Future of Aviation Advisory Committee

Subcommittee on Financing

Record of Meeting

November 17, 2010

General Aviation Manufacturers Association (GAMA) 

Washington, DC

1

Public Announcement

The U.S. Department of Transportation (DOT), Office of the Secretary of Transportation, told the 

public of this Future of Aviation Advisory Committee (FAAC), Subcommittee on Financing meeting in 

a Federal Register notice published October 27, 2010 (75 FR 66184).

Subcommittee Members in Attendance

Name Affiliation(s)

Jack J. Pelton 

(Subcommittee 

Chair)

Chairman, President, and 

Chief Executive Officer

Cessna Aircraft Company (Cessna)

Severin Borenstein1Professor Haas School of Business,

University of California, Berkeley

Thella Bowens President and 

Chief Executive Officer

San Diego County Regional Airport Authority 

John Hennigan

(Designated Federal 

Official (DFO))

Federal Aviation Administration

Jacqueline Knight1 Attended for 

Mr. Christopher Williams

The Williams Capital Group, L.P.

Joseph Kolshak1 Attended for Mr. Glenn Tilton United Continental Holdings 

Steve Litty1

(Alternate DFO)

DOT

Daniel McKenzie1 U.S. Airlines 

Research Analyst 

Hudson Securities, Inc.

Stan Van Ostran Attended for Mr. Regalado Metropolitan Nashville Airports Authority

Bob Peterson Attended for Nicole Piasecki Boeing

Raul Regalado1President and 

Chief Executive Officer

Metropolitan Nashville Airports Authority

Committee Members Not in Attendance

Name Affiliation(s)

Glenn Tilton Chairman, President, and 

Chief Executive Officer

United Continental Holdings

Christopher Williams Chairman, Founder, and 

Chief Executive Officer

The Williams Capital Group, L.P.

 

1 By phone.
Future of Aviation Advisory Committee

Subcommittee on Financing

Record of Meeting

November 17, 2010

General Aviation Manufacturers Association (GAMA) 

Washington, DC

2

Other Persons Present

Name Affiliation(s)

Elliott Black Federal Aviation Administration (FAA)

Chris Brown United Continental Holdings

Patty Clark Port Authority of New York and New Jersey

Andy Compart Aviation World/Aviation Daily

Mike Derrick PAI Consulting

Paul Feldman General Aviation Manufacturers Association

Christa Fornarotto DOT

Steve Giles MITRE Corporation

Katie Hamlin PAI Consulting

Lorraine Howerton Aircraft Owners and Pilots Association

Aloha Ley DOT

Debby McElroy Airports Council International-North 

America (ACI-NA)

Laura McKee The Air Transport Association of America, 

Inc. (ATA)

Ken Mead Baker Botts L.L.P.

Lisa Piccione National Business Aviation Association

John Provenzano Rockwell Collins 

Roger Schaufele

(Alternate DFO)

FAA

Ashleigh de la Torre Bombardier

Pete West NEXA Capital Partners, LLC

BACKGROUND AND WELCOMING REMARKS

This is the record of the fifth meeting of the Subcommittee on Financing of the Future of Aviation 

Advisory Committee (FAAC), a Federal advisory committee formed pursuant to and subject to the 

requirements of the Federal Advisory Committee Act (FACA). Mr. Jack Pelton, subcommittee chair, 

Cessna, called the meeting to order at 2:23 p.m. He welcomed the subcommittee members and 

members of the public in attendance, and opened the meeting by introducing the members of 

the subcommittee.

Mr. John Hennigan, the Designated Federal Official (DFO), FAA, summarized the FACA 

requirements. He noted the meeting is conducted under FACA and outlined his responsibilities as 

DFO, including maintaining adherence to the agenda, keeping accurate minutes, and adjourning the 

meeting if necessary.
Future of Aviation Advisory Committee

Subcommittee on Financing

Record of Meeting

November 17, 2010

General Aviation Manufacturers Association (GAMA) 

Washington, DC

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Mr. Hennigan noted this is the last subcommittee meeting and that the final full FAAC meeting will be

held on December 15, 2010, in Washington, DC. He added that the minutes of each meeting will be 

made available in the regulatory docket and on the FAAC Web site at http://www.dot.gov/faac. 

Mr. Hennigan read the formal statement required under FACA.

Mr. Pelton then asked the subcommittee for any edits or revisions to the respective records of the 

meetings for September 29, 2010 and October 14th, 2010. Ms. Thella Bowens, San Diego County 

Regional Airport Authority, noted she did not attend the September 29, 2010 meeting and asked for the 

record of meeting to reflect that she was not in attendance. After the correction was noted, Mr. Pelton 

requested a motion to approve. A motion was received, duly seconded, and the records of the meetings

were approved.

DISCUSSION

Mr. Hennigan explained the purpose of the subcommittee meeting is to review and finalize the formal 

subcommittee proposals to move forward ultimately as recommendations to the 

Secretary of Transportation. He noted the deliverable from the subcommittee is due to the FAAC on 

November 22, 2010. Mr. Hennigan reviewed the four proposals: (1) Public funding of accelerated 

aircraft equipage; (2) deliver the benefits of the Next Generation Air Transportation System (NextGen);

(3) extend the Alternative Minimum Tax (AMT) exemption for four years; and (4) review the eligibility 

criteria for Airport Improvement Program (AIP) and Passenger Facility Charge (PFC) programs. 

Mr. Hennigan noted the first three recommendation write-ups were slightly modified to meet the format 

requested by the DOT.

Funding Accelerated Equipage of Aircraft

Mr. Hennigan read aloud the first recommendation to support a public funding program to accelerate

the NextGen equipage of aircraft. He highlighted that the recommendation would receive a very 

thorough review by the Administration and require legislation. Mr. Hennigan noted the 

problem/challenge and rationale for the recommendation are included in the full paper, which is an 

internal working document for the subcommittee’s use. Mr. Hennigan stated the paper points out that 

on September 6, 2010, the President of the United States announced a federal program to accelerate 

aircraft NextGen equipage that is very similar to the program outlined in the subcommittee’s 

recommendation. Mr. Hennigan explained the President’s proposal does not include specific details at 

this time and contemplates completion of a cost-benefit analysis to justify the program. Mr. Hennigan 

read the problem /challenge and the rationale for the subcommittee recommendation. Mr. Pelton 

commented on how the other FAAC subcommittees support and encourage this recommendation. He 

noted the Financing Subcommittee’s recommendation is non-prescriptive to allow a broad base of 

options for implementation by the Administration. Mr. Pelton opened the floor to discussion.

Mr. Severin Borenstein, Haas School of Business, stated that his concern was the absence of a

cost-benefit analysis and support for why aircraft equipage should be government subsidized. He 

added the President’s decision to move the recommendation forward as part of the stimulus package

only makes sense if the funding is spent in the next few years. Mr. Borenstein further explained the Air 
Future of Aviation Advisory Committee

Subcommittee on Financing

Record of Meeting

November 17, 2010

General Aviation Manufacturers Association (GAMA) 

Washington, DC

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Transport Association of America (ATA) analysis that Mr. Hennigan previously circulated to 

subcommittee members suggested expenditures would not take place in the next few years.

Mr. Joseph Kolshak, United Continental Holdings, stated much of the equipage could be installed in 

the next 2 or 3 years. He conceded some components would not be installed immediately but 

explained how wiring could be installed now in aircraft, in preparation for new equipment in the future. 

Mr. Kolshak used Automatic Dependent Surveillance–Broadcast (ADS–B) as an example of equipment 

that is already installed in many aircraft. Mr. Borenstein requested analysis detailing a realistic time

line for installing equipment. He stated his belief that the stimulus will fall short unless there is 

pressure or a push to make expenditures in the next couple of years.

Mr. Hennigan also referred to an ATA study completed earlier this year and a paper from ACI-NA in 

support of accelerating aircraft equipage. He stated the Obama administration is conducting a costbenefit analysis of their proposal but it is not yet completed. Mr. Borenstein stated his belief that the 

proposal presumes certain facts that have not been established. Mr. Bob Peterson, Boeing, explained 

how the recommendation is built upon the work of the RTCA, Inc. Task Force 5, NextGen Mid-Term 

Implementation Task Force Report. He noted the RTCA report demonstrated a return with measurable 

results.

Mr. Daniel McKenzie, Hudson Securities, Inc. reviewed Mr. Borenstein’s objections: (1) the benefits 

do not phase in quickly enough; (2) the benefits do not apply or spill over into other industries; and (3) 

the source of cost is unknown. Mr. Borenstein commented on the lack of justification for including 

accelerated equipage in the stimulus program and the insufficient evidence supporting the public good 

argument.

Mr. McKenzie asked if other cost-benefit analyses of the proposed program exist. Mr. Pelton stated the 

recent ATA analysis is only one study. Mr. Peterson confirmed the FAA supplied the benefit and plan 

numbers to the ATA. He explained the intent is to ensure industry is invested and to link industry with 

the FAA to ensure NextGen occurs as quickly and practically as possible. Mr. Peterson acknowledged

the parallel activity at the FAA has not occurred as efficiently as planned. Mr. Borenstein highlighted 

the importance of the FAA implementing their side of NextGen so that air carriers can rely on the 

payback they expect. Mr. Pelton pointed out that the second recommendation of the subcommittee 

addresses Mr. Borenstein’s comment.

Mr. Hennigan stated the Financing Subcommittee staff previously circulated three separate analyses

providing support for this recommendation: (1) a previous ATA briefing, (2) Airports Council 

International- North America (ACI-NA), and (3) a separate FAA cost-benefit analysis of the underlying 

NextGen program. He mentioned another study by Deloitte LLP about accelerating aircraft equipage 

which will be available in January 2011. Mr. Hennigan acknowledged there are many studies on 

accelerating equipage, but the definitive study of the issue and this proposal is not available yet. 

Mr. Pelton pointed out the subcommittee’s recommendation provides a menu of options and does not 

specifically prescribe a government subsidy. Mr. Borenstein disagreed with Mr. Pelton and stated his 

view was that all of the options presented were forms of government subsidy. Mr. McKenzie
Future of Aviation Advisory Committee

Subcommittee on Financing

Record of Meeting

November 17, 2010

General Aviation Manufacturers Association (GAMA) 

Washington, DC

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commented on the benefits associated with the recommendation even though the supporting analyses 

have not been fully developed or released.

Mr. Borenstein acknowledged the ATA in the latest paper circulated to the subcommittee has made the 

argument that the recommendation meets the cost-benefit test but then he commented on the lack of 

justification for why the government should fund aircraft equipage. Mr. McKenzie explained the 

government funding will help make the industry more competitive and benefit the consumer and labor. 

Mr. Kolshak emphasized neither industry nor the public will benefit until every aircraft is equipped. 

After further discussion among the members to reach a compromise recommendation, Mr. Pelton

acknowledged that an agreeable position for all members could not be reached. He then asked 

Mr. Borenstein to file his dissent and asked if there is consensus on the recommendation from the rest 

of the committee. The remaining subcommittee members agreed on the recommendation.

Delivering the Benefits of NextGen

Mr. Hennigan read the second recommendation on delivering the benefits of NextGen, which included 

three components: (1) the Secretary of Transportation should fully endorse and focus on ensuring the 

FAA delivers the operational capabilities, procedures, and approvals necessary for operators to realize 

the benefits of the NextGen air traffic control systems; (2) the FAA must improve the environmental 

review process; and (3) the FAA must develop a well-crafted and balanced “best equipped, best served” 

program which fully leverages the operations of those who have already invested in performance-based 

navigation. Mr. Hennigan stated the recommendation also discusses the need to create a timetable to 

provide air carriers with more certainty on when benefits will be realized. He reviewed the 

problem/challenge and rationale of the recommendation. Mr. Pelton then asked the subcommittee for 

their input.

Mr. Kolshak distinguished the difference between the first and the second subcommittee 

recommendations: the first recommendation discusses the replacement of ground-based radar with 

ADS–B and other equipage in aircraft cockpits; and the second recommendation includes

implementing other operational capabilities and components such as Area Navigation (RNAV)

procedures and training that operators would not equip for and do on their own without a direct benefit. 

Mr. Kolshak explained how the recommendation allows self-help from the operator if the benefit is

commensurate with the investment. The key is that the FAA should be encouraged to timely deliver the 

benefits of these programs to equipped carriers. Mr. Pelton added the recommendation drives airspace

redesign and addresses some of the issues at major hub airports. There were no further comments and 

the subcommittee agreed on the recommendation.

AMT Exemption

Mr. Hennigan read the third recommendation, to extend the Alternative Minimum Tax (AMT) 

exemption for airport private activity bonds for four years. He reviewed the problem/challenge and 

rationale of the recommendation.
Future of Aviation Advisory Committee

Subcommittee on Financing

Record of Meeting

November 17, 2010

General Aviation Manufacturers Association (GAMA) 

Washington, DC

6

Ms. Bowens stated airports should go on record supporting this recommendation with the

understanding airports are willing to propose a permanent exemption. She commented on how the

4-year extension proposed by the subcommittee is a compromise position. Mr. Borenstein stated he is 

willing to agree to this recommendation but noted his concerns: Extending the AMT exemption will 

save airports a lot of money, but it may reduce Treasury revenue; and based on the argument and the 

separate set of investors who are required to be paid much higher interest rates, the markets do not 

arbitrage between AMT exempt and AMT non-exempt bonds. Mr. Borenstein was troubled by this and 

noted his support with caution.

Mr. Stan Van Ostran, Metropolitan Nashville Airports Authority, shared Ms. Bowens’ support and 

concerns. Ms. Bowens stated if the recommendation goes from the full FAAC to the 

Secretary of Transportation before this gets submitted to Congress, additional work could be done 

regarding the effects to the Treasury. Ms. Bowens stated that perhaps Mr. Borenstein could help to 

ensure the subcommittee has an argument the Treasury can support. Ms. Bowens stated that there is a 

typographical error in the first paragraph of the proposal. The correction was noted.

Mr. Pelton confirmed full committee consensus with the recommendation...

Eligibility Criteria for Airport AIP and PFC Programs

Mr. Pelton began the discussion by introducing a compromise proposal to the two versions of the 

recommendation which had been previously circulated to members. He explained that air carriers and 

airports had concerns about the original recommendation and the proposals each of them previously put 

forward. Mr. Pelton stated that he and staff pulled together this newly offered recommendation that 

could bring the parties together. Mr. Hennigan then distributed a hard copy of the compromise 

recommendation to the members at the meeting and explained that it was the same document that Mr. 

Pelton emailed to all subcommittee members shortly before the meeting. All members acknowledged 

they had copies of the compromise recommendation. At Mr. Pelton’s request, Mr. Hennigan reviewed 

the compromise recommendation, which included three elements: (1) the FAA should review and 

redefine what is meant by aviation infrastructure; (2) based on that study, it should update and 

modernize the eligibility criteria for AIP and PFC projects; and (3) the DOT and the FAA should 

consider whether investing AIP and PFC dollars in NextGen equipment, operational capabilities, and 

performance-based procedures is needed to produce a demonstrated near-term improvement in 

operational performance at airports. He added if changes are warranted, the FAA should do as much as 

possible of this update administratively and develop legislative recommendations to the 

Secretary of Transportation for the remainder of the updated changes. Mr. Hennigan summarized the 

problem/challenge and rationale of the compromise recommendation. He highlighted the belief that 

significant benefits could be realized with a more up to date and flexible eligibility criteria.

Mr. Van Ostran noted his overall agreement with the compromise and suggested a slight wording

change in the second paragraph, third line in the problem/challenge statement. He requested the 

addition of the word “facilities”. The revised statement refers to “facilities, capabilities, and 

procedures.” Mr. Van Ostran explained the need to improve the infrastructure of facilities at airports. 

Mr. Kolshak asked to modify the last paragraph in the actual recommendation section to reflect that the 
Future of Aviation Advisory Committee

Subcommittee on Financing

Record of Meeting

November 17, 2010

General Aviation Manufacturers Association (GAMA) 

Washington, DC

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FAA should determine whether the AIP and PFC caps need to be adjusted based on eligibility criteria 

changes. There was a discussion to refine the language. The subcommittee agreed on the 

revised statement.

Ms. Sharon Pinkerton, ATA, a public attendee, was recognized and asked for clarification of the 

authority responsible for determining eligibility criteria. She explained her understanding is the FAA 

has the authority based on the statute. Mr. Van Ostran provided examples of projects on which the FAA 

and the airports agreed but could not implement because of limitations imposed by the statute. 

Mr. Pelton explained flexibility is often desired at the airport and FAA level but is limited because of 

the statute. He stated the goal is to align the statute to provide flexibility for the FAA to fund these 

projects. Mr. Pelton stated that this is another recommendation that would require congressional 

action. He asked if there is concurrence with the proposed compromise recommendation with the 

suggested changes by members. The subcommittee agreed on the recommendation as modified.

CLOSING REMARKS/NEXT MEETING

There was an attempt to refine the first recommendation to make it acceptable to all subcommittee 

members. Mr. Pelton and others suggested several wording changes but general consensus was still not

reached. Mr. Borenstein stated he will write a concurring partial dissent. He reiterated his belief that 

the acceleration of equipage should be accomplished without government subsidy and commented on 

how the claim of net benefit to society was not adequately supported.

Mr. Pelton stated there are four recommendations to take forward to the full FAAC. He noted there is 

unanimous agreement on three of the recommendations: (1) delivering the benefits of NextGen; (2) the 

extension of AMT exemption for 4 years; and (3) eligibility criteria for airport AIP and PFC funding. 

Mr. Pelton added there is full committee agreement and one dissenter on the recommendation to

publicly fund aircraft equipage. Mr. Hennigan noted the four recommendations will be submitted to 

the DOT on November 22, 2010. He stated the next meeting will be the full FAAC meeting on 

December 15, 2010.

Ms. Christa Fornarotto, DOT, on behalf of Ms. Susan Kurland, DOT, and the Secretary 

of Transportation thanked the entire subcommittee for their time and resources. Mr. Pelton thanked

everyone for attending. Ms. Bowens thanked the subcommittee staff for coordinating and managing

logistics. Mr. Hennigan officially closed the meeting.

ADJOURNMENT

Mr. Hennigan adjourned the meeting at 3:50 p.m.

I hereby certify that, to the best of my knowledge, the foregoing minutes are accurate and complete.

Approved by: 

John Hennigan, Designated Federal Official
Future of Aviation Advisory Committee

Subcommittee on Financing

Record of Meeting

November 17, 2010

General Aviation Manufacturers Association (GAMA) 

Washington, DC

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Dated: __________________________________________________