ATA Testimony by CEO Jim May before the House Energy and Environment Subcommittee on Airlines' on Climate Change Commitments

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

	ATA Testimony by CEO Jim May before the House Energy and Environment Subcommittee on Airlines' on Climate Change Commitments
	PubZone1 June 9, 2009 INTRODUCTION ATA airline members transport more than 90 percent of all U.S. airline passenger and cargo traffic.1 Our airlines take their role in controlling emissions very seriously. Recently, there has been a great deal of focus in Congress on greenhouse gas (GHG) emissions in particular, and how this nation might achieve reductions in these emissions while maintaining economic stability and enhancing energy independence. Commercial aviation has a vital role to play in this regard. Thus, I appreciate this opportunity to provide our input to the subcommittee discussions regarding climate change policy. Specifically, I call to the attention of the subcommittee our airlines’ exceptionally strong fuel and GHG efficiency record and our commitment to continued improvements. I ask the subcommittee to support our initiatives, through modernization of the air traffic control system, including infrastructure and equipage investment, support for aviation alternative fuels, and restoration and enhancement of NASA and Federal Aviation Administration (FAA) funding for aviation environmental research and development. At the same time, I ask that Congress “do no harm” to the airlines’ ability to continue to invest in the technologies and operational enhancements that will allow us to continue to progress. Unfortunately, the American Clean Energy and Security Act of 2009, as currently crafted, would do significant harm to this industry and its initiatives. The cap-and-trade system would apply to our purchase of jet fuel, essentially operating as an additional, exorbitant tax on this fuel. While high fuel prices and volatility already threaten this industry and the nation’s economy, application of this legislation – which does not offer any credit (or, in the language of the bill, “allowances”) to the airlines for their tremendous GHG record or take into account our critical role as a driver of the U.S. economy – would serve as an “anti-stimulus,” wiping out the steps that the government has taken to try to help this nation recover. There is a better way. In this testimony, I provide concrete suggestions for ways Congress can work with us in enhancing energy independence and environmental protection, while ensuring that the economy gets back on track. U.S. AIRLINES: GREEN AND GETTING GREENER, CATALYST FOR ECONOMIC GROWTH For generations, flying has contributed to a better quality of life in America. Commercial aviation has been essential to the growth of our economy, yielded breakthrough technologies, brought people together and transported critical cargo – all while achieving an exceptional environmental track record. No industry is better positioned to stimulate the nation’s economy while constantly enhancing its environmental performance. Today’s airplanes are not just smarter – they are quieter, cleaner and use less fuel than ever before – but we also fly them smarter. That’s why our industry represents just 2 percent of all GHG emissions in the United States (see Figure 1)2 while driving three times more economic activity – nearly 6 percent of the nation’s GDP. And we are not stopping there. The initiatives that we are undertaking to further address GHG emissions are designed to responsibly and effectively limit our fuel consumption, GHG contribution and potential climate change impacts, while allowing commercial aviation to continue to serve as a key contributor to the U.S. economy. For the past several decades, commercial airlines have dramatically improved fuel and GHG efficiency by investing billions in fuel-saving aircraft and engines, innovative technologies like winglets (which improve aerodynamics) and cutting-edge route optimization software. For example, between 1978 and 2007, the U.S. airline industry improved its fuel efficiency by 110 percent, resulting in 2.5 billion metric tons of GHG savings – roughly equivalent to taking 18.7 million cars off the road in each of those years.3 Further, data from the Bureau of Transportation Statistics confirms that U.S. airlines burned almost 3 percent less fuel in 2007 than they did in 2000, resulting in absolute reductions in GHG emissions, even though they carried 20 percent more passengers and cargo on a revenue-ton-mile basis. Commercial aviation’s GHG efficiency compares very favorably to other modes and other sectors. (See Figure 2). While commercial aviation improved its per-passenger fuel efficiency from 1990, freight trucks showed the reverse trend, with GHG emissions growing faster than vehicle miles traveled.4 EPA also has confirmed that passenger vehicles have lagged far behind aircraft in fuel and GHG efficiency.5 At the same time, commercial aviation is critically important to local, national and global economies, enabling a large percentage of U.S. economic output. A July 2007 study by the FAA found that the national economy is highly dependent on commercial aviation, which is directly or indirectly responsible for $1.1 trillion in U.S. economic activity (gross output), an estimated 9.5 million jobs and $322 billion in earnings.6 Placing our economic output side-by-side with our GHG output, it is clear that commercial aviation is an extremely GHG-efficient economic engine, bringing good “bang” for our GHG “buck.” And we are committed to continuing that performance. As a cornerstone of our energy and environmental initiatives, the ATA airlines are committed to achieving, at a minimum, a 30 percent improvement in fuel efficiency from 2005 levels by 2025, which would save another 1.2 billion metric tons of CO2, equivalent to taking another 13 million cars off the road each of those years. Airlines have an inherent economic incentive to reduce fuel consumption and the resulting GHG emissions because jet fuel accounts for a significant and volatile part of an airline’s operating budget. Indeed, fuel, long one of the two highest costs for airlines, is now our largest cost center, averaging between 30 to 40 percent of our costs – nearly $60 billion in 2008. This aligns our economic and environmental interests in conserving fuel. Along with environmental gains, stable energy prices are critical for a stable and viable airline industry, which begs for a committed energy policy of independence and alternative fuels. However, enormous amounts of capital and committed research and development are required to advance science and technology, all of which are essential to new sources of energy, further fuel efficiency gains and greater GHG reductions. CONGRESS CAN COMPLEMENT AVIATION'S INITIATIVES Rather than impose a punitive tax on the fuel necessary to operate our air transportation system, Congress should pursue initiatives that will enable airlines to continue to significantly reduce fuel consumption and GHG emissions. Without question, a healthy airline industry is better positioned to make the necessary investments in cleaner aircraft and new technologies. Real environmental gains can only be accomplished through the collaborative efforts of the government, aviation manufacturers, energy companies, airlines and other stakeholders working together. Congress should focus on three areas to complement our industry’s initiatives: First, it is critical that the implementation of the Next Generation Air Traffic Control System be accelerated (“NextGen” ATC will become “NowGen” ATC). Second, it is vital that an energy policy be adopted by government that provides for stable supplies, stable prices and independence from foreign oil, which also is more climate-friendly. In particular, alternatives to crude-oil-based jet fuels are imperative. Third, new airframe and engine technologies must be researched, developed and delivered. With the enactment of these three initiatives, air transportation will be even more fuel efficient, more affordable and more able to contribute to domestic economic and job growth. NEXTGEN: A SATELLITE-BASED AIR TRAFFIC CONTROL SYSTEM WILL REDUCE GHG EMISSIONS UP TO 15 PERCENT “NextGen” includes a wide range of technologies and procedures to transform today’s antiquated ground-based air traffic navigation and surveillance system to a state-of-the-art satellite-based system. The cornerstone of NextGen is ADS-B, or Automatic Dependent Surveillance-Broadcast, which uses satellite technology to allow an aircraft to constantly broadcast its position to other aircraft and air traffic controllers. When coupled with RNAV (“Area Navigation”) and RNP (“Required Navigation Performance”) navigation aids/procedures and other technologies, aircraft will fly more efficiently and the system will see tremendous environmental, safety and capacity improvements. Today’s antiquated ground-based systems add flight time because they do not route aircraft in a direct, linear fashion. Further, because today’s technology does not precisely pinpoint an aircraft’s position in space, a greater amount of time and separation must be factored in spacing flights apart. Utilizing satellite-based systems, the FAA and airlines will be able to route flights more efficiently, precisely and directly. This reduces flight miles, flight times, congestion and delays. Less aircraft time in the air and on the ground means significantly lower fuel consumption and GHG emissions. The time to act is now – accelerated ATC modernization is a doable, pragmatic way to address aviation emissions. Congressional and FAA leadership, sufficient government investment in incentives and proven technologies can transform the system in a matter of years, not decades. Projections of fuel consumption and GHG emissions reductions from full NextGen implementation are significant and range as high as 15 percent. ATC modernization should be a top priority, yielding measurable benefits for the environment, air travelers and shippers, and the nation’s economy. ALTERNATIVE ENERGY – A POTENTIAL GAME-CHANGER Today, the aviation industry is dependent on crude oil as its source of jet fuel. Unlike other sectors of the economy, airlines currently have no alternative but to consume such jet fuel. To address this, ATA supports a balanced and comprehensive national energy policy that increases U.S. energy independence and results in more predictable and stable energy supply and costs. ATA and other aviation stakeholders have taken the initiative to develop and deploy commercially viable, environmentally friendly alternative jet fuels through the Commercial Aviation Alternative Fuels Initiative (CAAFI). The federal government can assist the airline industry through the following actions: Certification assistance – A key step in alternative aviation fuel development is certification. Before the fuel can be approved for commercial use, it must meet rigorous safety and performance standards – much higher standards than fuel for ground-based transportation. Federal support is needed to accelerate the approval and deployment of several alternative aviation fuels that have already been developed and tested. Increased funding is also needed for ongoing U.S. military efforts to develop alternative and biofuels for military jet fleets that will transition to commercial fleets. Infrastructure investment – Considerable ground and flight testing has demonstrated that commercial aviation is coming closer to the widespread use of alternative aviation fuels. However, the economic slowdown has dried up investment dollars for already conceived pilot plants and full-scale production plants. Direct federal support for such infrastructure investments and greater support in the area of research and development, including the feasibility of pipeline use for biofuel transport, will allow the development plans to proceed. Environmental assurances – Alternative aviation fuels will succeed only if they are found to be economically viable and more climate-friendly than today’s aviation fuels. Direct federal investment is needed to develop criteria in test programs and models that will accelerate the deployment of alternative aviation fuels. AIRCRAFT AND AIRFRAME TECHNOLOGY As ATA and its members are pushing the envelope with existing technology, we continue to contribute to work that will advance new technology. For example, ATA participates in key, joint government/ stakeholder initiatives, including the Steering Committee of the Partnership for Air Transportation Noise & Emissions Reduction (PARTNER) and the Environment and Energy Subcommittee of the FAA Research Engineering and Development Advisory Committee. While additional evolutionary environmental improvements are in the pipeline as a result of such initiatives, revolutionary environmental breakthroughs can only come about through the reinstatement of significant federal investments in basic aeronautics research and development programs at NASA and FAA. Indeed, Pratt & Whitney’s new geared turbofan engine, which offers both noise and emissions benefits, as well as many features of Boeing’s more environmentally efficient 787 were spawned through such programs. As we have noted in other contexts, however, congressional funding to NASA and FAA for aeronautics research and development – specifically for environmental projects – has been cut significantly (by about 50 percent) in the past 8-10 years, compromising the public-private partnership for exploring and bringing to market products with significantly improved environmental performance.7 Thus, we continue to urge Congress to provide this needed funding, which also is critical to preserving America’s competitiveness in aeronautics. ONE-SIZE-FITS-ALL CAP-AND-TRADE SYSTEMS DO NOT FIT AVIATION We are confident that the measures ATA is undertaking and supporting will continue to limit and reduce aviation’s emissions footprint, such that commercial aviation will remain a very small source of GHG emissions. We are concerned, however, that economywide cap-and-trade systems, such as that proposed in H.R. 2454 – the American Clean Energy and Security (ACES) Act of 2009 – will be counterproductive to our efforts. As drafted, the bill proposes to cover the transportation sector, including aviation, indirectly, through a cap-and-trade system “upstream,” which would require fuel producers to acquire allowances sufficient to cover the GHG content of the fuel they sell to the transport sector. Fuel producers will incorporate the cost of these allowances into fuel prices, passing the costs on to fuel consumers (including airlines) – in effect, operating as a fuel tax on jet fuel and other transportation fuels. This would have significant economic repercussions on the airline industry and the economy, as every penny increase in the price of a gallon of jet fuel drives an additional $190-200 million in annual fuel costs for U.S. airlines. Application of the ACES legislation to aviation would result in exorbitant costs to the airlines. As currently styled, the legislation would provide no free allowances to aviation – so every drop of the airlines’ fuel and resulting emissions would have to be covered by allowances and fuel surcharges to the airlines. Based on the extensive fuel consumption data that commercial airlines (unlike most industries) long have been required to report to the federal government, and factoring in FAA forecast information, the annual costs to the U.S. commercial airlines of the ACES legislation in 2012 would be approximately $5 billion, assuming a $25 emissions allowance price. Using analysts’ estimates that emissions allowance prices likely will be in the $40 range by 2020, the annual costs to aviation would escalate to almost $10 billion in that year, and would grow thereafter. For an airline, higher fuel prices would negatively impact ticket prices, reduce service to both small and large communities and severely hamper the economic development associated with commercial aviation (i.e., travel and leisure businesses, aircraft manufacturing, airport-related jobs, etc.). Moreover, higher fuel prices associated with a cap-and-trade system would siphon away the very capital we need to continue the investments in technology, operations and infrastructure that have made us so fuel- and GHG-efficient today, essentially subsidizing industries that have done far less to improve their fuel efficiency. And these concerns become even more acute in light of the international market in which we operate. Based on our fuel- and GHG-efficiency records and commitments, application of a cap-and-trade bill to commercial aviation simply is unnecessary. As noted, we already are incentivized by the market to minimize GHGs, without further market-based measures. However, if such a measure is to be applied to aviation, there are several changes to the legislation that Congress should consider to lessen the detrimental impact the legislation would have on our industry. THE INTERNATIONAL CIVIL AVIATION ORGANIZATION: THE GLOBAL, SECTORAL APPROACH The International Civil Aviation Organization (ICAO), an agency of the United Nations, by treaty is charged with establishing standards and recommended practices for international aviation and fosters the planning and development of international air transport to ensure safe and orderly growth. Because of the inherently international nature of commercial aviation, the Kyoto Protocol expressly recognized that emissions from international aviation should not be included in national targets but should be addressed by ICAO. This is a clear acknowledgement that policies that work for other sectors do not always work for aviation, and that is particularly true for a challenge like climate change. Over the years, ICAO has continually adopted standards that have driven down aircraft noise and emissions. Moreover, ICAO has taken action on climate change. For example, it commissioned the first – and only – sector-specific climate change analysis by the IPCC and crafted guidance on state-of-the-art approaches to minimizing fuel burn and emissions. And ICAO is working on a set of recommendations to further limit GHGs from international aviation. Indeed, ICAO’s Group on International Aviation and Climate Change (GIACC), a 15-government (government-only) group charged with identifying additional GHG measures, recently announced a draft “action plan” in this regard. The ICAO Council (ICAO’s governing body), will consider the draft recommendations later this month, with ICAO expected to finalize a policy position at a special meeting scheduled for October 7-9, 2009. These recommendations then will be fed into the larger negotiations to replace the Kyoto Protocol taking place in Copenhagen in December 2009. Further, ICAO can also use its Assembly meeting in September 2010 to further flesh out the approach to international aviation and climate change if needed. In light of the unique aspects of the aviation industry – for example, that we (1) operate globally, with mobile assets, (2) by treaty, adhere to aircraft, engine, safety, noise, emissions and other standards set by ICAO, (3) have perhaps the most rigorous safety standards of any industry, which limit some of the options for “tailpipe” type emissions controls, among other factors – we believe that our industry is a poster child for a global, sectoral approach through ICAO. To ensure that that aviation is not subject to conflicting and overlapping international and domestic requirements, we respectfully request that Congress acknowledge and defer to work of ICAO. MONEY SHOULD BE REINVESTED IN CARBON-REDUCING AVIATION INITIATIVES As indicated above, the competitive nature of the U.S. airline industry – and the significance of fuel in the operation of airlines – provide a strong and inherent incentive for airlines to increase efficiency, burn less fuel, and emit less carbon. The industry has a proven track record of efficiency improvements over the past 30 years and removing financial resources from the industry will only serve to make it more difficult for airlines to get cleaner. For this reason, it is imperative that if a cap-and-trade regime or other economic measure is applied to the airline industry, monies collected (in the form of fuel surcharges or otherwise) be returned to the industry in ways that will assist it in reducing emissions. This certainly includes assistance in: Retiring old, less efficient aircraft with newer and cleaner models; Assisting airlines in retrofitting existing planes with new avionics, airframe components and engines; Greatly accelerating the development, certification, and commercialization of low-carbon alternative jet fuels that will work with existing engines and infrastructure; and Fast-tracking the implementation of a satellite-based, 21st century air traffic control system that greatly improves the efficiency of all aviation in this country. As noted, projections of fuel savings and GHG emissions reductions from full NextGen implementation are as high as 15 percent. SAFETY VALVE The ACES legislation directs the Environmental Protection Agency to create a “strategic reserve” of emission allowances by setting aside a small number of allowances from each year’s tonnage limit. It also establishes rules for releasing allowances from the reserve and for refilling the reserve if allowances from the reserve are sold. Clearly, this strategic reserve is intended to dampen price volatility that will almost certainly occur within the carbon allowance/offset market. While ATA commends the Energy & Commerce Committee for its acknowledgement that this is a significant issue, the mechanism that the bill seeks to implement is insufficient to address the type and degree of volatility that an industry like the airlines likely will face, in light of the link between the oil and carbon markets. Congress should address this with sector-specific provisions. Specifically, ATA supports a mechanism that would allow for the free issuance of allowances, specific to the transportation fuel market, if the aggregate price of liquid fuel plus allowances, in any combination, exceeds a certain threshold. (Alternatively, rather than providing free allowances in such a case, the mechanism could waive the requirement for allowances to cover the portion of fuel and emissions over the threshold). Such a “safety valve” feature is needed to prevent volatility in the oil and/or carbon markets from driving costs above and beyond reasonable market levels, which would threaten the airline industry and the economy alike. APPROPRIATE CREDIT FOR THE AIRLINES' ACHIEVEMENTS- ALLOWANCES AND TRANSPARENCY The specific topic of the subcommittee’s hearing is on the allocation of allowances – particularly free allowances – under a cap-and-trade scheme. As noted above, as currently styled, the ACES legislation would not provide any free allowances to the airlines. While the airlines should not be covered in a cap-and-trade system at all, should such a system be applied, the airlines should be given free allowances to cushion the economic blow of the system and in recognition of the airlines’ tremendous fuel- and GHG-efficiency record and commitments. As approved by the Energy & Commerce Committee, the ACES legislation would give 2 percent of available allowances to certain fuel providers. Some have suggested that this would benefit their downstream customers – such as those who purchase gasoline for their cars and airlines that purchase jet fuel to fly. Unfortunately, however, there are no mechanisms in the legislation mandating a pass-through of the benefits of any such allowances to the airlines. Further, there are no requirements that the fuel providers be transparent in the costs they charge, so the airlines will have no way of separating the costs of the fuel product from the costs of the GHG-allowance-related fuel surcharges. This should be remedied. The best way would be for Congress to directly provide the airlines with free allowances. Alternatively, if Congress maintains the “upstream” approach to both coverage and allowances, it should mandate that fuel providers pass on the benefit of free allowances to the airlines. In any event, if an upstream approach is maintained, Congress should require the fuel providers to be transparent in the costs they charge the airlines. FEDERAL PREEMPTION Currently, states and localities are largely preempted from regulating most aspects of U.S. commercial aviation, particularly with respect to the aircraft. This makes sense: if states and local governments could assert jurisdiction-specific requirements on aircraft or air services, the patchwork quilt would prevent us from being able to fly from state to state and city to city. This principle supports full preemption of all state authority to impose regulations on the emission of GHGs from aircraft and air services. Moreover, climate change is not a localized issue, but a global one. GHG emissions in a certain city or state do not cause unique environmental challenges for that locality because of where the emissions occurred. Thus, there is no environmental rationale for allowing local standards, while there are compelling reasons for federal preemption. CONCLUSION I close by asking you to note the achievements that commercial airlines have made in reducing fuel burn and GHGs, particularly when compared to other industries, and the actions that we are taking to continue our progress in this regard. While we are fully committed to working with Congress and are asking for congressional leadership and support in each of the areas I have described, we are not asking you to work for us, we’re asking you to work with us in addressing these environmental, energy and transportation concerns. This includes ATC modernization, which is a critical path to environmental improvements for aviation. We also are urging you to refrain from adopting policies that would work against our efforts. A vibrant, competitive and efficient aviation sector is a key part of the solution. It is not an impediment to creating a strong economy, freeing ourselves from foreign oil, and creating a cleaner, greener, healthier planet. [1] ATA airline members include ABX Air, Inc., AirTran Airways, Alaska Airlines, Inc., American Airlines, Inc., ASTAR Air Cargo, Inc., Atlas Air, Inc., Continental Airlines, Inc., Delta Air Lines, Inc., Evergreen International Airlines, Inc., Federal Express Corporation, Hawaiian Airlines, JetBlue Airways Corp., Midwest Airlines, Southwest Airlines Co., United Airlines, Inc., UPS Airlines, US Airways, Inc.; Associate members are: Air Canada, Air Jamaica Ltd., Mexicana. [2] EPA, Inventory of Greenhouse Gas Emissions and Sinks: 1990 -2006 (April 15, 2008) (hereinafter EPA GHG Inventory 1990-2006) at pages ES-4 and 21 (“in 2006, total U.S. greenhouse gas emissions were 7,054.2” teragrams of carbon dioxide equivalent (Tg CO2 Eq)) and Table 2-15 at pp. 2-22 & 2-23 (“Commercial Aircraft – Domestic” account for 143.6 Tg. CO2 Eq.) [3] Fuel-savings numbers are from Bureau of Transportation Statistics data. Carbon dioxide savings and equivalencies were calculated using EPA tools at www.epa.gov/cleanenergy/energy-resources/calculator.html. [4] EPA GHG Inventory 1990-2006 at 3-8. [5] Id. [6] See FAA, The Economic Impact of Civil Aviation on the U.S. Economy (July 2007). [7] While later funding cuts were even more drastic, a 2002 study by the National Academy of Sciences observed: In constant year dollars, NASA funding for aeronautics research was cut by about one-third between 1998 and 2000, reducing the breadth of ongoing research and prompting NASA to establish research programs with reduced goals, particularly with regard to TRL (technology readiness level). This significantly reduces the likelihood that the results of NASA research will find their way into the marketplace in a timely manner, if at all. The ultimate consequence is that the federal expenditures are inconsistent with the long-term goal of support for an aviation enterprise compatible with national goals for environmental stewardship. See National Academy of Sciences, Committee on Aeronautics Research and Technology for Environmental Compatibility, For Greener Skies: Reducing Environmental Impacts of Aviation at 44 (2002). PubZone2	A4A advocates measures to support aviation safety, security and well-being.