Non-legacy airlines represent a fast-growing segment of the passenger airline industry. From 2002 through 2004, the annual enplanements for these airlines grew from 122 million to about 200 million passengers, or from about 20 percent to 28 percent of all passenger air travel. During this same period, the percentage of people flying on legacy airlines declined from 80 percent to about 72 percent of all passengers flown (see fig. 1). FAA’s safety oversight of non-legacy airlines is carried out by inspectors located at 109 field offices throughout the world that are part of 9 regional offices. For each airline, FAA puts together a team led by principal inspectors who maintain primary responsibility for managing the airline’s certificate requirements and focus on one of three disciplines: avionics, maintenance, or operations. Additional team members include those based at the FAA office that holds the airline’s operating certificate—typically an aircraft dispatch inspector, a cabin safety inspector, and assistants. FAA locates its principal inspectors close to their respective airlines’ primary operational base. For example, the principal inspectors for Independence Air (formerly Atlantic Coast Airlines) are located at FAA’s field office at Dulles International Airport, where the airline has its headquarters. In addition, FAA has geographic inspectors based at the 109 field offices to conduct additional inspections. Rather than being designated to particular airlines, geographic inspectors may conduct inspections of aircraft of any non-legacy airlines that land in their area. FAA’s safety inspector workforce for all commercial airlines has remained steady, averaging about 1,780 inspectors over fiscal years 2002 through 2004. FAA cannot determine how many of these inspectors were assigned to non-legacy passenger airlines during those 3 years, because the agency did not collect that information, according to an FAA headquarters’ official. FAA expects the number of inspectors assigned to non-legacy airlines to remain steady for fiscal years 2005 and 2006 and decline slightly in fiscal year 2007, as shown in figure 2. Inspectors record information about these inspections in PTRS—a nationwide computerized database that maintains such information as inspector findings and airline activities in response to the findings. NPG and SEP are the main inspection processes that FAA uses to oversee the safety of non-legacy airlines. Since 1985, FAA has used NPG, which includes both required and planned inspections, as its primary means of ensuring that airlines comply with safety regulations. In NPG, an FAA committee of program managers identifies an annual minimum set of required inspections that are to be undertaken to ensure that airlines are in compliance with their operating certificates. In addition, inspectors determine annual sets of planned inspections based on their knowledge and experience with the particular airlines they oversee. Typically, inspections would include ramp inspections, in which inspectors examine an aircraft while it is parked at the airport, and maintenance inspections. However, we found problems with NPG throughout the 1990s, including: (1) FAA’s routine inspections were ineffective in identifying serious safety problems, (2) critical airline inspections had not been conducted, (3) FAA’s follow-up actions often did not ensure that problems were corrected once identified, and (4) FAA did not have a methodology for estimating airline safety risks so that it could target limited inspection resources to high-risk inspections. We also found that FAA’s inspection database was of limited use in providing early warning of potential risks or targeting inspection resources. In response to these findings, and in the aftermath of the 1996 ValuJet crash, an FAA task force reviewed the agency’s safety inspection process and recommended in part that the agency initiate a project to make surveillance of airlines more systematic and targeted to deal with identified risks. This recommendation resulted in the agency’s development and implementation of ATOS in 1998 at the nation’s 10 largest commercial passenger airlines, with the goal of eventually including all commercial passenger and cargo airlines. ATOS emphasizes a system safety approach that extends beyond periodically checking airlines for compliance with regulations to the use of technical and managerial skills to identify, analyze, and control hazards and risks. The goal of ATOS is to identify safety trends in order to spot and correct problems at their root cause before an accident occurs. This program allows FAA inspectors to look at an airline as a whole, to see how the many elements of its operations, including aircraft, pilots, maintenance facilities, flight operations, and cabin safety, interact to meet federal standards. Collectively, the airlines under ATOS had a dedicated inspector staff of 585 inspectors as of July 2005. The number assigned to each airline depends on the size of the airline’s operations. ATOS uses special checklists and databases that are intended to cover all areas of airline operations. Part of FAA’s oversight is expected to include an in-depth look at an airline’s policies and procedures and whether the airline is following them. There are 16 airlines in the ATOS program, including two cargo carriers as of September 2005. Due to resource constraints, FAA determined it would not be able to immediately place the remaining passenger airlines in the ATOS program. FAA developed SEP as a bridge to introduce safety risk concepts used in ATOS into the oversight process for non-legacy airlines in order to facilitate the ultimate transition of these airlines to ATOS. As of September 2005, FAA estimates that it will move the remaining non-legacy airlines to ATOS by the end of fiscal year 2007. Since the introduction of ATOS, FAA has been moving toward integrating system safety into its oversight activities. However, the agency has been delayed in placing a significant number of non-legacy airlines in the ATOS program, resulting in those airlines continuing to be overseen through NPG, a process that is not system safety oriented. FAA agrees that NPG is not a system safety process, but explained that the planned NPG inspections, which inspectors identify based on their expertise, provide a risk-based element to the process. To address the delay in moving airlines to ATOS, FAA, in 2002, added SEP to NPG as a way to introduce airlines to a system safety oversight process until those airlines were transitioned to ATOS. Although originally envisioned by FAA as a transitional program for airlines that were awaiting placement in ATOS, SEP has become a more permanent oversight process as budget and staff constraints have prevented the agency from moving all airlines to ATOS. SEP is complementary to NPG and permits the risk-based, data-driven alteration of required NPG inspections. SEP provides a formal structure to risk identification that is absent from the NPG process. Under SEP, the principal FAA inspectors for each airline meet periodically during the year to discuss the results of their inspections and identify risks using the same risk assessment principles and checklists used in ATOS. An outcome of the meetings is the identification of inspections to augment the NPG baseline of required inspections, which FAA views as the minimum number of inspections that need to occur to ensure that certain areas of all airlines are reviewed. During the SEP process, FAA headquarters allows principal inspectors to replace NPG-required inspections with inspections targeting higher-risk areas identified through the SEP meetings. This process is known as retargeting. At the end of the meeting, entries are created in the PTRS database that indicate all inspections to be performed for that airline. SEP-initiated inspections that are designated as priorities are required to be completed. See appendix II for additional information on SEP, ATOS, and NPG. FAA also oversees the safety of both legacy and non-legacy passenger airlines through participation in industry partnership programs. Two of these programs—the Aviation Safety Action Program and Voluntary Disclosure Reporting Program—encourage certain airline employees, such as pilots and mechanics, or airlines to voluntarily report safety information that might be critical to identifying potential precursors to accidents without fear that FAA or their companies will use reports accepted under the programs to take legal enforcement or disciplinary actions against them. The Aviation Safety Action Program provides for the voluntary self- reporting of safety incidents under procedures set out in memorandums of understanding between FAA, airlines, and participating employee groups such as aircraft mechanics. As of June 2005, 20 of the top 25 non-legacy airlines (in terms of the number of enplanements) were participating in the Aviation Safety Action Program. The Voluntary Disclosure Reporting Program allows airlines to voluntarily report safety incidents to FAA. However, our prior work found that FAA has not analyzed violation data derived from these two programs to monitor national trends in airline operations, so that it can target resources to address operational risks. A third program, the Internal Evaluation Program, requires airlines to continuously monitor and evaluate their practices and procedures. The incorporation of system safety into FAA’s oversight presents a shift in concept from the agency’s traditional oversight method, which relied upon periodic inspections, to an approach that allows for the prioritization of inspections based on areas of highest risks. The development of SEP, a key element in FAA’s system safety oversight process, allows for the efficient use of inspection staff and resources by incorporating this risk-based approach. FAA’s incorporation of SEP into its oversight addresses a past concern by us that the agency was not prioritizing inspectors’ workload. Our review of literature by government and private organizations supported FAA’s concept of system safety because it makes apparent the risks that are the basis for changes. In addition, FAA’s oversight process includes a requirement that inspectors verify that corrective actions have occurred, providing a level of assurance that the safety problem has been mitigated. To facilitate the implementation of a system safety approach, FAA has made an effort to train its staff in system safety, which is a strength of its oversight approach. FAA has recognized that inspectors need training in the system safety concept in order to effectively incorporate this approach into airline oversight.