Next Generation Air Transportation System: FAA Faces Challenges in Responding to Task Force Recommendations
Published: 2009-10-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: On September 9, 2009, the Next Generation Air Transportation System (NextGen) Midterm Implementation Task Force (Task Force) issued its final report and recommendations. The Task Force was to reach a consensus on the operational improvements to the air transportation system that should be implemented between now and 2018. Its recommendations call for the Federal Aviation Administration (FAA) to develop improvements that allow operators to take advantage of equipment that has been widely deployed or is available for installation in existing aircraft. FAA is now considering how to modify its existing plans and programs in response to the Task Force's recommendations and must do so in a way that retains safety as the highest priority. This testimony highlights the NextGen challenges previously identified by GAO and others that affect FAA's response to the Task Force's recommendations. GAO groups these challenges into three areas: (1) directing resources and addressing environmental issues, (2) adjusting its culture and business practices, and (3) developing and implementing options to encourage airlines and general aviation to equip aircraft with new technologies. GAO's testimony updates prior GAO work with interviews with agency officials and industry stakeholders and includes an analysis of the Task Force report.
section_title: What GAO Found
paragraphs: Directing resources and addressing environmental issues. Allocating resources for advanced navigational procedures and airspace redesign requires FAA to balance benefits to operators against resource limits and other challenges to the timely implementation of NextGen. Procedures that allow more direct flights--versus those that overlay existing routes--and redesigned airspace in congested metropolitan areas can save operators time, fuel, and costs, and reduce congestion, delays, and emissions. However, FAA does not have the capacity to expedite progress towards its current procedure development targets. While FAA has begun to explore the use of the private sector to help develop procedures, issues related to public use of these procedures and oversight of developers remain. In addition, required environmental reviews can be lengthy, especially when planned changes in noise patterns create community concerns during reviews. Challenges to FAA include deciding whether to start in more or less complex metropolitan areas, and finding ways to expedite the environmental review process and proactively ameliorate community concerns. Changing FAA's culture and business practices. According to stakeholders and Task Force members, and as GAO has previously reported, FAA faces cultural and organizational challenges in implementing NextGen capabilities. Whereas FAA's culture and organization formerly supported the acquisition of individual air traffic control systems, FAA will now have to integrate and coordinate activities across multiple lines of business, as well as reprioritize some of its plans and programs, to implement near-term and midterm capabilities. FAA is currently analyzing what changes may be required to respond to the recommendations. StreamliningFAA's certification, operational approval, and procedure design processes, as a prior task force recommended, will also be essential for timely implementation. And sustaining a high level of involvement and collaboration with stakeholders--including operators, air traffic controllers, and others--will also be necessary to ensure progress. Developing and implementing options to encourage equipage. The Task Force focused on making better use of equipment that has already been widely deployed in aircraft, but as NextGen progresses, new equipment will have to be installed to implement future capabilities and FAA may have to offer incentives for operators to accelerate their installation of equipment that may not yield an immediate return on investment. While FAA could mandate equipage, mandates take time to implement and can impose costs, risks, and other disincentives on operators that discourage early investment in equipment. The Task Force identified several options to encourage equipage, including offering operational or financial benefits to early equippers. Challenges to implementing these options include defining how operational incentives would work in practice, designing financial incentives so as not to displace private investment that would otherwise occur, and targeting incentives where benefits are greatest.

section_title: Letter
paragraphs: I appreciate the opportunity to testify before you today on efforts to  transform the nation’s current air traffic control (ATC) system to the Next  Generation Air Transportation System (NextGen). Today’s air  transportation system is straining to meet current demands. Thus far in  2009 more than one in five airline flights have been delayed or canceled.  These problems have occurred even though air traffic has declined during  the current recession, and they are expected to worsen as the economy  recovers and air traffic increases. NextGen improvements include new  integrated systems, procedures, aircraft performance capabilities, and  supporting infrastructure needed for a performance-based air  transportation system that uses satellite-based surveillance and navigation  and network-centric operations. These improvements are intended to  improve the efficiency and capacity of the air transportation system while  maintaining its safety so that it can accommodate this anticipated future  growth. NextGen improvements have been planned over a long horizon.  The initial planning for NextGen focused on implementing improvements  through 2025, but more recently the Federal Aviation Administration  (FAA) has emphasized improvements that can be implemented in the  midterm, defined as between 2012 and 2018. Additionally, many  stakeholders have concluded that more can and must be done in the near  term—generally thought of as between now and 2012—to address  inefficiencies and delays in the system. In their view, it is time to take full  advantage of existing technologies and capabilities rather than waiting for  new systems to be deployed and for aircraft to be equipped with new  technology.
Recognizing the importance of near-term and midterm solutions, FAA  requested that RTCA, Inc.—a private, not-for-profit corporation that  develops consensus-based recommendations on communications,  navigation, surveillance, and air traffic management system issues—create  a NextGen Midterm Implementation Task Force (referred to in this  statement as the Task Force) to reach consensus within the aviation  community on the operational improvements that can be implemented  between now and 2018. The Task Force focused on maximizing benefits in  the near term, and paid particular attention to aligning its  recommendations with how aircraft operators decide to invest in aircraft  equipment. On September 9, 2009, the Task Force issued its final report,  which contained a list of recommendations to implement operational  capabilities in five key areas—surface operations, runway access,  congestion relief in metropolitan areas, cruise operations, and access to  certain airspace—and two cross-cutting areas—data communication  applications and integrated air traffic management. The Task Force also  made four overarching recommendations to (1) work toward closer  adherence to current separation standards (criteria for spacing between  aircraft), (2) establish incentives that will ensure a return on investment  for those wishing to install new technology and equipment on aircraft, (3)  streamline the operational approval process that ensures the safety of  equipment and the training of those that use the equipment in the national  airspace system, and (4) follow up on and track recommendations to  ensure their implementation. These recommendations represent a  consensus view from industry on how to move forward with NextGen. The  Task Force includes representation from the four major operating  communities—airlines, business aviation, general aviation, and the  military—as well as participation from controllers, airports, avionics and  aircraft manufacturers, and other key stakeholders. FAA is now  considering how it will modify its NextGen Implementation Plan in  response to the Task Force’s recommendations and do so in a way that  retains safety as the highest priority. Our work over the last few months  has identified a number of findings similar to those the Task Force  reported.
My testimony today highlights challenges previously identified by GAO  and others that affect FAA’s response to the Task Force’s  recommendations. We group these challenges into three areas: (1)  directing resources and addressing environmental issues to ensure the  timely implementation of capabilities, (2) adjusting FAA’s culture and  business practices to support the implementation of operational  improvements, and (3) developing and implementing cost-effective  options to encourage airlines and general aviation operators to equip their  aircraft with NextGen technologies. My statement is based on recent  related GAO reports and testimonies updated with more recent FAA data,  our analysis of the Task Force report, and our discussions with selected  senior FAA officials and aviation industry stakeholders, including airlines,  general aviation stakeholders, avionics industry representatives, and the  National Air Traffic Controller Association (NATCA). We discussed this  testimony with FAA and received technical comments from RTCA, which  we incorporated as appropriate. Our work was conducted in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the work to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
subsections: section_title: FAA Faces Challenges in Directing Resources and Addressing Environmental Issues to Ensure Timely Implementation
subsections: section_title: Developing Navigation Procedures with Significant Benefits in a Timely Manner
paragraphs: Developing Area Navigation (RNAV) and Required Navigation  Performance (RNP) procedures, often called performance-based  navigation procedures, with significant benefits is one way to leverage  existing technology in the near term and provide immediate benefits to  industry, but developing these procedures expeditiously will be a  challenge for FAA. According to the Task Force, developing RNAV and  RNP procedures could be a key part of relieving current congestion and  delays at major metropolitan airports. Benefits of RNAV and RNP can also  include reduced fuel usage, reduced carbon emissions, reduced noise,  shorter flights, fewer delays, less congestion, and improved safety. For  example, Southwest Airlines demonstration flights show that RNP can  reduce fuel burn and carbon dioxide emissions by as much as 6 percent  per flight. In 2008, Alaska Airlines estimated that it used RNP procedures  12,308 times and saved 1.5 million gallons of fuel, thereby reducing carbon  dioxide emissions by approximately 17,000 metric tons and operating  costs by $17 million. Even greater benefits can be realized when the  procedures are part of a comprehensive airspace redesign that includes  more efficient flight paths, and are not simply overlays of historical  aircraft flight paths.
Deriving benefits from RNAV and RNP technology depends less on  equipping aircraft with the technology required to fly these procedures,  than on developing procedures with significant benefits in a timely  manner. MITRE Corporation, which collects and retains data on equipage  levels for the existing fleet, estimates that for aircraft in commercial  operations in 2009, equipage rates are more than 90 percent for RNAV,  more than 60 percent for RNP, and more than 40 percent for RNP  equipment that allows for higher levels of precision. These figures indicate  that the equipment necessary to take advantage of RNAV and RNP  technology is already substantially deployed. However, comparatively few  procedures have been developed for airlines to use the equipment. Since  2004 FAA has published 305 RNAV procedures, 206 RNAV routes, and 192  RNP approaches, but much remains to be done (see table 1). FAA believes  that it can annually develop about 50 RNAV and RNP procedures, 50 RNAV  routes, and 50 RNP approaches. At this pace of development, a simple  calculation suggests that it would require decades to complete the  thousands of procedures currently targeted for development.
The Task Force report suggests that FAA and industry create joint teams  to focus on performance-based navigations issues at certain locations and  to prioritize procedures for development at these locations. Such an effort  would likely lead to changes in FAA’s current development targets.  Nonetheless, accelerating the development of procedures would require a  shift in FAA’s resources, or additional human resources and expertise. In  addition to FAA, numerous companies have expertise and experience to  develop procedures and are doing this work for air navigation service  providers around the world. FAA recognizes the potential benefits of  involving these private companies and has taken steps to use them more.  FAA recently authorized one such company, Naverus, which has a long  history of expertise in procedure development, to validate public and  private flight procedures that the company has developed for the U.S.  market. This authorization will allow the company to validate  performance-based navigation flight procedures from beginning to end.  While private sector development may be one way to accelerate procedure  development, issues related to FAA’s capacity to approve these  procedures remain, according to some stakeholders. In addition, questions  such as who can use the procedures and how oversight of third-party  developers is to be provided must also be resolved.
While FAA tracks the number of navigation procedures completed,  stakeholders have told us that developing procedures with significant  benefits is more important than developing a specific number of  procedures. For example, according to Southwest Airlines, FAA has  developed 69 RNP procedures for the routes it flies, 6 which they view as  useful to the airline because of the resulting reduction in flight miles or  emissions. Some stakeholders have suggested that FAA use other metrics  that better capture benefits to industry from advanced procedures, such as  fuel savings, time savings, or mileage savings, which could lead to more of  a focus on the development of procedures that maximize these benefits.
The Task Force report identified the establishment of performance  metrics as an important part of following up on and tracking the  implementation its recommendations, and we have ongoing work for this  committee reviewing FAA’s performance metrics related to this and other  aspects of NextGen development.
section_title: Completing Timely Environmental Reviews and Addressing Local Concerns
paragraphs: As FAA develops new procedures to make more efficient use of airspace  in congested metropolitan areas, it will be challenged to complete the  necessary environmental reviews quickly and address local concerns  about the development of new procedures and airspace redesign. Anytime  an airspace redesign or a new procedure changes the noise footprint  around an airport, an environmental review is initiated under the National  Environmental Policy Act (NEPA). Under NEPA, varying levels of  environmental review must be completed depending on the extent to  which FAA deems its actions to have a significant environmental impact.  There are three possible levels:  1.  Categorical exclusion determination. Under a categorical exclusion,  an undertaking may be excluded from a detailed environmental review  if it meets certain criteria and a federal agency has previously  determined that the undertaking will have no significant environmental  impact. 2.  Environmental assessment/finding of no significant impact  (EA/FONSI). A federal agency prepares a written environmental  assessment (EA) to determine whether or not a federal undertaking  would significantly affect the environment. If the answer is no, the  agency issues a finding of no significant impact (FONSI).  3.  Environmental impact statement (EIS). If the agency determines  while preparing the EA that the environmental consequences of a  proposed federal undertaking may be significant, an EIS is prepared.  An EIS is a more detailed evaluation of the proposed action and  alternatives.
The more extensive the analysis required, the longer the process can take.  A full EIS can take several years to complete. EAs and categorical  exclusions, by contrast, take less time and resources to complete. Because  NEPA does not allow consideration of the net impact of an action such as  the introduction of new procedures or broader airspace redesign—which  may increase noise in some areas but increase capacity at an airport and  reduce noise and emissions overall—these actions can often result in  extensive and time-consuming reviews. FAA is exploring situations in  which it might be more appropriate to use a categorical exclusion or an  EA instead of an EIS. The 2009 FAA reauthorization legislation includes  language that may expedite the environmental review process. For  example, the legislative proposal would allow airport operators to use  grant funds for environmental reviews of proposals to implement flight  procedures. The proposal would also allow project sponsors to provide  FAA with funds to hire additional staff as necessary to expedite  completion of the environmental review necessary to implement flight  procedures.
section_title: FAA Faces Challenges in Changing Its Culture and Business Practices in Order to Respond Effectively to the Task Force’s Recommendations
subsections: section_title: Changing from an Organization and Culture Focused on System Acquisition to an Emphasis on Integration and Coordination
paragraphs: According to stakeholders and Task Force members, and as we have  previously reported, FAA faces organizational and cultural challenges in  implementing NextGen operational capabilities. FAA has traditionally  developed and acquired new systems through its acquisition process.  However, most NextGen technologies and capabilities, such as Automatic  Dependent Surveillance Broadcast (ADS-B),  rely on components in the  aircraft, on the ground, and in space for their use. They also require  controllers and pilots to be trained and flight procedures to be developed  in order to maximize their benefits. Different offices within FAA— including its Aircraft Certification Service, Flight Standards Service, and  Air Traffic Organization (ATO), among others—are responsible for  ensuring the completion of all the activities required to maximize the use  of a technology or capability. While FAA has recently made organizational  changes to address integration issues, several stakeholders told us, and  our previous and ongoing work suggests, that FAA’s structure and culture  continues to hamper its ability to ensure that all the actions necessary to  maximize use of a technology or capability in the national airspace system  are completed efficiently. For example, stakeholders identified  coordination and integration as particular challenges to implementing  operational capabilities in the surface operations area identified by the  Task Force. Implementing capabilities in this area will require greater  coordination among offices within ATO, airport operators, pilots, and  controllers, among others.
section_title: Reprioritizing or Changing Some Aspects of Plans and Programs to Implement the Task Force’s Recommendations
paragraphs: While many of the operational improvements identified by the Task Force  align with FAA’s current plans, a senior FAA official indicated that in  several instances, FAA may need to adjust its plans, budgets, and priorities  as it decides how it will respond to the Task Force’s recommendations.  According to this senior FAA official, potential budgetary changes are  already being identified, and a comprehensive analysis of what additional  changes to existing plans would be necessary to respond to the  recommendations is underway. Until this analysis is completed, it is  difficult to know exactly what changes FAA would need to make to  implement the Task Force’s recommendations. In some cases, the Task  Force’s recommendations, if accepted and fully implemented, will require  altering the course of initiatives that are already underway or programs  that are being implemented. For example, a recommendation to expand  surveillance of airspace around certain general aviation airports may  require an increase in the scope of the current ADS-B program, which does  not cover those areas. In addition, recommendations to expand  information sharing to improve surface situational awareness and traffic  management could affect the current plans for FAA programs such as  System-Wide Information Management (SWIM), according to one  stakeholder. Responding to the Task Force’s recommendations will  require a willingness to change and reprioritize current plans and  programs.
section_title: Streamlining Certification, Operational Approval, and Procedure Design Processes
paragraphs: Inefficiencies in FAA’s certification, operational approval, and  procedure design processes constitute another challenge to delivering  near-term benefits to stakeholders, instilling confidence in FAA plans, and  investing in new equipment. Our prior work has identified this issue and  concluded that the time required to complete such activities will have to  be balanced against the need to ensure reliability and safety of procedures  and systems before they are used in the national airspace system.  Stakeholders, including airlines and general aviation groups, including one  that represents avionics manufacturers, as well as the Task Force, have  said that these processes take too long and impose costs on industry that  discourage the stakeholders from investing in NextGen aircraft equipment.  For example, the President of GE Aviation Systems recently testified, and  other stakeholders have told us, that the process of approving and  deploying RNP navigation procedures remains extremely slow and that  FAA’s review and approval of a given original RNP design often takes  years. A 1999 RTCA task force also identified a need to streamline the  certification and operational approval processes and made a number of  recommendations to FAA. According to a senior FAA official, while FAA  has made progress in addressing many of these recommendations, it has  yet to take action on others and some challenges remain. For example, the  NextGen Task Force reports that FAA aircraft certification offices face  resource issues and applicants for many required installation approvals  wait about 6 months until FAA engineers are available to oversee their  project. Other suggestions to streamline the equipment certification  process include increasing staffing at FAA’s certification offices to process  applications and having NextGen-specific equipment certification  processes that allow quicker approvals of equipment.
section_title: Effectively Engaging Stakeholders
paragraphs: Another challenge for FAA will be to continue involving stakeholders-— including industry and controllers, as well as others as appropriate—in  implementation and key decisions related to the Task Force’s  recommendations. The Task Force recommends, and we agree, that FAA  and industry establish institutional mechanisms to facilitate continued  transparency and collaboration in planning and implementing actions to  address the Task Force’s recommendations, particularly as these actions  lead to changes in the NextGen Implementation Plan. The Task Force  recommended the creation of a NextGen Implementation Workgroup  under the RTCA Air Traffic Management Advisory Committee (ATMAC).  An FAA official indicated that several mechanisms, including a variety of  advisory boards and working groups, currently exist and can also be used  to improve collaboration among stakeholders. We have previously  reported that the roles of these various groups have become somewhat  unclear, even to stakeholders involved in them. FAA will need to work  with industry and key stakeholders to come to agreement on how, where,  and when stakeholders will be involved. Continued transparency and  collaboration are key to developing industry’s trust that FAA is making  changes to implement NextGen.
In addition, FAA will need to continue to work toward changing the nature  of its relationship with controllers and the controllers’ union to create  more effective engagement and collaboration. In September 2009, FAA and  NATCA signed a new 3-year contract. FAA views the new contract as a  framework for helping meet the challenges of implementing NextGen.  NATCA states that the contract starts a process to discuss ways for getting  NATCA representatives involved in all NextGen-related issues. One  particular change that would affect the relationship between controllers  and FAA, as well as facilitate NextGen’s implementation, would be to  modify the incentives that influence how controllers apply FAA’s aircraft  separation standards. More specifically, a change that encouraged  controllers to decrease the separation between aircraft during landing or  takeoff would improve system capacity and efficiency and was one of the  Task Force’s overarching recommendations. Currently, according to  NATCA, controllers are encouraged to increase the separation between  aircraft, because they are penalized if separation thresholds are crossed.  Moreover, according to MITRE, controllers often separate aircraft by more  than the prescribed minimum distances to address any uncertainty about  the actual positions of aircraft as well as to reduce the likelihood of  violating the required separation distances. NextGen technologies and  procedures can provide controllers with more precise information about  the locations of aircraft and allow for aircraft to operate closer to one  another. Recent changes to the Operational Error program and the Air  Traffic Safety Action Program (ATSAP) program are aimed at  establishing a nonpunitive safety reporting program and are a positive first  step towards changing the culture and establishing a more collaborative  relationship with controllers.
section_title: FAA Faces Challenges to Provide Incentives to Accelerate New Equipage as NextGen Progresses
paragraphs: The Task Force’s focus was on making better use of the equipment that  has already been installed or is available for installation. However, as  NextGen progresses and as the Task Force’s recommendations are  implemented, operators will need to acquire additional equipment to take  full advantage of the benefits of NextGen. In some cases the federal  government may deem financial or other incentives desirable to speed the  deployment of new equipment. Appropriate incentives will depend on the  technology and the potential for an adequate and timely return on  investment. A discussion of options to accelerate equipage discussed in  our prior work and identified by the Task Force follows.
subsections: section_title: Mandating Equipage
paragraphs: The first option is mandating the installation of equipment. Traditionally,  FAA mandates the equipage of aircraft for safety improvements and  provides several years for operators to comply. According to academic  researchers, among these mandated safety improvements are ground  proximity warning sensors, extended ground proximity warning sensors,  and traffic collision and avoidance systems. Mandates can be effective  because they force operators to equip even when there may not be clear  and timely benefits to operators that justify the cost of equipping. In the  NextGen context, FAA has proposed a rule that mandates equipage with  ADS-B Out for affected aircraft by 2020. However, operators may not  equip until the deadline for compliance is near because the cost of early  investment in new technologies is often high and the return on investment  limited. This is particularly true for general aviation operators who  typically do not fly enough to recoup a large investment in new aircraft  equipment. According to a general aviation stakeholder, general aviation  operators typically fly hundreds of flight hours a year, while scheduled  airlines fly thousands a year. Our prior work has identified a variety of  other disincentives to early investment. These disincentives include the  possibility that a technology may not work as intended, may not provide  any operational benefits until a certain percentage of all aircraft are  equipped, or may become obsolete because a better technology is  available. Other risks to early investors include potential changes in the  proposed standards or requirements for the technology, later reductions in  the price of technologies and installations, or the risk that FAA may not  implement the requisite ground infrastructure and procedures to provide  operators with benefits that would justify their costs to equip. Moreover,  because equipage mandates are designed to cover a broad range of users  in a single action, they may lead to objections and lobbying from users,  such as general aviation operators, on whom significant costs are imposed.
section_title: Making the Best Use of Equipment that Is Widely Deployed
paragraphs: A second option to accelerate equipage is to develop operational  improvements that make use of equipment that is already widely deployed  to produce benefits for operators to justify the costs of equipage. The Task  Force’s recommendations are geared toward this option. A large part of  the fleet is equipped with technologies that operators cannot fully use until  FAA has implemented operational improvements. If FAA can implement  such improvements for operators that have this equipment, it could  provide a return on investment for them and create a financial incentive  for others to equip. But because FAA has not always taken the actions  needed for operators to take full advantage of investments in equipage,  such as for Controller Pilot Data Link Communications, some industry  stakeholders question whether FAA will now follow through with the  tasks required to allow operators to achieve the full benefit of their  investment in a timely manner. Early success in implementing some of the  Task Force’s near-term recommendations will help build trust between  FAA and operators that FAA will provide operational improvements that  allow operators to take advantage of the required equipment and realize  benefits.
section_title: Providing Operational Incentives to Equip
paragraphs: A third option proposed by FAA and known as “best equipped, best  served” requires that FAA ensure some form of operational benefit for  operators that do equip, such as preferred airspace, routings, or runway  access, which can save time or fuel. If early equippers get a clear  competitive advantage, other operators may be encouraged to follow their  example, providing further incentive for all operators to fully equip their  fleets. An advantage of pursuing this option is that no federal financial  incentives are required for equipage, so costs to the federal government  are generally lower. However, designing such incentives and analyzing  how they will work in practice is a major challenge and has only begun to  move forward. For example, giving a better-equipped aircraft preference  over lesser-equipped aircraft to land or depart may increase delays and  holding patterns for the lesser-equipped aircraft, potentially increasing  delays and fuel usage overall, and resulting in lower systemwide benefits.  Furthermore, according to airline stakeholders, the best equipped, best  served option will require controllers to accept procedures that they have  expressed safety concerns about in the past. Mechanisms will also have to  be created so that controllers know which aircraft are best equipped, and  these mechanisms cannot adversely affect controller workload or safety.  The Task Force’s report does not address the practical implications of  how a best equipped, best served option would work, but recommends  that the option be explored in the context of specific operational  capabilities and locations.
section_title: Providing Financial Incentives
paragraphs: A fourth option is to provide financial incentives where operators do not  have a clear and timely return on investment for equipping aircraft.  Financial incentives can accelerate investment in equipment, which, in  turn, can accelerate the operational and public benefits expected from  implementing additional capabilities. According to the Commission on the  Future of the United States Aerospace Industry, one argument for some  form of federal financial assistance is that the total cost to the federal  government of fully financing the communication, navigation, and other  airborne equipment required for more efficient operations would be less  than the costs to the economy of system delays and inefficiencies that new  equipment would help address. In previous work, we concluded that the  federal government’s sharing of costs is most justifiable when there are  adequate aggregate net benefits to be realized through equipage, but those  who need to make the investments in the equipment do not accrue enough  benefits themselves to justify their individual investments.
Financial assistance can come in a variety of forms including grants, cost- sharing arrangements, loans, and tax incentives. As we have previously  reported, prudent use of taxpayer dollars is always important; therefore,  financial incentives should be applied carefully and in accordance with  key principles. For example, mechanisms for financial assistance should  be designed so as to effectively target parts of the fleet and geographical  locations where benefits are deemed to be greatest, avoid unnecessarily  equipping aircraft (e.g., those that are about to be retired), and not  displace private investment that would otherwise occur. Furthermore, it is  preferable that the mechanism used for federal financial assistance result  in minimizing the use of government resources (e.g., some mechanisms  may cost the government more to implement or place the government at  greater risk than others). We also reported that, of the various forms of  assistance available to the federal government, tax incentives have several  disadvantages because (1) many scheduled airlines may not have any tax  liability that tax credits could be used immediately to offset, (2) a tax  credit would provide a more valuable subsidy for carriers that are  currently profitable than for those that are not, and (3) using the tax  system to provide a financial incentive can impose an administrative  burden on the Internal Revenue Service.
One financing option proposed by the Task Force to encourage the  purchase of aircraft equipment is the use of equipage banks, which  provide federal loans to operators to equip their aircraft. Recent legislation  proposes that FAA establish a pilot program that would permit the agency  to work with up to five states to establish ADS-B equipage banks for  making loans to help facilitate aircraft equipage locally. The Task Force  suggests that equipage banks could be used to provide funds for operators  to equip with a NextGen technology when there may not be a benefit or  return on investment for doing so. By providing for a variety of NextGen  technologies, an equipage bank can avoid penalizing those who have  already invested in a particular NextGen technology. The federal  government has used a similar financing option in the past to fund other  infrastructure projects including highway improvements.
Thank you Mr. Chairman. This concludes my prepared statement. I would  be pleased to answer any questions that you or Members of the  Subcommittee may have at this time.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: For further information on this testimony, please contact Dr. Gerald L.  Dillingham at (202) 512-2834 or dillinghamg@gao.gov. Individuals making  key contributions to this testimony include Andrew Von Ah (Assistant  Director), Amy Abramowitz, Kieran McCarthy, Kevin Egan, Bess  Eisenstadt, and Bert Japikse.
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