National Airspace System: Reauthorizing FAA Provides Opportunities and Options to Address Challenges
Published: 2003-02-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Much has changed since the Congress enacted the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21) 3 years ago--the downturn in the nation's economy and the terrorist attacks of September 11, 2001, have taken a heavy toll on aviation. Competition for federal funding has also grown. The reauthorization of AIR-21 provides an opportunity for the Congress and the Federal Aviation Administration (FAA) to focus on several challenges to improving the national airspace system. These challenges include (1) funding planned airport capital development, (2) increasing capacity and efficiency, (3) implementing human capital and procurement reforms, and (4) ensuring aviation safety. This testimony is based on ongoing and published GAO work. The information on funding and development, obtained from FAA and the Airport Council International (ACI), a key organization representing the airport industry, is preliminary and therefore subject to change.
section_title: What GAO Found
paragraphs: Funding planned airport development: Estimates vary as to the annual cost of planned airport capital development over the next 5 years, from FAA's estimate of about $9 billion to the airport industry's estimate of about $15 billion. If airports continue to receive about $12 billion a year for planned capital development--the average for 1999 through 2001--they would be able to fund all of the projects included in FAA's estimate, but would fall about $3 billion short of the industry's estimate. Increasing capacity and efficiency: Recently, airports have taken about 10 years to develop runways, and ongoing runway projects are expected to take even longer. The federal government and airports have taken actions to expedite runway development, but it is still too early to assess the impact of these actions. FAA's management of costly air traffic control acquisitions has improved, but cost, schedule, and performance problems remain. Implementing human capital and procurement reforms: FAA is making progress in implementing human capital and procurement reforms, but it has not fully implemented a new compensation system, in part because it has to negotiate with multiple unions, and it is not yet systematically evaluating the results of reforms in either area. Ensuring aviation safety: The Safer Skies program, which focuses on identifying and correcting the causes of aviation accidents, and FAA's redesigned program to inspect airline operations are two important aviation safety initiatives. While both programs have made good starts, some challenges remain. The Safer Skies program, which began in 1998, is not fully implemented, and the inspection system has encountered startup problems with inspector training and guidance.

section_title: Letter
paragraphs: We are pleased to be here today to discuss issues relevant to ensuring the  safe and efficient operation of the national airspace system. These issues  are particularly relevant as you prepare to reauthorize the Wendell H. Ford  Aviation Investment and Reform Act for the 21st Century (AIR-21). Much  has changed since the Congress enacted AIR-21 3 years ago. As you know,  the downturn in the nation’s economy and the terrorist attacks of  September 11, 2001, have taken a heavy toll on aviation. Flights that were  once filled are now being canceled for lack of business, and attention has  shifted from increasing the capacity of the national airspace system to  enhancing aviation security. Furthermore, as the federal budget deficit has  increased, competition for federal resources has intensified.
The Congress and the administration have responded to the public’s  concerns about aviation security by federalizing airport screeners,  upgrading and installing new airport screening equipment, and expanding  the Federal Air Marshal Service. These security measures will continue to  require and compete for federal funds. At the same time, the transfer of  some key security responsibilities to the Transportation Security  Administration, which recently moved to the new Department of  Homeland Security, will allow the Federal Aviation Administration (FAA)  to focus on the challenges it faces in improving the national airspace  system. These challenges include (1) funding planned airport capital  development, (2) increasing capacity and efficiency, (3) implementing  human capital and procurement reforms, and (4) ensuring aviation safety.
My statement today is based on our ongoing work on airport funding and  on our published reports addressing the other challenges. Because our  information on planned airport capital development, including the  information we obtained from surveying 400 smaller airports, is  preliminary, it is subject to change.
Although it is generally agreed that maintaining the integrity of the  national airspace system requires continual funding, estimates vary as to  the type and cost of planned airport capital development needed to ensure  a safe and efficient system. For 2001 through 2005, FAA has estimated  annual planned capital development costs of about $9 billion, while the  Airport Council International (ACI), a key organization representing the  airport industry, has estimated annual costs of about $15 billion for 2002  through 2006. FAA’s estimate includes only projects that are eligible for  federal funding, whereas ACI’s estimate includes projects that are both  eligible and ineligible for federal funding. Neither FAA’s nor ACI’s estimate  covers the airport terminal modifications needed to accommodate the new  explosives detection systems required to screen checked baggage.  According to ACI, these modifications could cost $3 billion to $5 billion  over the next 5 years. The Congress has not yet determined how these  modifications will be funded. If airports continue to receive about $12  billion a year for planned capital development—the average amount they  received from 1999 through 2001—they would be able to fund all of the  projects included in FAA’s estimate, but they would not be able to fund  about $3 billion in planned development estimated by ACI. While this  projected shortfall could change with revisions in future funding, planned  development, or both, it nevertheless provides a useful indication of where  funding differences may be the greatest. Options are available to increase  or make better use of the funding for airport development, and these  options would benefit different types of airports to varying degrees. For  example, raising the current cap on passenger facility charges would  primarily benefit larger airports, while increasing or redistributing Airport  Improvement Program grant funds would be more likely to help smaller  airports.
To increase the capacity and efficiency of the national airspace system,  FAA has focused on building new runways and modernizing air traffic  control. Results have been mixed in both areas. FAA’s Operational  Evolution Plan, a 10-year blueprint for increasing capacity and efficiency,  includes one new runway but notes the cancellation of another runway  and delays in the construction of six others. Our work has identified  challenges to runway development, including community opposition,  environmental concerns (especially noise issues), and litigation. Because  of these and other challenges, airports have taken about 10 years to plan  and build runways, and they expect to take about 14 years for runways  that are not yet completed. Several federal initiatives, such as an executive  order designed to streamline the environmental review process, are  designed to facilitate runway development, but we believe it is too early to  assess their impact. To modernize air traffic control, FAA spends almost  $3 billion annually, but its progress has been slow because of cost  overruns, schedule delays, and performance shortfalls. As a result, we  designated this area as high risk in 1995, and it remains at high risk today.  FAA has made some progress in addressing the root causes of its  modernization problems—by, for example, improving its cost-estimating  and cost-accounting practices—but it has not yet determined which  modernization technologies and initiatives are most likely to increase  capacity and efficiency and what impact the current financial condition of  the airline industry will have on the implementation of planned  modernization efforts.
Recognizing the importance of effective human capital and acquisitions  management to FAA’s ability to achieve its mission, the Congress  exempted FAA from many federal human capital and acquisitions laws,  and FAA began implementing reforms in these areas in 1996.  FAA has  made progress in implementing the reforms.  However, as we reported last  week, FAA has not yet finished implementing some key human capital  management initiatives, in part because it needs to negotiate changes with  multiple unions. FAA also lacks data on the effects of its human capital  initiatives, indicating that it has not fully incorporated important elements  into its human capital reform effort, including data collection and analysis,  performance goals and measures, and links between its reform goals and  program goals. Developing a strategic approach to human capital  management is particularly important because FAA faces the likelihood of  hiring thousands of air traffic controllers in the next decade to fill  vacancies caused by retirements. To improve its procurement  management, FAA implemented an acquisitions management system that  is now capturing key information; however, FAA has not yet put processes  in place to evaluate projects after implementation so that it can identify  lessons learned and improve the investment management process.
Finally, FAA and the Congress have taken important steps to enhance  aviation safety; however, some challenges remain. Safer Skies, an initiative  designed by FAA and the aviation industry to reduce the nation’s fatal  aviation accident rate by 80 percent by 2007, is the centerpiece of FAA’s  efforts to improve aviation safety. The initiative was implemented in 1998  and many preventive actions are under way but have not yet been fully  implemented. Another key to improving aviation safety is effective  inspections of the nation’s airline operations. In reporting on FAA’s  redesigned Air Transportation Oversight System in 1999, we noted that it  incorporated important features to ensure that airlines have systems to  control risks and prevent accidents, but that it had encountered startup  problems with inspector training and guidance. Many of these problems  were not yet fully resolved when the Department of Transportation’s  Inspector General reported on the inspection system last year. Finally, to  reduce the risk of accidents, the Congress enacted the Pilot Records  Improvement Act of 1996, which requires air carriers to review  information on a pilot’s performance, qualifications, and training before  making a final hiring decision. As we reported in 2002, compliance with  the act has improved over time, but FAA needs to update its guidance and  incorporate information on the act in the agency’s training for inspectors  so that they can more effectively monitor and enforce compliance,  particularly among the smaller carriers.
subsections: section_title: Prior Years’ Funding Levels Would Cover Projects Included in FAA’s Estimate, but Not All Planned Capital Development
paragraphs: Both FAA and ACI have estimated the costs of planned airport capital  development. Our analysis indicates that recent funding levels would  cover the costs estimated by FAA, but not all the costs estimated by ACI.  Options for addressing the potential difference between funding and  planned development estimates include increasing or reallocating Airport  Improvement Program (AIP) grant funds and removing the current cap on  passenger facility charges.
subsections: section_title: FAA’s and the Airport Industry’s Estimates of Planned Capital Development Vary Substantially
paragraphs: The estimated costs of planned airport capital development vary  depending on which projects are included in the estimates. According to  FAA’s estimate, which includes only projects that are eligible for AIP  grants, the total cost of airport development will be about $46 billion, or  over $9 billion per year, for 2001 through 2005. FAA’s estimate is based on  the agency’s National Plan of Integrated Airport Systems, which FAA  published in August 2002. ACI’s estimate includes all of the projects in  FAA’s estimate, plus other planned airport capital projects that may or  may not be eligible for AIP grants. ACI estimates a total cost of almost $75  billion, or nearly $15 billion per year, for 2002 through 2006. Projects that  are eligible for AIP grants include runways, taxiways, and noise mitigation  and noise reduction efforts; projects that are not eligible for AIP funding  include parking garages, hangars, and expansions of commercial space in  terminals.
Both FAA’s and ACI’s estimates cover projects for every type of airport. As  table 1 indicates, the estimates are identical for all but the large- and  medium-hub airports, which are responsible for transporting about 90  percent of the traveling public. ACI’s estimates are about twice as large as  FAA’s for these airports.
According to FAA’s analysis of the planned capital development for 2001  through 2005, airports will use (1) 61 percent of the $46 billion for capacity  enhancement, reconstruction, and modifications to bring airports up to the  agency’s design standards and (2) 39 percent to fund safety, security,  environmental, and other projects. See figure 1.
Neither FAA’s nor ACI’s estimate includes funding for terminal  modification projects that are needed to accommodate the new explosives  detection systems. ACI estimates that terminal modifications will cost  about $3 billion to $5 billion over the next 5 years.
section_title: Airports Obtain Most Funding from Bonds and Federal Sources
paragraphs: From 1999 through 2001, the 3,364 airports that make up the national  airport system received an average of about $12 billion per year for  planned capital development. The single largest source of these funds was  bonds, followed by AIP grants and passenger facility charges. (See table  2.) It is important to note that the appropriated AIP funding for fiscal year  2002 totaled $3.2 billion and that the authorized AIP funding for fiscal year  2003 is $3.4 billion. However, because data for funding from other sources   were not available for these years, we used the figures from 1999 through  2001, the most recent years for which consistent data were available.
The amount and type of funding vary depending on the airport’s size. For  example, as shown in figure 2, the large- and medium-hub airports depend  primarily on bonds, while the smaller airports rely principally on AIP  grants. Passenger facility charges are a more important source of revenue  for the large- and medium-hub airports because they have the majority of  commercial service passengers.
section_title: Prior Years’ Funding Levels Would Cover All of FAA’s Planned Development Estimate but Would Fall About $3 Billion Short of ACI’s Estimate
paragraphs: If the funding for airport capital development remains at about $12 billion  a year over the next 5 years, it would cover all of the projects in FAA’s  estimate. However, it would be about $3 billion less per year than ACI’s  estimate. Figure 3 compares the average annual funding airports received  from 1999 through 2001 with FAA’s and ACI’s annual planned development  for 2001 through 2006. This difference is not an absolute predictor of  future funding shortfalls; both funding and planned development may  change in the future. However, it does provide a useful indication of where  funding differences may be the greatest.
section_title: Funding Difference Would Affect Smaller Airports Proportionally More Than Larger Airports, but Difference Has Narrowed
paragraphs: The difference between past funding and planned development is  proportionally greater for smaller airports than for large- and medium-hub  airports. If the smaller airports were to continue to receive an average of  about $2.4 billion per year, they would be able to fund about 73 percent of  the estimated cost of their total planned development. In comparison,  large- and medium-hub airports would be able to fund about $9.4 billion  per year, or about 80 percent, of the estimated cost of their total planned  development. It is important to note that while the airlines may be  experiencing financial problems, most large airports have very solid credit  ratings and could, if necessary, issue more debt without facing exorbitant  interest rates. Figures 4 and 5 illustrate the differences between funding  levels and estimated planned capital development at smaller and at large-  and medium-hub airports.
The primary reason that smaller airports would be able to fund 73 percent  of their planned development, rather than the 52 percent reported we  reported in 1998, is that they have benefited significantly from the  increases in AIP grants, which is a larger source of funding for smaller  airports than it is for larger airports. Of the $2.4 billion in AIP grant funds  that airports received each year, on average, from 1999 through 2001,  smaller airports received almost 63 percent, whereas large- and medium- hub airports received about 37 percent. Smaller airports have received an  increasing share of AIP grants primarily because of statutorily required  changes in the distribution of these funds. For example, in AIR-21, the  Congress increased the funding for two categories that primarily or  exclusively benefit small airports—the state apportionment fund and the  small airport fund—and created general aviation entitlement grants, which  also benefit smaller airports.
section_title: Options Are Available to Address Difference between Funding and Planned Development
paragraphs: Options are available to increase airport funding or to make better use of  the existing funding. These options, some of which were authorized or  implemented as part of AIR-21, include increasing the AIP grant funding  for smaller airports, increasing passenger facility charges, and using  innovative financing approaches. The various options would benefit  different types of airports to varying degrees.
To help address the difference between funding and planned development,  AIR-21 provided that up to $150,000 a year in AIP grant funds be made  available to all general aviation airports for up to 3 years for airfield capital  projects such as runways, taxiways, and airfield construction and  maintenance projects. In our report issued yesterday, we reported that  since the program’s inception in fiscal year 2001, general aviation airports  have received a total of about $325 million, which they have used primarily  to help build runways, purchase navigational aids, and maintain  pavements and airfield lighting. Most of the state aviation officials and  general aviation airport managers we surveyed said the grants were useful  in meeting their needs, and some suggested that the $150,000 grant limit be  increased so that general aviation airports could undertake larger projects.  However, a number of state officials cautioned that an increase in the  general aviation entitlement grant could cause a decrease in the state  apportionment fund, which states use to address their aviation priorities.
Another option would be to increase or eliminate the cap on passenger  facility charges. This option would primarily benefit larger airports,  because passenger facility charges are a function of the volume of  passenger traffic. However, under AIP, airports that collect passenger  facility charges must forfeit a certain percentage of their AIP formula  funds. These funds are subsequently divided between the small airport  fund, which is to receive 87.5 percent, and the discretionary fund, which is  to receive 12.5 percent. Thus, smaller airports would benefit indirectly  from any increase in passenger facility charges. In our 1999 report on  passenger facility charges, we estimated that a small increase in  passenger facility charges would have a modest effect on passenger traffic.  At that time, we estimated that each $1 increase would reduce passenger  levels by about 0.5 to 1.8 percent, with a midrange estimate of 0.85  percent. Since AIR-21 raised the cap on passenger facility charges from  $3.00 to $4.50, the full effect of the increase has not been realized because  only 17 of the 31 large-hub airports (55 percent) and 11 of the 37 medium- hub airports (30 percent) have increased their rates to $4.50. Additionally,  3 large-hub airports and 6 medium-hub airports do not charge a passenger  facility fee. The reluctance to raise passenger facility charges is likely to be  the result of several factors, including the views of airlines, which are  opposed to any increase in passenger facility charges because an increase  would raise passenger costs and reduce passenger traffic. Nonetheless, if  all airports were to increase passenger facility charges to the current  ceiling, additional revenue could be generated.
FAA has introduced other mechanisms to make better use of existing  funding sources, the most successful of which has been letters of intent, a  tool that has effectively leveraged private sources of funding. A letter of  intent represents a nonbinding commitment from FAA to provide  multiyear funding to an airport beyond the current AIP authorization  period. Thus, the letter allows the airport to proceed with a project  without waiting for a future AIP grant because the airport and investors  know that allowable costs are likely to be reimbursed. A letter of intent  may also enable an airport to receive a more favorable interest rate on  bonds that are sold to refinance a project because the federal government  has indicated its support for the project. FAA has issued 64 letters of intent  with a total commitment of about $3 billion; large- and medium-hub  airports account for the majority of the total.
Other approaches to making better use of existing funding resources were  authorized under AIR-21. Specifically, the act authorized FAA to continue  its innovative finance demonstration program, which is designed to test  the ability of innovative financing approaches to make more efficient use  of AIP funding. Under this program, FAA enabled airports to leverage  additional funds or lower development costs by (1) permitting flexible  local matching on some projects, (2) purchasing commercial bond  insurance, (3) paying interest costs on debt, and (4) paying principal and  interest debt service on terminal development costs incurred before the  enactment of AIR-21. FAA has provided about $31 million for smaller  airports to test these innovative uses of AIP funding. According to FAA  officials, the results of the program have been mixed. The most popular  option for airports has been flexible matching, which has resulted in  several creative loan arrangements.
section_title: Improvements in Capacity and Efficiency Will Be Needed to Meet Future Demand
paragraphs: Ensuring the efficient operation of the national airspace system is an  important reauthorization issue that is vital to improving mobility and  supporting economic growth. Despite the overall decline in air traffic since  September 11, demand is gradually increasing, and at some airports,  especially those in the Midwest, recovery is progressing more rapidly. To  avoid the congestion and delays that plagued air traffic before September  11, FAA, airlines, and airports are continuing to pursue capacity-enhancing  efforts, such as building new runways, making more efficient use of  existing capacity, and better managing the acquisition of air traffic control  technology. Figure 6 illustrates congestion at a major airport.
subsections: section_title: FAA’s Operational Evolution Plan Encompasses Capacity and Efficiency Improvements
paragraphs: In December 2002, FAA published the most recent version of its  Operational Evolution Plan, a 10-year plan to increase the capacity and  efficiency of the national airspace system, primarily by focusing on  building runways. If successfully carried out, the plan would substantially  increase capacity and improve efficiency. However, FAA faces several  challenges in implementing the plan. First, the success of the plan depends  on adequate funding and on the consensus of FAA’s aviation industry  partners. Yet according to the most recent version of the plan, the timing  and implementation of some activities may be in jeopardy because of the  current economic situation and the uncertain viability of some industry  participants. For example, the plan calls for the airline industry to invest  $11 billion in new equipment for aircraft. FAA is currently reviewing the  ability of the airlines to make this investment. Second, as noted, the plan  relies heavily on runway development to increase capacity, but the most  recent version reports mixed results in building new runways. While the  plan indicates that one new runway will be built, it points out that another  runway has been cancelled and the construction of six additional runways  has been delayed because of local situations. Furthermore, building new  runways would be difficult at several of the most delay-prone airports,  such as La Guardia, Newark, Kennedy, Los Angeles, and San Francisco,  because these airports either are out of room or would face intense local  opposition. Persistent delays at key airports such as these will continue to  create “choke points” that slow air traffic throughout the system. In  addition, AIR-21 requires the phaseout of slot restrictions at Chicago  O’Hare by July 1, 2002, and at LaGuardia and John F. Kennedy airports by  2007. Because slot restrictions limit the number of gates at an airport, their  phaseout could lead to an increase in air traffic. According to the  Operational Evolution Plan, FAA is undertaking a number of efforts to  address problems at choke points, such as rerouting aircraft and adding  technology.
section_title: Building Runways Is Challenging and Takes a Long Time
paragraphs: Our work has found that airports face many of the same challenges and  delays in building new runways that FAA reported in the Operational  Evolution Plan. In January 2003, we reported that airports spent about 10  years planning and building recently completed runways and expect to  spend about 14 years on runways that are not yet completed. Several  external factors affect how much time is spent planning and building  runways, and several airports with unfinished runway projects identified  significant challenges that had delayed their projects’ completions. While  many airports believed that completing the environmental review phase  was a significant challenge, they also described other phases of the  runway development process as equally challenging. For example, airport  officials in Los Angeles and Boston said that they faced significant  challenges in reaching agreement with community interest groups during  the planning phase. In Boston, differences with these groups have led to  lengthy litigation. Other airports said that mitigating the potential impact  of aircraft noise on the surrounding community continues to be a  challenge because of heightened community concerns about noise.
Although there may be no single solution to all of the issues involved in  planning and building runways, the federal government and airport  authorities have taken some actions. For example, a recent executive  order is designed to streamline the environmental review of transportation  infrastructure projects. In addition, FAA has taken several actions to  increase communication and coordination and streamline the planning  and environmental review of runway projects. Some airports said these  actions could help airports resolve challenges more quickly; however, we  believe it is too early to assess the impact of these actions on the runway  development process.
Our work has shown that airports have also tried to address the challenges  in building runways by, for example, involving local stakeholders, such as  community groups, at the beginning of the process and reaching early  agreement on how to mitigate the adverse effects of runway projects.  Airports said these efforts helped to facilitate the completion of their  projects and could be useful for other airports considering runway  projects. However, the variety of situations that airports described and the  different levels of challenges they face make it difficult to generalize from  one airport’s experience to another’s.
Recognizing that building new runways is not always a practicable way to  increase capacity at some airports, we identified three alternatives to  building runways:    Add capacity by using nearby airports that have available capacity or by  building new airports.
Find ways to manage and distribute demand within the system’s existing  capacity by, for example, limiting the number of takeoffs and landings  during peak periods or limiting the ability of aircraft, other than those  operated by airlines, to use especially crowded or sensitive airports (under  current law, all aircraft have equal access to even the largest airports).
Develop other modes of intercity travel, such as high-speed rail, where  metropolitan areas are relatively close, to form an integrated, intermodal  transportation network.
These alternatives would require extensive change, could conflict with the  interests of one or more key stakeholder groups, and would often be  costly. Nevertheless, they may be essential to accommodate expected  increases in the demand for efficient transportation services or to address  security and other concerns prompted by the terrorist attacks. To facilitate  their implementation, we believe that the federal government will need to  assume a central role. Accordingly, we have recommended that the  Department of Transportation (DOT) begin a more extensive evaluation of  initiatives to address flight delays, including intermodal solutions and a  dialogue with the aviation community and other transportation  stakeholders as a basis for developing a comprehensive blueprint for  addressing the nation’s long-term transportation needs. DOT has  recognized the need for more and better long-range planning on the  potential use of such measures, but its efforts are in the beginning stages.  The current hiatus in air traffic growth creates an opportunity for such  planning to take place.
section_title: FAA’s Air Traffic Modernization Effort Remains High Risk
paragraphs: To increase the safety, capacity, and efficiency of the national airspace  system, FAA undertook a major effort in 1981 to modernize and replace  aging air traffic control equipment. This effort has been plagued by cost  overruns, schedule delays, and performance shortfalls. In 1995, we  designated it as high risk, and we continue to designate it as such.  Inefficiencies in the air traffic control system contributed to some of the  delays in the system that peaked in 2000. At that time, FAA estimated that  modernizing equipment along with other changes, such as redesigning the  airspace, would increase capacity by 5 to 15 percent.
Originally, FAA planned to complete its modernization in 10 years at a cost  of $12 billion. Now, two decades and $35 billion later, FAA estimates that  it will need nearly $16 billion more through fiscal year 2007 to complete  key projects, including the Standard Terminal Automation Replacement  System (STARS), the Wide Area Augmentation System (WAAS), the Next- Generation Air/Ground Communications (NEXCOM), the Local Area  Augmentation System (LAAS), the Integrated Terminal Weather System  (ITWS), and free flight initiatives, which FAA’s Operational Evolution Plan  recognizes as a new way of managing air traffic that is expected to help  lower costs for the airlines and help the aviation system accommodate  more flights.
While FAA is making progress in managing the air traffic control  modernization, key programs continue to experience cost, schedule, and  performance problems. As a result, resources have not been spent cost- effectively and improvements in capacity and efficiency have been  delayed. Table 3 shows the status of three major programs that we have  been monitoring.
DOT’s Inspector General has noted similar problems with the Local Area  Augmentation System—a new precision approach and landing system that  is expected to boost airport arrival rates under all weather conditions— and the Integrated Terminal Weather System—which provides enhanced  weather information. FAA planned to begin operating the Local Area  Augmentation System in 2004, but it will not meet that milestone because  of additional development work, changing requirements, and unresolved  safety certification issues. In addition, the estimated production costs for  the Integrated Terminal Weather System, originally expected to be about  $286 million, have tripled.
Our work has also identified free flight implementation issues. Free flight  is a new approach to air traffic management that replaces highly  structured rules and procedures with a more flexible system based on  collaboration between air traffic controllers and pilots. The use of new  free flight technologies and procedures is expected to increase the  efficiency and capacity of the airspace system and help to avoid gridlock  by improving operations in various segments of flight. In 2001, we made  several recommendations to improve the implementation of free flight,  including improving training for air traffic controllers and establishing  detailed tracking of costs, schedules, and benefits. FAA has begun to  address our recommendations. However, several outstanding issues  remain. For example, the airlines are not likely to voluntarily equip their  fleets with new technologies to support free flight until their business  improves.
Since 1995, we have made over 30 recommendations to address the root  causes of FAA’s modernization problems. Although FAA has made  progress in addressing these root causes, more remains to be done,  including the following:  Improve immature software capabilities. FAA has developed an integrated  framework for improving its software acquisition, software development,  and systems engineering processes. In addition, FAA has continued to  increase the number of system development projects that use this  integrated framework. However, FAA still does not require all systems to  achieve a minimum level of progress within the framework before being  funded.  Improve cost-estimating and cost-accounting practices. FAA has  developed a standard work breakdown structure and established an  historical database for tracking systems’ estimated costs and other  information. Furthermore, FAA has made progress in implementing its  cost-accounting system. However, the agency has not yet fully instituted  rigorous cost-estimating practices—that is, FAA is not yet incorporating  actual costs from related system development efforts in its processes for  estimating the costs of new projects. Most recently, we reported that the  cost estimates for the Standard Terminal Automation Replacement System  are unreliable because FAA did not follow its own acquisition guidance.
Change organizational culture. FAA issued an organizational culture  framework in 1997 and is working to implement it. However, in 2000, the  DOT Inspector General followed up on problems that we first identified in  1996 and reported that FAA’s culture remains a barrier to successful  acquisition project management and that integrated teams, a key  mechanism to deliver more cost-effective and timely products, are not  working well because FAA’s culture continues to operate in vertical  “stovepipes,” which conflict with the horizontal structure of team  operations. Our 2000 report on the Wide Area Augmentation System also  found that the integrated teams were not working as intended. We found  that competing priorities between two key organizations that are part of  the system’s integrated team negated the effectiveness of the team’s  approach for meeting FAA’s goals for the system.
As FAA moves forward with modernization in the current economic  climate, it will be important for the agency to ensure that it is spending its  resources on the projects that will provide the most return. This may  require reprioritizing projects in the agency’s investment portfolio,  cooperating more closely with private industry to leverage federal dollars  and share the risk of investments, and seeking other opportunities to  reduce costs and operate more efficiently. Such activities would be under  the purview of the Air Traffic Services Subcommittee and the chief  operating officer, a position created by AIR-21 to oversee the air traffic  control system and FAA’s modernization program. However, FAA has not  yet hired a chief operating officer to direct these efforts.
section_title: FAA Is Implementing Human Capital and Procurement Reforms
paragraphs: As problems with the air traffic control modernization program mounted  in the early 1990s, FAA attributed the delays in implementing air traffic  control projects, at least in part, to burdensome governmentwide human  capital rules and federal acquisition regulations that impeded its ability to  hire, train, and deploy personnel and to acquire equipment and systems. In  response to these claims, the Congress exempted FAA from many federal  laws governing human capital and acquisitions, and the agency began  implementing human capital and procurement reforms in 1996.
subsections: section_title: Human Capital Reforms Have Not Been Fully Implemented, Evaluated, or Linked to Goals
paragraphs: As we reported last week, FAA has implemented the majority of its human  capital reform initiatives, but it has not yet completed this effort. (Fig. 7  shows the status of several key initiatives.) For example, it has not  implemented a new compensation system for about 20 percent of its  50,000 employees—those staff whose unions have not reached agreements  with FAA. Among the factors affecting FAA’s progress in implementing  this initiative were the wide range of skills represented in FAA’s workforce  and the multiple unions representing FAA employees.
FAA has not developed data to assess the effects of its human capital  reforms. For example, it has not systematically surveyed managers and  employees or analyzed their views on the new compensation system.  Although FAA human capital officials cited positive effects of the system,  nearly two-thirds (110 out of 176) of the managers and employees we  interviewed disagreed or strongly disagreed that the new system is fair to  all employees.
The lack of data on the effects of its human capital reforms is an indication  that FAA has not fully incorporated elements that are important to  effective human capital management into its overall reform effort. These  elements include data collection and analysis, performance goals and  measures, and links between reform goals and program goals. Evaluations  of FAA’s human capital reforms have cited these shortcomings, but FAA  has not developed specific steps and time frames for building the missing  elements into its human capital management and for using these elements  to evaluate the effects of its initiatives, make strategic improvements, and  hold the agency’s leadership accountable.
Addressing these weaknesses and developing a more strategic approach to  its human capital reforms is particularly important as FAA faces the  likelihood of hiring thousands of air traffic controllers in the next decade  to replace retiring controllers. While the exact number and timing of the  controllers’ departures is impossible to determine, FAA’s and our analyses  show that the attrition rate will grow substantially in the near and long  term as thousands of controllers hired over a 3- to 4- year period in the  1980s become eligible to retire. In June 2002, we reported that FAA’s  strategy for replacing controllers was generally to hire new controllers  only when current, experienced controllers leave—an approach that  makes it challenging to ensure that well-qualified new controllers are  available when needed. For example, we found that FAA’s hiring process  did not adequately take into account the time needed to fully train  replacements, which could take up to 5 years; there was uncertainty about  agency’s tools for screening and testing the aptitude of applicants; and the  agency had not addressed the resources that may be needed to train these  replacements. We recommended, among other things, the development of  a comprehensive workforce strategy to address FAA’s impending  controller needs. While FAA has made some changes in this area since our  report appeared, it remains to be seen whether the agency’s actions will be  sufficient to ensure that qualified new controllers are available when  needed. Figure 8 shows an air traffic controller monitoring and handling  air traffic.
section_title: FAA’s Procurement Reforms Have Improved Investment Management Processes, but Weaknesses Remain
paragraphs: As part of its procurement reforms, FAA introduced an acquisition  management system to reduce the time and cost to deploy new products  and services. In 1999, we found that while this was a good first step in  establishing a structured investment management approach for selecting  and controlling the agency’s investments, the system had weaknesses in its  selection, control, and evaluation phases that impeded FAA’s ability to  manage its investments effectively and make sound decisions about  continuing, modifying, or canceling projects. We concluded that  correcting these weaknesses would increase the likelihood that FAA’s  projects would meet established cost and schedule objectives and  contribute to measurable improvements in the agency’s mission  performance, and we made several recommendations designed to improve  the agency’s selection, control, and evaluation of its information  technology investments.
Recently, we found that FAA has improved its investment management  processes, but that more remains to be done. For example, FAA is now  overseeing investment risks and capturing key information from the  investment selection process in a management information system. FAA  has also developed guidance for validating costs, benefits, and risks, and  expects to finalize this guidance by early 2003. However, FAA has not yet  implemented processes for evaluating projects after implementation in  order to identify lessons learned and improve the investment management  process. Because its procurement reform effort is not complete, major  projects continue to face challenges that could affect their costs, schedule,  and performance.
section_title: FAA Is Making Progress in Implementing Safety Initiatives
paragraphs: Safety has always been and continues to be FAA’s highest priority. FAA  has taken a number of important steps to improve aviation safety;  however, planning and implementation could be more effective in some  cases.
subsections: section_title: FAA and Industry Have Taken Actions to Reduce the Fatal Accident Rate
paragraphs: Reducing fatal aviation accidents is key to improving aviation safety.  FAA’s centerpiece for reaching this goal is Safer Skies, an initiative that  dates back to 1998, when FAA and aviation industry representatives  worked together to identify the major causes of fatal accidents and to  design and implement preventive actions. Safer Skies is intended to reduce  the fatal accident rate for commercial aviation by 80 percent and to reduce  the number of fatal accidents for general aviation to 350 by 2007. Because  many preventive actions have not yet been fully implemented, it may be  too early to assess their effectiveness. Achieving the initiative’s goals will  require FAA to systematically implement these preventive actions and to  maintain good data to monitor their progress and evaluate their  effectiveness. As of last week, 44 preventive actions had been  undertaken—of which 16 are completed and 28 are under way, according  to FAA.
section_title: FAA’s New Safety Inspection System Offers Promise, but Problems Still Need to Be Addressed
paragraphs: Improving the effectiveness of FAA’s inspections of airline operations is  key to improving aviation safety. The FAA Administrator has noted that  perhaps the greatest support the agency can provide to the industry is a  robust safety oversight role that will not waver in difficult times. FAA’s  new inspection program, the Air Transportation Oversight System, is  central to this oversight role. The program aims to ensure not only that  airlines comply with FAA’s safety requirements but also that they have  operating systems to control risks and prevent accidents. We found that  FAA had not completed many critical steps, such as developing guidance  and creating usable databases to capture information, before  implementing the new inspection system in 1998. As a result, the agency’s  ability to conduct effective inspections remains limited. FAA has begun to  address some of these problems. However, according to a 2002 review by  the DOT Inspector General, many of the problems persist, and the  program’s implementation remains inconsistent because FAA has not  established strong oversight and accountability procedures. These  problems limit FAA’s ability to conduct more systematic, structured  inspections; analyze the resulting data to identify safety trends; and target  its resources to the greatest aviation safety risks.
section_title: Better Implementation and Monitoring of Requirements to Perform Preemployment Checks on Pilots Could Enhance Aviation Safety
paragraphs: Finally, the Congress has endeavored to keep unsafe pilots out of the  cockpits of commercial aircraft by requiring that carriers perform  preemployment checks on pilot applicants. We found that carriers have  increasingly requested the required records since the Pilot Records  Improvement Act took effect in 1997. In 2000, nearly half of the nation’s  large commercial airlines reported deciding not to hire pilots because of  this information. However, our data analyses and surveys of carriers  showed that a few carriers did not request all required records. In a few  cases, hiring carriers reported never receiving the records. Delays in  providing the records can be costly for both carriers and pilots because  the carrier is not allowed to use the pilot to fly passengers or cargo until  the records have been received. In addition, because FAA did not update  its guidance when the law was amended, carriers and pilots lack  awareness of some provisions, and FAA inspectors are not prepared to  review compliance. In response to our recommendations, FAA has  updated its guidance and is taking additional steps to better inform  carriers, pilots, and inspectors of the law’s requirements.
In conclusion, Mr. Chairman, the aviation industry and the national  economy are still struggling to recover their health. Analysts nonetheless  expect the demand for air travel to rebound, and the nation’s aviation  system must be ready to accommodate the projected growth safely and  securely. Sustaining recent funding levels for planned capital development  should allow the majority of airport capital improvements to move  forward, but it will not address the costly terminal modifications needed  to accommodate explosives detection systems. Options such as additional  federal grant funding or increases in passenger facility charges could make  more funding available for airport improvements; however, competition  for federal budget dollars and concerns about the impact of higher charges  on airline ticket sales may limit the practicality of these options.
Enhancing the capacity and efficiency of the national airspace system  through runway development and air traffic modernization is critical to  preparing for the projected growth in demand for air travel. Today, we  have a window of opportunity to prepare for this growth without the  pressures of congestion and flight delays. Yet we also face public and  private constraints on spending that require us to accomplish these  improvements as efficiently as possible. Setting priorities among projects,  identifying opportunities for streamlining the runway development  process, and fully implementing human capital and procurement reforms  should help to ensure efficiency. Finally, moving forward with aviation  safety initiatives is essential to restore and maintain the public’s  confidence in air travel.
section_title: Scope and Methodology
paragraphs: To determine how much planned development would cost over the next 5  years, we obtained planned development data from FAA and ACI. ACI  provided its estimate to us in January 2003, and we are still analyzing the  data on which the estimate is based. To determine the sources of airport  funding, we obtained capital funding data from FAA, the National  Association of State Aviation Officials, Thomson Financial, and a survey  we conducted of 400 general aviation and reliever airports. We obtained  funding data from 1999 through 2001, because they were the most recent  years for which consistent data were available. We screened the planned  development and funding data for accuracy and compared funding  streams across databases where possible. We also clarified ambiguous  development or funding source information directly with airports. We did  not, however, audit how the databases were compiled, except for our own  survey. However, we have not finished analyzing our survey data, and the  results presented in this testimony are still preliminary.
We performed our work from May 2002 through February 2003 in  accordance with generally accepted government auditing standards.
This concludes my statement. I would be pleased to answer any questions  you or other members of the Committee might have.
section_title: Contact Information
paragraphs: For further information on this testimony, please contact Gerald  Dillingham at (202) 512-2834. Individuals making key contributions to this  testimony include Jon Altshul, Bonnie Beckett, Tammy Conquest, Howard  Cott, Elizabeth Eisenstadt, James Geibel, Charles D. Ireland, Edward  Laughlin, David Lehrer, Maren McAvoy, Matthew Sakrekoff, John W.  Shumann, Teresa Spisak, Richard Swayze, Larry Thomas, and Alwynne  Wilbur.
section_title: Related GAO Products
paragraphs: Aviation Finance: Implementation of General Aviation Entitlement  Grants. GAO-03-347. Washington, D.C.: February 11, 2003.
Human Capital Management: FAA’s Reform Effort Requires a More  Strategic Approach. GAO-03-156. Washington, D.C.: February 3, 2003.
National Airspace System: Better Cost Data Could Improve FAA’s  Management of the Standard Terminal Automation Replacement  System. GAO-03-343. Washington, D.C.: January 31, 2003.
Aviation Infrastructure: Challenges Related to Building Runways and  Actions to Address Them. GAO-03-164. Washington, D.C.: January 30,  2003.
High-Risk Series: An Update. GAO-03-119. Washington, D.C.: January  2003.
Air Traffic Control: Impact of Revised Personnel Relocation Policies Is  Uncertain. GAO-03-141. Washington, D.C.: October 31, 2002.
Airport Finance: Using Airport Grant Funds for Security Projects Has  Affected Some Development Projects. GAO-03-27. Washington, D.C.:  October 15, 2002.
National Airspace System: Status of FAA’s Standard Terminal  Automation Replacement System. GAO-02-1071. Washington, D.C.:  September 17, 2002.
Options to Enhance the Long-term Viability of the Essential Air Service  Program. GAO-02-997R. Washington, D.C.: August 30, 2002.
Aviation Safety: Better Guidance and Training Needed on Providing  Files on Pilots’ Background Information. GAO-02-722. Washington, D.C.:  August 30, 2002.
Air Traffic Control: FAA Needs to Better Prepare for Impending Wave of  Controller Attrition. GAO-02-591. Washington, D.C.: June 14, 2002.
Aviation Finance: Distribution of Airport Grant Funds Complied with  Statutory Requirements. GAO-02-283. Washington, D.C.: April 30, 2002.
Department of Transportation, Transportation Security  Administration: Aviation Security Infrastructure Fees. GAO-02-484R.  Washington, D.C.: March 11, 2002.
Applying Agreed-Upon Procedures: Airport and Airway Trust Fund  Excise Taxes. GAO-02-380R. Washington, D.C.: February 15, 2002.
National Airspace System: Long-Term Capacity Planning Needed  Despite Recent Reduction in Flight Delays. GAO-02-185. Washington,  D.C.: December 14, 2001.
Air Traffic Control: FAA Enhanced the Controller-in-Charge Program,  but More Comprehensive Evaluation Is Needed. GAO-02-55. Washington,  D.C.: October 31, 2001.
National Airspace System: Free Flight Tools Show Promise, but  Implementation Challenges Remain. GAO-01-932. Washington, D.C.:  August 31, 2001.
Air Traffic Control: Role of FAA’s Modernization Program in Reducing  Delays and Congestion. GAO-01-725T. Washington, D.C.: May 10, 2001.
Aviation Safety: Safer Skies Initiative Has Taken Initial Steps to Reduce  Accident Rates by 2007. GAO/RCED-00-111. Washington, D.C.: June 30,  2000.
National Airspace System: Problems Plaguing the Wide Area  Augmentation System and FAA’s Actions to Address Them. GAO/T- RCED-00-229. Washington, D.C.: June 29, 2000.
National Airspace System: Persistent Problems in FAA’s New  Navigation System Highlight Need for Periodic Reevaluation.  GAO/RCED/AIMD-00-130. Washington, D.C.: June 12, 2000.
Federal Aviation Administration: Challenges in Modernizing the  Agency. GAO/T-RCED/AIMD-00-87. Washington, D.C.: February 3, 2000.
Air Traffic Control: Status of FAA’s Implementation of the Display  System Replacement Project. GAO/T-RCED-00-19. Washington, D.C.:  October 11, 1999.