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 Octob er 27 , 2010 (75 FR 66184 ).

Subc ommittee Members in Attendance

Name Affiliation (s)

Jack J. Pelton ( Subcommittee

Chair ) Chairman, P resident

, and

Chief Executive Officer Cessna Aircraft Company (Cessna)

Severin Borens tein 1 Professor Haas School of Busin ess, 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 Knight 1 Attended for

Mr

. Christopher Williams The Williams Capital Group, L.P.

Joseph Kolshak 1 Attended for Mr. Glenn Tilton U nited Continental Holdings
Steve Litty 1

( Alternate DFO) DOT

Daniel McKenzie 1 U.S. A irlines

R esearch A nalyst Hudson Securities , Inc.

Stan Van O stran Attended for Mr. Regalado Metropolitan Nashville Airports Authority

Bob Peterson Attended for Nicole Piasecki Boeing
Raul Regalado 1 President and

Chief Executive Officer Metropolitan Nashville Airports Authority

Committee Members Not in Attendanc e

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 Person s Present

Name Affiliation ( s)

Elliott Black Federal Aviation Administration ( FAA )

Chris Brown United Continental Holdings
Patty Clark Port Authority of N ew Y ork and N ew J ersey Andy Compart Aviation World/Aviation Daily

Mike Derrick PAI Consulting

Paul Feldman General Avi ation Manufacturers Association

Christa Fornarotto DOT

Steve Giles MITRE Corporation

Katie Hamlin PAI Consulting

Lorraine Howerton A ircraft 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 Bot t s L.L.P.

Lisa Piccione National Business Aviation Association

John Provenzano Rockwell Collins
Roger Schaufele

(Alternate DFO) FAA

Ashleigh de la T

o rre Bombardier

Pete West NEXA Capital Partners, LLC

B ACKGROUND AND W ELCOMING R EMARKS

This is the record of the fifth meeting of the Subcommittee on Financing of the Future of Aviation Advisory Committee ( FAAC ) , a F ederal advisory committee formed pursuan t to and subject to the requirements of the Federal Advisory Committee Act (FACA)

. M r

. Jack Pelton

, s ubc ommittee c hair

, Cessna, called the meeting to order at 2 : 23 p .m

. He welcomed the subcommittee members and members of the public in attendance, and ope ned the meeting by introducing the members of

the subcommittee.

Mr. John Hennigan

, the Designated Federal Official ( DFO )

, FAA, summarize d the FACA requirements. He noted the meeting is conducted under FACA and outlined h is responsibilities as DFO, includi ng 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

3 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. H e 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 s tatement required under FACA.

Mr. Pelton then asked the subcommittee for any edits or revisions to the respective record s of the meeting s for September 29, 2010 and October 14 th , 2010

. Ms. Thella Bowens, San Diego County Regional Airport Authority

, not ed 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 record s of the meeting s

w ere approv ed.

D ISCUSS ION

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

a ircraft equipage ; (2) deliver the benefits of the Next Generation Air Transportation System (NextGen); (3) extend the Alternative Minim um 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 r ecommendation write

- ups were slightly modified to meet t he format requested by the DOT.

Funding Accelerated E quipage of A ircraft

Mr. Hennigan read aloud the first recommendation to support a public funding program to ac c elerate

the NextGen equipage of aircraft. He highlighted that the recommendation would rece ive 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. H ennigan stated the paper points out that on September 6, 2 010, 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. He nnigan explained t he 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 recomme ndation

. Mr. Pelton

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

noted the F inancing Subcommittee’s recommendation i s no n

- prescriptive to allow a broad base of options for implementation by the Administratio n

. 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 subsidi zed. He

added the Presiden t’s decision to move the recommendation forward as part of the stimulus package

on ly make s sense if the funding is spent in the next few years. Mr. Borenstein further explained the AirFuture of Aviation Advisory Committee Subcommittee on Financing Record of Meeting
November 17, 2010 General Aviation Manufacturers Association (GAMA)

Washington, DC

4 Transport Association of America (ATA) analysis that Mr. Hennigan prev iously 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 in stalled in

the next 2 or 3 years. He conceded some compone nts 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 alre ady installed in many aircraft

. Mr. Borenstein requested analysis detailing a realistic time line for installing equipment . H e stated his belief that th e 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 cost

benefit analysis of their proposal but it is not yet complete d

. Mr. Borenstein sta t ed his belief that the proposal presumes certain facts that have not been established

. Mr. Bob Peterson, Boeing

, explained

how the recommendation is built up on the work of the RTCA , Inc. Task F orce 5

, NextGen Mid

- Term

I mplementation Task Force Report. He noted the RTCA report demonstrated a return with measurabl e results.

Mr. Dan iel McKenzie, Hudson Securities, Inc

. reviewed Mr. Borenstein’s objections: (1) t he benefits

do not phase in quickly enough; (2) th e benefits do not apply or spill over in to othe r ind ustries ; and (3)

the source of cost is unknown. Mr

. Borenstein commented on the lack of justification for including accelerated equipage in the stimulus p rogram and the insufficient evidence supporting the public g ood

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

num bers to the ATA

. He explained t he 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. Borens tein highlighted the importance of the FAA implement ing 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. H enni gan state d the F inancing S ubcommittee 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

- benef it analysis of th e 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 def initive 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. McKenzieFuture of Aviation Advisory Committee Subcommittee on Financing Record of Meeting
November 17, 2010 General Aviation Manufacturers Association (GAMA)

Washington, DC

5 commented on the benefits associated with the recommendation even though the supporting analyses have not been fully developed or released.

Mr. Borenstein acknowledged the A TA in the latest paper circulated to the subcommittee has made the argument that the recommendation meets the cost

- benefit tes t but then he commented on the lack of justification for why the government should fun d 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 n or the public will benefit until every aircraft is equipped

. After further discussion amo ng the members to reach a compromise recommendation, Mr. Pelton acknowledged that an agreeable position for all members could not be reached. He then ask ed

Mr. Borens tein to file his dissent and asked if there is consensus on the recommendation from the re st
of the committee. The remaining subcommittee members agreed on the recommendation.

Delivering the B enefits of NextGen

Mr . Hennigan read the second recommendation on delivering the benefits of NextGen, which included three components: (1) t he 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 Nex t Gen air traffic control systems ; (2) t he FAA must improve the environmental review process ; and (3) t he 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 re commendation also discusses the need to create a timetable to provide air carriers with more certainty on w hen benefits will be realized. He review ed the problem/challenge and rationale of the recommendation . Mr. Pelton then asked the subcommittee for

the ir input.

Mr

. K olsh ak distinguished the difference between the first and the second subcommittee

recommendation s: t he first recommendation discusses the replacement of ground

- based radar with

ADS

– B and other equipage in aircraft cockpits ; and t he second recommendation includes implementing other operational capabilities and compo nents such as Area Navigation (RNAV) procedures and training that operators would not equip for and do on their own without a direct benefit

. Mr

. Kols ha k explained how the recomm endation allows self

- help from the operator if t he benefit is

commensurate with the in vestment. 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 drive s 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 r e a d the t hird recommendation

, to e xtend the Alternative Minimum Tax ( AM T ) 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 willi ng to propose a permanent exemption

. She commented on how t he

4

- year extension proposed by the subcommittee is a compromise position. Mr

. B orenstein 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 T reasury 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

arbit r age between AMT exempt and AMT non

- exempt b onds

. Mr

. Bor e n stein was troubled by this and noted his support with caution

.

Mr. Stan Van Ostran , Metropolitan Nashville Airports Authority, shared Ms

. Bowen s ’ support and

conc erns. Ms. Bow e ns stated if the recommendation goe s from the full FAAC to the

S ecretary of Transportation b efore this gets submitted to C ongress
, additional work could be done regarding the effects to the T reasury. Ms. Bowen s stated that perhaps Mr

. Borens tein could help to

ensure the subcommittee h as an argument the T reasury can s upport. Ms

. Bowens stated that there is a typographical error in the f irst 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 com promise proposal to the two version s 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) t he FAA should review and

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

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

consider whether investing AIP and PFC dollars in NextGen equipment , operational c apabilitie s, and performance

- based procedures is needed to produce a demonstrated near

- term improve ment in operational perfor mance at airports

. He added if changes are warranted, t he FAA should do a s 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/challeng e and rationale of the compromise recommendation. He highlighted the belief that

s ignificant benefits could be realized with a more up to date and flexibl e eligibility criteria

.

Mr. Van Ostra n noted his overall agreement wit h 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 “f

acilities ”. The revised statement refers to “ facilities, capabilities

, and procedures

. ” Mr. Va n Ostran explained the need to improve the infrastructure of facilities at airports

. Mr. K olshak asked to modify the last paragraph in the actual recommendation section to reflect that theFuture of Aviation Advisory Committee Subcommittee on Financing Record of Meeting
November 17, 2010 General Aviation Manufacturers Association (GAMA)

Washington, DC

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

. There was a dis cussion to refine the language. The subcommittee agreed on the

revised statement.

Ms. Sharon P inkerton

, ATA

, a public attendee

, was recognized and asked for clarification of t he authority responsible for det ermining 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. P e lton 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 flexi bil i t y for the FAA to fund these projects

. Mr

. Pelton stated that this is another recommendation that woul d require c ongressional

action. He asked if there is concurrence with the proposed compromise recommendation with the suggested changes by members . The subcommittee agreed on the recommend ation as modified

.

C LOSING R EMARKS

/N EXT M EETING

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

members. Mr

. Pelton and others sugge sted 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 su pported

.

Mr. Pelton stated there are four recommendation s to take forward to the full FAAC . He noted there is unanimous agreement on three of the recommendations : (1) delivering the benefits of NextG en ; (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 dissente r 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 t he next meeting will be the full FAAC m eeting on

December 15

, 2010

.

Ms. Christa Forn a r o tto , DOT, on behalf of Ms

. Susan Kurland

, DOT, and the Secretary

of T ransportation 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.

A DJOURNMENT

Mr. Hennigan adjourned the meeting at 3 : 5 0 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 OfficialFuture of Aviation Advisory Committee Subcommittee on Financing Record of Meeting
November 17, 2010 General Aviation Manufacturers Association (GAMA)

Washington, DC

8 Dated: ________________

__________________________________