A4A Letter to Republican National Committee (RNC) regarding need for party platforms

Commercial aviation helps drive more than 10M American jobs and 5 cents of every dollar of U.S. GDP
Commercial aviation drives more than $1 trillion per year in economic activity
In 2012, U.S. airlines moved more than 48,000 tons of cargo per day
In 2012, the value of a kilogram of U.S. merchandise exported by air averaged 121 times the value exported by sea
For every 100 airline jobs, some 360 are supported outside of the airline industry
Federal taxes constitute $61 – or 20% – of the price of a typical $300 domestic round-trip ticket
In 2011, U.S. airlines carried 16 percent more passengers and cargo using 10 percent less fuel than in 2000
Domestically, airlines drive 5% of economic activity but account for 2% of man-made GHG emissions
From 2000-2011, airlines reduced GHG emissions by 11% while transporting 16% more passengers and cargo
From 1975-2011, U.S. airlines and their partners reduced significant noise exposure by 99%
Commercial air travel is the safest form of intercity transportation in the United States
In the most recent decade, scheduled air service on U.S. airlines was seven times safer than in the 1970s
From 2000-2012, U.S. airlines improved the on-time arrival rate from 72.6% to 81.9%
From 2000-2012, U.S. airlines reduced the flight cancellation rate sharply from 3.30% to 1.29%
Airfares are a bargain: From 2000-2012, U.S. CPI rose 33% while average domestic fare rose just 14%
Adjusted for inflation, the average round-trip domestic airfare fell 15% from 2000
2007 domestic flight delays cost the United States approximately $31 billion
In 2012, the value of U.S. merchandise exported by air reached an all-time high of $427B
In 2012, U.S. exports of air-travel services reached an all-time high of $39.5B, driving a $5.1B trade surplus
In 2012, U.S. passenger and cargo airlines spent more than $50B on fuel, averaging 36% of operating expenses
In 2012, U.S. airlines posted the lowest annual rate of mishandled baggage ever recorded
FAA projects U.S. air travel demand to top 1 billion passengers in 2027
In 2012, US airlines flew 83.4 million passengers in scheduled international service - a record high
In 2012, the total value of merchandise exported from or imported to the United States by air exceeded $927 billion
In 2012, 7.15 teragrams of merchandise was exported from or imported to the United States by air

	A4A Letter to Republican National Committee (RNC) regarding need for party platforms
	PubZone1 August 8, 2012 The Honorable Robert McDonnell Chairman, Committee on Resolutions Republican National Convention 310 First St., SE Washington, DC 20003 Dear Chairman McDonnell: Thank you for your service to the Republican Party as Chairman of the Committee on Resolutions at the 2012 Republican National Convention. The importance of your committee’s work to develop a strong policy document that articulates the core principles and goals of the Republican Party cannot be overstated. On behalf of our member airlines, Airlines for America (A4A) submits its ideas for strengthening the U.S. economy and creating jobs for American workers by ensuring a strong, competitive U.S. airline industry. We respectfully ask the committee to consider including the following language in the 2012 Republican Platform: “The U.S. commercial transportation industry – particularly the airline sector – is vital to the health of our nation’s economy. To enhance the economic viability and global competitiveness of this critical industry, we support adoption of a National Airline Policy that would rationalize the industry’s crippling tax and regulatory burdens, and modernize the nation’s antiquated air traffic control system.” The Case for a National Airline Policy Effectively, the U.S. commercial aviation industry is the physical Internet of the U.S. economy – connecting markets of all sizes and regions with each other, and with rapidly growing global markets. Commercial aviation – particularly the U.S. airline sector – is vital to the health of our nation’s economy, driving over $1 trillion in annual economic activity in the United States and nearly 10 million well-paying jobs. It also contributes between $700 billion-$800 billion per year to our nation’s economy – roughly 5 percent of gross domestic product (GDP). However, the ability of the U.S. airline industry to drive U.S. economic growth, employment and exports, and to preserve and grow air service in smaller communities, has been undermined by an uncoordinated patchwork of counterproductive public policies, or lack thereof, particularly in the areas of taxation and regulation. As a result, the U.S. airline industry is at an inflection point. The industry has lost $53 billion and more than 150,000 jobs – nearly one-third of its total workforce – since 2001. As a result, Fortune Magazine found that of the 53 principal industries that make up the nation’s economy, airlines are dead last in profitability. Costs faced by U.S. passenger airlines have doubled since 2000, due primarily to skyrocketing jet-fuel costs. At the same time, domestic airfares, including fees for baggage and other ancillary services, have dropped by 12 percent, adjusted for inflation. To help defray rising operating costs – which have spiked by another 7 percent so far this year – airlines have reduced domestic capacity by 9 percent since the recession began in late 2007, and have unbundled fares to generate additional revenue from fees for ancillary services. These initiatives have helped airlines post meager profits in each of the last two years – $2.2 billion in 2010 and $577 million in 2011 – which translates into margins of only 1.6 percent and .4 percent, respectively. Last year, U.S. passenger airlines earned just 81 cents per passenger – including ancillary revenue. Due primarily to record-high fuel prices, which have increased by another 19 percent this year, the industry lost $1.7 billion in the first quarter of 2012. In contrast to the United States, many other countries have recognized and embraced their airline industries as critical enablers of economic expansion and sources of global relevance and competitive advantage for other industries. For example, the United Arab Emirates and Qatar launched their airlines as foundations for their economic development, ensuring low tax rates and subsidized state-of-the-art infrastructure. As a result, Emirates Airlines and Qatar Airways, along with Etihad Airlines, are poised to double in size, with Emirates on track to become the world’s third largest airline within five years. These and other Mideast-based carriers, along with airlines from China, India and Latin America, are growing at a significant rate, reinvesting earnings in their product and expanding their global presence at the expense of U.S. airlines, with troubling implications for the entire U.S. economy. Without a cohesive policy supporting the integral role of the U.S. airline industry in our economy, U.S. global economic leadership and competitive advantage will suffer. Similarly, domestic air-service levels will suffer, since it is the U.S. airlines, not foreign airlines, that are willing and able to serve smaller cities and rural communities with our international gateways. To help right the ship, we respectfully request that the 2012 Republican Party platform recommend the adoption and implementation of a National Airline Policy that would restore and enhance U.S. airline industry economic viability, and enable it to increase air service across the nation, boost economic growth, expand exports, and create more well-paying U.S. jobs. The policy would necessitate a mix of legislative and regulatory action addressing five core areas: • Rationalizing the U.S. Airline Industry’s Federal Tax Burden • Rationalizing the Industry’s Regulatory Burden • Enhancing Global Competitiveness • Modernizing and Reforming Infrastructure • Mitigating Jet-Fuel Cost and Price Volatility These five areas, discussed later in greater detail, were the focus of numerous bipartisan federal panels convened to review the challenges confronting the U.S. airline industry, including the National Commission to Ensure a Strong, Competitive Airline Industry, chaired by former Virginia Governor Gerald Baliles (1993); The National Civil Aviation Review Commission, chaired by former Secretary of Transportation Norm Mineta (1997); and most recently, The Future of Aviation Advisory Committee (2010). I. Rationalizing the Industry’s Tax Burden As noted previously, from 2001 through 2011, U.S. passenger and cargo airlines reported cumulative losses of $53 billion, culminating in deep cuts in capacity across most large and medium U.S. hub airports and many smaller communities, and the elimination of more than 150,000 jobs – nearly one-third of the industry’s U.S. workforce. With an uncertain economy affecting both business and leisure travel and the impact of record-high fuel costs (fuel is now the highest cost of any airline, constituting up to 40 percent of annual operating costs), the industry’s long-term viability and global competitiveness is threatened by the rising federal aviation tax burden, which has tripled since 1972. Today, the U.S. aviation industry leads all others in having the greatest number of unique taxes and fees imposed upon it and its customers by the federal government – 17 in all, totaling $18 billion in 2011. Federal taxes and fees already constitute $61 or more than 20 percent of the cost of a typical $300 domestic round-trip ticket. The U.S. commercial aviation sector is now taxed at a higher rate than alcohol, beer, cigarettes and guns – items taxed at high rates to discourage use. Since travel is often an optional choice for individual consumers and businesses, even the smallest increase in airline ticket costs has a negative impact on travel decisions. The U.S. Government Accountability Office (GAO) estimates that for every $1 increase in airfares, passenger travel decreases by up to 2 percent. II. Rationalizing the Industry’s Regulatory Burden Certain aspects of the extensive federal regulatory environment under which we operate are critical, particularly in the safety arena. However, much of the regulation we face is costly, unproven and unnecessarily burdensome, which adversely impacts growth, global competitiveness, airline profitability and job creation. The regulatory tentacles of four cabinet-level departments and six federal agencies touch nearly every aspect of an airline’s operations, making the industry one of the most regulated deregulated sectors of the U.S. economy. The U.S. airline industry’s regulatory burden has grown progressively worse over the past two decades. A recent report by the American Aviation Institute (AAI) found that new Department of Transportation (DOT) “passenger protection” regulations and resulting enforcement actions will cost airlines $1.7 billion annually. With more than $50 billion in losses over the last decade and losses of $1.7 billion in the first quarter of 2012, the rising federal regulatory burden continues to hinder the ability of U.S. airlines to compete globally, become sustainably profitable and create well-paying U.S. jobs. If the federal government does not rationalize its approach to regulating airlines and diminish the industry’s regulatory burden, the U.S. airline industry’s workforce, which has lost more than 150,000 jobs since 2001 – nearly one-third of its total workforce – will contract further, thereby undermining the nation’s economic recovery. A4A has identified 10 federal regulations that will cost airlines more than $4 billion annually and provide little to no benefit to the traveling public. Of these regulations, we are especially concerned with recent and forthcoming DOT consumer regulations, Federal Aviation Administration (FAA) pilot qualification and flight-crew training regulations, and certain environmental regulations and laws, including FAA fuel-tank inerting regulations and the European Union Emissions Trading Scheme (EU ETS). Other costly and burdensome recommendations include a proposed FAA rule that would rewrite training regulations for pilots, flight attendants, flight engineers and dispatchers; an Environmental Protection Agency (EPA) proposed rule that would bring airport hydrant fueling distribution systems (“airport hydrant systems”) under the federal underground storage tank (UST) rules; a proposed DOT rule that would require airlines to periodically report revenues from the sale of ancillary services (e.g., on-board food, in-flight entertainment, access to airline lounges, checked baggage, priority boarding and preferred seating, and the sale of frequent-flier points); and a proposed DOT rule to “modernize” the commercial airline traffic and revenue data that it collects from U.S. airlines. III. Enhancing Global Competitiveness The United States has championed free trade in the airline sector, and the U.S. airline industry has supported that effort. Our member airlines are efficient, effective enterprises and are anxious to compete in the global marketplace. The United States has entered into 107 Open Skies agreements with aviation trading partners. These agreements liberalize the aviation relationship and allow airlines to decide route, frequency, capacity and pricing decisions based on commercial considerations free from government interference. As the State Department notes on its website, “Open Skies agreements have vastly expanded international passenger and cargo flights to and from the United States, promoting increased travel and trade, enhancing productivity, and spurring high-quality job opportunities and economic growth.” Unfortunately, U.S. policy for its airline sector has not kept up with the evolution of the global market for airline passenger and cargo services. The United States does not have a coherent airline policy that recognizes the strategic value of the U.S. airline industry and seeks to advance its global competitiveness. Rather than “strengthening the competitive position of air carriers to at least ensure equality with foreign air carriers…to maintain and increase their profitability in foreign air transportation,” another Airline Deregulation Act specific policy goal, the ad-hoc approach to the U.S. airline industry has hobbled it. In direct contrast with the United States, other countries have championed their airlines. This is particularly true in South America, Asia and the Middle East, areas that have seen strong growth and expansion by their airlines and where future demand is expected to be strong. Asian and Middle Eastern countries, in particular, have encouraged their airlines to grow and supported that growth with policies that reduce costs and encourage capital investment. Emirates and Singapore Airlines, for example, not only have large, young fleets of widebody aircraft, they also have considerably more widebody aircraft on order than U.S. airlines. In fact, only one U.S. airline is on the list of the 15 airlines with the largest widebody orders. With the greatest amount of growth forecast to be in the emerging economies, foreign airlines, not U.S. airlines, are poised to succeed. The foreign airlines that are buying the majority of new widebody aircraft today are providing the connectivity their governments envisioned – and driving economic growth in the process. This includes flying to/from the United States in increasing numbers – to/from our major cities – which has caused U.S. carriers to pull down capacity in some international markets, the most profitable part of the business and the part of the business that subsidizes – to a great degree – our domestic routes. The impact of the Open Skies initiative coupled with the absence of a coherent airline industry policy is plain. 107 foreign airlines will fly to/from the U.S. from 98 countries in the third quarter 2012. This compares to 11 U.S. airlines scheduled to fly to/from 77 countries. Today, Emirates operates to/from Houston, Dallas, Los Angeles, San Francisco, New York JFK and Seattle, and just announced plans to launch service to/from Washington, D.C. in September. Etihad operates to/from New York JFK and Chicago. And they start service to/from Dulles in 2013. They are not alone. Dozens of foreign-flag carriers serve the United States today and more are looking to add service, including Brazil’s Gol, which has announced plans for service to/from Miami. A strong airline industry drives well-paying, middle-class American jobs within the industry and is the foundation for jobs in the broader aviation industry. As we learned from the post-9/11 and post-recession years, an unprofitable airline industry translates directly into job loss, reduced service and reduced investment in airplanes, facilities and equipment. In August 2001, industry employment exceeded 536,000 full-time-equivalent employees. By April 2010, that number had dropped to just over 376,000, a loss of 160,000 well-paying jobs. Likewise, an unprofitable industry cannot sustain the level of service America needs. In March 2001, there were slightly more than 30,000 daily scheduled domestic flights. That number dropped more than 21 percent, to 23,600 daily scheduled domestic flights, in March 2012. Foreign airlines will not directly serve smaller U.S. markets. They will cherry-pick profitable cities and rely on others to provide connectivity, at whatever cost, across the rest of the country. That is not good for American businesses or consumers. U.S. network airlines have a vested interest. Their business model accommodates connecting every part of the country with the revenues from the more profitable segments, subsidizing the much less profitable, smaller communities. To continue to provide such service, the U.S. airline industry needs a more rational, cost-effective regulatory environment. IV. Modernizing and Reforming Infrastructure A4A members believe that the United States should be guided by a National Airline Policy that will treat America’s airlines like the global businesses they are and enable them to operate as such. An indispensable element of such a policy is the modernization of the U.S. air traffic management system, the Next Generation Air Transportation System (NextGen). NextGen, a $40 billion, multiyear initiative, is designed to transform today’s World War II-era, ground-based air traffic management system into a state-of-the-art satellite-based system that utilizes Global Positioning System (GPS) signals. Despite its antiquated technology, the current National Airspace System (NAS) is extraordinarily safe. However, the technological constraints of today’s ground-based system cannot meet current air traffic demands in major metropolitan areas, most notably in the New York area. An FAA-commissioned study estimated that the total cost of U.S. air transportation delays in 2007 exceeded $31 billion, including nearly $17 billion to passengers and $8 billion to airlines. With NextGen, the FAA and airlines will be able to route flights more precisely, directly and efficiently. This will reduce miles flown, flight times, congestion and delays. Less aircraft time in the air and on the ground means less congestion and lower fuel consumption and greenhouse gas emissions. While the importance of NextGen is clear, its implementation has been complicated and significant issues remain unresolved. Airlines cannot afford to wait for all of the pieces of NextGen to come together. We must get the most out of existing technology and equipage. This means that the FAA should focus resources on expediting introduction of the most cost-beneficial elements of NextGen that are available, most notably performance-based navigation procedures. These will pay dividends for all stakeholders, including passengers and shippers, by increasing system capacity, reducing fuel burn and decreasing emissions. In addition, pursuant to the FAA Modernization and Reform Act of 2012, the FAA should establish, based on stakeholder input, NextGen performance goals and metrics, which is a crucial step to ensuring its successful and timely implementation. V. Mitigating Jet-Fuel Cost and Price Volatility Fuel is by far the industry’s largest and most volatile cost, hitting a record high last year and a new record high this year. A swing of just a few cents can mean the difference between a year in the red and a year in the black. Unfortunately there is no silver bullet to mitigating commercial jet-fuel price volatility. The United States should adopt a multipronged approach that involves expediting the most cost-beneficial elements of NextGen, including deployment of performance-based procedures; increased domestic production of fuels; and continued research and development into alternative aviation fuels. In the near-term, record-high commercial jet-fuel costs could be reduced by repealing the 4.3-cent-per-gallon commercial jet-fuel tax, which costs the industry about $400 million per year. All other transportation modes managed to have the tax – which was intended to be a temporary deficit reduction measure – repealed. ********************************************** Without the adoption of a National Airline Policy, a critical sector of the U.S. economy will continue to wither. There is precedent for such inaction – the U.S. maritime industry. From its height more than 60 years ago, the U.S. maritime industry has shrunk to a tenth of its former size, and carries just 2 percent of total world tonnage today. The reasons cited for the decline of the maritime industry sound all too familiar – harmful U.S. tax policies, overregulation and enhanced competition from foreign carriers. Better precedent exists for changing course and getting it right, as we did with the U.S. freight railroad industry, which was failing 40 years ago. As a result of the three comprehensive reform bills that were enacted in the1970s, the U.S. freight rail industry – in direct contrast to the U.S. airline industry – has been sustainably profitable – and is now the most efficient and cost effective rail system in the world. A4A and its member airlines are ready and willing to work collaboratively with the United States on our nation’s priorities for the future, using all the good work that has already been done to address the aforementioned challenges facing the airline industry. Through a National Airline Policy, the United States can put a regulatory and tax structure in place that will enable our industry to function as a business, be sustainably profitable, create jobs and grow the economy. Sincerely, Nicholas E. Calio cc: Mr. Reince Priebus, Chairman, Republican National Committee The Honorable John Hoeven, Co-Chair, Committee on Resolutions The Honorable Marsha Blackburn, Co-Chair, Committee on Resolutions Ms. Elise Stefanik, Policy Director, Platform Committee _________________________________________________________________ ^[1]The departments of Agriculture, Homeland Security, Transportation and the Treasury. ^[2]Animal and Plant Health Inspection Service, Customs and Border Protection, Environmental Protection Agency, Federal Aviation Administration, Immigration and Customs Enforcement, and Transportation Security Administration. ^[3] See Consumer Regulation and Taxation of the U.S. Airline Industry, Estimating the Burden for Airlines and the Local Impact, American Aviation Institute (Nov. 16, 2011). ^[⁴^] See http://www.state.gov/e/eb/tra/ata/index.htm. ^[⁵^]49 USC § 40101(a)(15)). PubZone2	A4A advocates measures to support aviation safety, security and well-being.