund taxes were reauthorized the General Fund contribution exceeded $3 billion. It is equally clear that in years where

the contribution was lower it was a result of the FAA’s poor forecast for Trust Fund revenue, not a desire from Congress to cut essential investment in aviation.

Fortunately, the structure of our funding mechanisms has allowed Congress to adjust the balance between Trust Fund and

General Fund as circumstances dictate. Recognizing the significant

national interest in maintaining and operating our air traffic control system, NATCA believes that Congress has acted appropriately

in this regard. Oddly enough, the opponents of the current funding

system cite eliminating the role of Congress as a reason to change

to user fees. NATCA disagrees. We are talking about the safety of

hundreds of millions of passengers every year, we are talking about

the mobility of our nation, and an infrastructure that is a powerful

economic engine. NATCA believes that the people we elect to represent us play a vital role in those decisions.

Another common argument from Trust Fund opponents is the

need to replace many of our air traffic control facilities. My members work in those facilities and yes, many are in need of repair

and replacement, and many projects are funded and ongoing. In

the last five years, the FAA has replaced more than thirty air traffic control towers and terminal radar approach control facilities.

That is an average of one every two months. Yet, to hear the rhetoric today, you would think that it is an insurmountable task, that

opening a new air traffic control facility is incredibly difficult.

Nothing could be further from the truth. In fact, I would argue that

in the United States we have more experience opening new air

traffic control facilities just in the last five years than our competitors have in their entire history.
82

Do we have facilities in need of replacement? Yes. Many centers

are over 40 years old, just like the building we are in today. But

like this building, our old air traffic control facilities are chock full

of new computers, new equipment, and new technology that has allowed the workforce to do their job safely, efficiently, and more productively.

In closing, NATCA believes we should not underestimate the

strength of the current FAA funding system and we should not

tamper with it lightly. That Trust Fund is a stable source of revenue. We should keep it that way by rejecting radical changes based

on a manufactured crisis. Thank you.

Mr. MICA. Thank you for your testimony. We will now hear from

Jim Coyne, president of the National Air Transportation Association. Welcome. You are recognized.

Mr. COYNE. Thank you very much. Mr. Chairman, Congressman

Costello, it is a pleasure for me to represent the National Air

Transportation Association before this panel. Our association represents commercial businesses across the whole spectrum of aviation in thousands of airports across the country. We represent both

the traveling passengers, air charter, flight students, maintenance

companies, FBOs, many other companies that work at local airports and commercial airline airports as well. If I may, I would like

to have my official statement submitted for the record.

Mr. MICA. Without objection, the entire statement will be a part

of the record.

Mr. COYNE. A lot of hard work went into that. Much of it is repetitive of what has been said today, so I would like to really respond to a few of the issues that are directly related to the membership of the National Air Transportation Association.

First, I would like to sort of give a perspective about why I think

we are in the mess that we are in today. As a former Member of

Congress, I understand how hard it was for Congress several years

ago to develop the funding strategies for the Aviation Trust Fund.

And what we have developed over the years is a multiple level of

revenue streams into the Trust Fund.

People talk about a predictable level, but really, no one can predict any of the various factors or parameters by which taxes are assessed. So to be secure, relatively secure, the Aviation Trust Fund

relies upon different formats to collect its taxes. Of course, one format is the General Revenue Fund, another one is the ticket tax

which is essentially an ad valorem tax, a function of the dollar

value of the transportation provided, for airports we have funding

through PFCs, a per capita tax, and we have a fuel tax. I would

submit to you that the fuel tax is probably one of the most

foresightful tax formats for funding the Aviation Trust Fund because it is the only format which is based upon essentially the

weight of the airplane and the distance flown—the heavier the airplane, the further it flies, the more fuel is used. Therefore, we at

NATA believe very strongly that the fuel tax is a very valid component and should always be a valid component of the Aviation Trust

Fund funding scheme.

But here before us today is a new proposal essentially by some

proponents to add a per-flight tax. All these other taxes might arguably be called user fees. But this new user fee, if you will, is so
83

tremendously different because it is a per-flight tax. I want to give

you some indication of the impact that would have on our side of

commercial aviation.

We are the commercial aviation segment which does not fly two

schedules. We are the commercial aviation segment which flies to

more than 5,000 airports across the country, not just 400 or 500

hundred as the airlines do. We are the commercial aviation segment which is on-demand, which flies in unusual circumstances

with emergency situations, and especially in unpredictable routes

and situations. Now for the airlines to propose a fixed user fee perflight tax, it is easy for them. There are only a few dozen airlines,

they will only get a few dozen bills, they know their schedules, they

know where they are going to be flying. It is an easy thing for them

to rely upon that tax. But for the charter industry, 2,800 different

companies, flying over 1.5 million flights a year to 5,000 airports,

most of the time we do not even know we are going to fly tomorrow

because our passenger has not called us, and so our billing oftentimes is made several weeks after the flight. We would like to try

to get it wrapped up as quickly as possible.

If the example of Europe and these other countries is to be expected, the typical user fee assessment over there for general aviation may not arrive until three or four months after the flight, and

many, many of the times, I am told as much 10 or 20 percent of

time, the bill is wrong. I submit to you that the Federal Government is not capable of producing millions and millions of accurate

bills a year to the commuter or charter airline industry. They may

think they can do it. But they have never done it. Anywhere in

Government ever have we seen an example of the Federal Government sending out millions of accurate bills. And our industry is

going to pay the price.

Now we happen to believe that there is a much simpler solution,

which is to continue to have the fuel tax and the ticket tax in the

format that it is now. I want to mention very quickly about the

ticket tax. The real mess that we are in today is because we have

seen about a 20 or 25 percent reduction in the average ticket price

in the airlines. That has caused the average passenger payment to

fall from about $12, in terms of the 7.5 percent ticket tax, to about

$9. So we have lost about $3 per passenger times 600 million passengers. That is a lot of money. That same flight though, that 1,000

mile flight that we were talking about earlier today, when Congressman Hayes takes that flight he pays today with the fuel tax

not $9, or not even $12 like it used to be for the airlines, he pays

$60 for that same 1,000 flight in terms of the fuel tax. Furthermore, a charter operator when he flies that same flight is paying

7.5 percent of a much higher fee. The typical charter aircraft flying

that same 1,000 flight will pay $450 to carry that same one passenger. So clearly, just because the airlines have seen their tax revenues fall, ours have been going up in the same environment. We

have been paying more money over the last four or five years as

the activity and the ticket prices in the charter industry has grown.

So we are not part of the problem. We like to think, however,

that the fuel tax will continue to be part of the solution. Thank

you.
84

Mr. MICA. Thank you for your testimony. We will now hear from

Mr. Phil Boyer, president of the Aircraft Owners and Pilots Association. Welcome, and you are recognized.

Mr. BOYER. Good afternoon, Chairman Mica, Congressman

Costello, and also the dedicated staff here. Like today’s hearing

which reminds me of a marathon, we are starting at least for me

the third marathon discussion of this whole debate about how we

fund the agency. And as we start this, I want you to know that we

have been participants in all of the forums, all of the hearings, and

will continue to be alongside the airlines and the other people represented at this table.

You have heard some testimony today and I am not going to try

to get into the dollars and the numbers like our IG or like the

GAO. But I would like to indicate that the Administration itself,

the OMB this year has said that over the coming years, because

we have had a dip in the Trust Fund, as you have heard, it will

increase by the year 2010 by 53 percent. Now let us remember that

this is a revenue and expense equation. So I would claim, as one

of our panelist said earlier on the first panel, it ‘‘might not be as

bad as painted.’’ And just to cut to the bottom line of the written

testimony that we hope will go into the record, Mr. Chairman, we

look at this increase, our tried and true Trust Fund which has had

its ups and downs, the General Fund contribution which I think

needs to be looked at, both remain the biggest and the strongest

way to fund our infrastructure.

Who do I represent? A little different than most at the table

here. It is 400,000 members. Jim has members, and Ed has members, but our members are the people who fly these planes own

them, the general aviation, the personal aircraft, and they are the

ones that do not pass on to a customer, to a passenger in an airline, or to a business. They pay this out of their own pocket. The

one thing they have told us is how they do not want this system

funded. We do a lot of research. In 2005, knowing this debate was

coming, we went to our membership and 96 percent oppose the use

of user fees in any form to fund the system. Do not forget these

also are your constituents. They are people who were here earlier

today talking to this very subject on the panel. And why do they

oppose? Well the great lead in, Congressman Oberstar talked about

the cash register, Jim talked about how in the world are we going

to ever charge for this.

[Video presentation.]

Mr. BOYER. And once again coming from this owner’s pocket $71

for a short under 50 nautical mile flight, based on some rates that

were projected by the Reason Foundation in 1996 when we were

at the second running of this long marathon.

You know, we have looked at saving money. Here is just a few

places where we have rung the cash register on the positive side,

and the Administrator spoke to these. Working with general aviation, the largest user of this service, we did not come to you and

say stop what may be going on. But we said, you know, there may

be a better way to do this more economically. It is $2.2 billion over

10 years. How about decommissioning little used approaches, $8

million over 10 years. Or some of the tower operations overnight

that are now just being looked at, $5 million over the next year.
85

A letter was sent to our members, your constituents, to educate

them on the meetings and the things that we have gone to concerning FAA funding. We sent that actually just last month. And a

quote from the letter is, we wanted to let them know it is too early

to tell which way you are going, against or for a user fee system,

but to indicate if you believe so, the debate develops, that this is

not an option for GA. Let me just take you around the horn a bit.

A full committee chair from Alaska, as you can see, ‘‘If such a

system were implemented, many private pilots would be tempted,’’

and you heard it earlier, ‘‘to cut their expenses by ’opting out’ of

the NAS.’’ Or in Congressman Oberstar’s district, ‘‘I am forced on

occasion to make payments on the privatized system in Canada.’’

because they are near the border there, ‘‘I am not impressed at all.

Our people and our system are really hard to beat.’’ Or looking,

Chairman Mica, at your own district, ‘‘Flying my aircraft extensively in the conduct of my medical practice and national eye research protocols, in addition to managing numerous property investments, I ask you to please exert all efforts to oppose user fees

and instead support excise taxes as the way to fund our system.’’

Congressman Costello, Illinois is not exempt from members who

feel this same way. Once again, ‘‘I am encouraging you to not establish a user fee-based system to fund our system.’’ And obviously,

our own member and pilot, and we hear from him quite often in

Congressman Hayes’ area, and other members of the Committee,

we got an equal number of letters in this way.

To sum it up. Fund the Trust Fund by excise taxes, not fees. At

least 25 percent of the FAA costs should be supported by the general tax revenue. The General Fund, people did not tell, has been

as high as 59 percent. There were several years it was 48-49 percent. One year only it was zero percent. General aviation is an incremental user of our air traffic system but we are committed to

keeping the costs of our exclusive services very low. Thank you

very much.

Mr. MICA. Thank you. We will hear from our last, patient witness, Mr. Ed Bolen, president and CEO of the National Business

Aviation Association. Welcome. You are recognized.

Mr. BOLEN. Thank you, Mr. Chairman. First of all, let me ask

that my written statement be made a part of the record.

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

Mr. BOLEN. Thank you. This is the first time I have had the opportunity to testify before this Subcommittee in my new capacity

with the National Business Aviation Association.

Business aviation represents over 10,000 companies in the

United States that utilize GA aircraft to help them compete in the

global marketplace. Approximately 85 percent of the companies are

small and medium size. Piston-twins and turboprops make up the

majority of the business aviation fleet. Business aviation tends to

fly above or below the scheduled airline service between 30,000 and

40,000 feet. We also use different airports. Business aviation operations total about 3.5 percent at the Nation’s 20 largest airports.

There has been a lot of talk today about how general aviation

pays. So let me be very clear about it. General aviation, all of its

segments, pay 4.3 cents per gallon tax which was originally created

in the early 1990s for deficit reduction purposes and later made a
86

part of the Airport and Airways Trust Fund. We also pay 0.1 cents

per gallon for leaking underground storage tanks. Those are true

of all segments of air transportation including all segments of general aviation. The operators under Part 91 pay a 15 cents per gallon tax on AvGas and a 17.5 cents per gallon tax on jet fuel. Fractional operators pay a 7.5 percent tax on their hourly charge, a

$3.20 departure fee, and a $14.10 international departure fee.

Charters also pay the 7.5 percent, the $3.20 departure fee, and the

$14.10 international departure fee.

As I said before, and echoing the statements, the fuel tax is at

the foundation of the general aviation taxes. We in this community

support it strongly as the right way for us to pay our share. In

terms of how much general aviation pays, when you look at the

various segments of general aviation, the piston, the turbine under

Part 91, the fractional operators, the Part 135 charter operations,

we believe that the total amount paid into the Trust Fund from the

general aviation community is in excess of $600 million.

Another question that has come up today not only is how GA

pays or how much GA pays, but how much should GA pay. It has

been said that general aviation represents 30 percent of the IFR

traffic but pays a much smaller portion of the Airport and Airways

Trust Fund revenues. GA does in fact represent 30 percent of the

IFR traffic and we have looked at this according to tail numbers.

Turboprops represent 7.2 percent of total IFR traffic; the pistons

represent 11.2 percent of IFR traffic; and the turbojets represent

12.5 percent of the IFR traffic. Again, that is across all segments

of general aviation including the fractionals and the charter operations.

Mr. Chairman, the point that I want to make here, and I want

to be very clear about this, economists will tell you the percentage

of the traffic one creates does not equate to the amount of cost imposed on the system. This is something that any economist will tell

you. Instead, you have to look at the drivers of the cost of the system to understand the true cost imposed. If you look at some place

like the Chicago area, the number of radars there, the number of

controllers there, the TRACONS, those are not driven because of

general aviation traffic. Those are driven because of the commercial

airlines with their peak demands, sometimes operating each airline

at 50 and 60 operations per 15 minute interval. We know that is

true just looking at Washington Reagan National Airport where

general aviation has been completely banned from the airport for

the last three years and the costs associated with that airport have

not gone down. In fact, when the GAO testified back in 1996, they

issued a report that made it very clear that it was the peak demands of the commercial airlines that were the drivers of the cost

of the system.

When you actually get to the cost imposed on the system by general aviation, I think that is an open question. But looking back at

the FAA, the last time they did a cost allocation study in 1997,

they suggested that GA should be responsible for somewhere in the

5 or 6 percent of total revenues.

I want to finish where a lot of people have done so today, and

that is offer some guiding principles for us to keep in mind as we

go through what my friend Phil Boyer described as this marathon.
87

The first is, do no harm. As Congressman Oberstar and Congresswoman Sue Kelly talked about earlier, the U.S. has the largest, the most complex, the most sophisticated, and the safest air

transportation system anywhere in the world. We need to be very

cautious before we throw out a system that has worked very well

for over 35 years. We want to ensure a strong General Fund contribution, as almost everybody has testified today. We want to control the FAA’s costs. We want to clearly identify the technologies

needed for modernization. And, as the Mineta Commission recommended in 1997, we want to keep the general aviation fuel taxes

as the mechanism through which general aviation pays. Thank

you.

Mr. MICA. Thank you. And I thank each of our witnesses for your

testimony today.

Let me yield to Mr. Costello.

Mr. COSTELLO. Thank you, Mr. Chairman. Mr. Chairman, as you

no doubt have heard the bells, we have four or five votes on the

floor. I really do not have any pressing questions. I think all of the

witnesses made their points very clear. I would ask unanimous

consent to keep the record open for a two week period in order for

us to submit questions.

Mr. MICA. Without objection, so ordered.

Mr. COSTELLO. And I thank all of the witnesses for being here

today and for your testimony. Thank you.

Mr. MICA. I also want to thank the witnesses. You represent a

great cross-section of American aviation. Certainly, we do have a

challenge on how we address the funding of our whole system. We

have a Trust Fund that has some very serious financial problems

if we continue without looking at additional means of revenue. You

all represent key elements of a great system and we are going to

rely on you to help us. This is sort of the kick-off of a very significant debate, discussion, on hopefully positive solutions to resolve

the situation we find ourselves in.

We may submit some questions. But I want to thank you for

your patience in waiting, and thank each of you for your very

worthwhile testimony today.

There being no further business before the Aviation Subcommittee, this hearing is adjourned.

[Whereupon, at 1:33 p.m., the subcommittee was adjourned.]
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
246
247
248
249
250
251
252
253
254
255
256
257
258
259
260
261
262
263
264
265
266
267
268
269
270
271
272
273
274
275
276
277
278
279
280
281
282
283
284
285
286
287
288
289
290
291
292
293

Æ