Remarks to the Aero Club of Washington

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

	Remarks to the Aero Club of Washington
	PubZone1 Nicholas E. Calio, President and CEO Air Transport Association Remarks to the Aero Club of Washington Washington, DC October 18, 2011 I appreciate the opportunity to be here with the Aero Club today to talk about what, in the last nine months, has been my job, and has become my passion and my frustration. The state of the airline industry in the United States and government’s role in it. On the day my appointment was announced, the former Chairman of the Board of Citigroup, Sir Win Bischoff, e-mailed me. It read: "Dear Nick: I have always trusted your judgment. I read today that you are leaving the financial services industry for the airline industry. Shrewd move?" A lot of people expressed the same sentiment. But, I did my due diligence. I knew the airline industry was financially challenged, often unpopular with politicians and underappreciated by the public it transports. But, I also knew that I loved to fly and that airplanes got me where I wanted to go farther, faster and more efficiently than any other mode of transportation. And, like anyone else in this room over the age of 50, I have experienced first-hand in my lifetime, how traveling by air has gone from being the privilege of the few and well-off, to transiting masses of people of all income levels; from being a luxury to being a necessity for getting from one place to another for leisure travelers; and, absolutely pivotal for business people doing their work both nationally and globally. Airlines truly are the physical Internet. But, what I really did not understand, or appreciate, was the degree to which the industry has been mired in a rut of government neglect, and sometimes misguided, and sometimes downright punitive, policy actions for years and years. Nor did I know the degree to which various stakeholders recognized the industry’s predicament and talked – for years and years – about the key issues – without successfully executing practical steps forward to really address the problems. I like to call this the Groundhog Day phenomenon. You remember that movie with Bill Murray where he gets forced to relive the same scene over and over again? Well, in the industry, we are forced to keep talking about the same challenges over and over again with the same nonoutcome. So, after I had been at ATA a few months, we decided that our overarching strategy had to be to pursue a National Airline Policy… a comprehensive approach to putting the airline industry in a position to first survive – and second, thrive, in keeping with the fundamental role it plays in the U.S. economy. Significantly, the playbook for a National Airline Policy already exists. It was written by three federal panels that have reviewed the challenges confronting the airline industry in the United States. I know that a number of you in this room were involved in their development. The National Commission to Ensure a Strong, Competitive Airline Industry, chaired by former Virginia Governor Gerald Baliles, in 1993; The National Civil Aviation Review Commission, chaired by former Secretary of Transportation Norm Mineta, in 1997; and, most recently, Secretary LaHood’s Future of Aviation Advisory Committee. These panels proposed solutions that were strikingly similar: Reduce the industry’s tax burden; Expedite the implementation of a satellite-based air traffic management system; Expand access to rapidly growing global markets; and Enable the U.S. airline industry to attract investment. Despite the availability of these blueprints, ATA wanted to have our own basic research to back up the strategy. One of our members generously commissioned a very deep dive on the fundamentals of the industry and turned the research over to ATA. Armed with 700 pages of research, we reduced it to a manageable narrative designed to begin to educate Members of Congress and other policymakers that the airline industry in the United States is at an inflection point that requires positive action from those who write laws and issue regulations…starting now. We hold no illusions. This was – and is – going to be a long campaign conducted mostly on a retail basis. And, it is like a political campaign in which politicians are consigned – by necessity – to making their key points over and over again. The facts are – or should be – compelling. Let’s start with the basics. The aviation industry is a critical driver of U.S. economic activity. It drives $1.2 trillion dollars a year – over 5 percent of the United States Gross Domestic Product – and provides over 10 million well-paying jobs. Of the industries that contribute the most to our economy, these statistics make aviation number three, right behind energy and farming. In the United States, we transport more than two million passengers a day – connecting people and products to places both in the United States and abroad for family, leisure and business purposes more efficiently than any other mode of transportation. U.S. airlines also move 50,000 tons of cargo per day – these goods and exports by air are 130 times the value of exports transported by sea and, at nearly $400 billion in value, constitute nearly one-third of the total value of U.S. exports. With all that, of the 53 principle industries that make up the nation’s economy, airlines are dead last in profitability, according to Fortune Magazine. Between 2001-2010 the U.S. airline industry: lost $55 billion; suffered through 41 bankruptcies; and lost 160,000 jobs, one-third of the entire U.S. airline workforce The results, for the airlines, their employees, their shareholders and consumers, have been considerable and wrenching. The financial difficulties resulted directly in cuts in both employment and air service. The cause is something that apparently eludes many of our policymakers. I don’t want to go too Financial Services on you, but it’s Economics 101: Reduced earnings translate to a lower Return on Invested Capital (ROIC) A lower ROIC compels management to pursue ways to improve it, most often by shorting investment back into the business In the case of the U.S. airlines, reduced investment in the business has manifested itself in the form of less air service, fewer jobs, delayed fleet renewal and reduced in-flight service options. That meant not only those 160,000 people losing their jobs, it meant a 10 percent reduction in domestic seating capacity over the last four years. America’s airlines, in the face of this environment, have done everything they can to reduce costs and make a profit. As a result, we have the lowest unit costs in the world. It’s still not enough and a significant part of the answer is the legislative and regulatory climate. I said earlier that the airline industry in the United States is at an inflection point that requires positive action from those who write laws and issue regulations. Instead we have gotten just the opposite in too many cases. I’m going to leave regulation alone for today. Instead, I’m going to focus on legislative proposals – specifically taxes. The President has been talking daily about doing everything possible to create jobs – a goal supported on a bipartisan basis on Capitol Hill. He also has talked about doubling exports by 2014. Yet, while talking about those goals, he has proposed two job-killing, growth-destroying tax increases on airlines and our passengers. When the President announced his proposals, he said, “we need a tax code where…everyone gets a fair shake and everyone pays their fair share.” He went on to say the tax code should “give an advantage to companies that invest and create jobs right here in the United States” It’s not just the President. These proposals are part of the Super Committee’s deliberations and, these types of taxes have had some Republican support in the past on the notion that they could be viewed as a user fee and be passed on to customers. However you judge them, no matter what you call them, the airline tax-increase proposals make no sense whatsoever. The airline industry leads all other businesses in the United Sates in two measures. We have the lowest returns of any industry – and we have the greatest number of stand-alone taxes and fees imposed by the federal government – 17 in all. Airlines are among the highest federally taxed industries in the United States. Federal taxes and fees already account for $61 – or 20 percent – of the cost of a typical $300 domestic round-trip ticket. Moreover, airfares have not even kept up with inflation. When adjusted for inflation, the average round-trip domestic fare actually fell 43 percent, from $559 in 1979 to $316 today. The Administration wants Congress to double the passenger security tax to $5 per one-way trip, and triple the tax to $7.50 by 2017. Paying more doesn’t necessarily mean safer travel. There is no clear plan of how security will be increased, nor is there any accountability for whether the additional resources are used efficiently or effectively. More to the point, the bulk of the new tax increases would go to deficit reduction, not security. Even further to the point, it also does not explain why someone choosing to fly from point A to point B should make a contribution to the deficit reduction, when someone driving, or sailing, or riding the train or the bus from point A to point B contributes nothing? The Administration also has asked Congress to impose yet another stand-alone tax on aviation – number 18 – a mandatory $100 charge for every airplane departure whether carrying passenger or cargo. These taxes combined would cost airlines and our customers $36 billion over the next 10 years. On an industry that in 2010, its first profitable year in some time, collectively made a 2.1 percent profit totaling $3.6 billion. The real point here is that it makes absolutely no sense – For any reason/for any purpose for the Administration or the Congress – to impose two huge tax increases on airlines and our passengers while others profitable industries and competitors are left untouched. No other form of transportation bears the cost of federal security; not railroads; not cruises or maritime; not the DC Metro system; not the NYC subway; not Amtrak. Amtrak is a good example. It and its passengers neither pay for security nor the full cost of their ticket. Every Amtrak customer’s ticket is partially subsidized by federal-taxpayer dollars. So, what is fair about $36 billion in new taxes on airlines and their passengers? It’s not fair. It’s about the fact that we are, for the government, an efficient collection agency that allows policymakers to be shielded from the tax increases they impose? These proposed taxes have sometimes been described as “low-hanging fruit.” We have been meeting with members of the Administration, the Congressional Leadership and the Super Committee to convince them that further taxes on the airlines and our passengers should be forbidden fruit. As it was for Adam, one more bite at the apple has very serious consequences. Airline tickets are priced to sell. No airline wants or can afford empty seats in the sky; the basics of the industry are matching supply to demand – at prices customers will pay and that at least (hopefully) cover costs. Airlines in the United States have not covered our costs. We have been flying passengers for less than it costs us to get them there. Airlines will have no choice but to offset the higher taxes by trying to adjust air fares or reducing service. “Price elasticity,” a concept most of our policymakers don’t seem to understand, makes it extremely difficult for airlines to pass on additional costs to passengers. It is probably one of the biggest misconceptions about the industry: that an airline can simply increase a fare by even a few dollars without impacting demand. This is particularly true in small communities, some of which are served by airplanes with as few as nine seats. A departure fee of $100 on such services cannot be sustained or simply passed on to passengers – especially since those passengers would already be paying more due to a doubled security fee. Reductions in service will hit the less-profitable routes and smaller and rural communities the hardest. Reductions in service correlate directly to job loss. Simple equation – fewer flights require fewer crews onboard, fewer employees at the airports and in back-office support. The domino effect continues as jobs and businesses associated with the airlines and airports, such as vendors and hospitality, are impacted. Reductions in service correlate directly to the viability of an airport – and importantly, the community it serves. There isn’t a town, city or state for that matter that is not concerned about the level of air service connecting them to the national and global economy. Mayors get it. Governors get it. Businesses have choices where they locate their headquarters and facilities – they certainly get it. You have to say this: These tax-increase proposals have accomplished what everyone in this room knows is near impossible…uniting the entire industry. The airlines, the unions, employees, airports and our customers are aligned in opposing these tax increases. I hope you have seen our ATA ads. They state the facts and consequences simply: Add taxes, add costs Add taxes, lose jobs Add taxes, lose service We have launched a website, urging visitors to e-mail and tweet their elected officials to tell them why this tax is wrong. We have more than 40,000 Facebook fans. We’re gaining momentum because people understand that this proposal is bad: It will kill jobs and cost service. We need to take a step back and form a new understanding, with the Administration, members of Congress and regulators and our industry partners, based on this country’s need for strong and healthy airlines that can support economic growth and job creation. A National Airline Policy. The government can continue its current treatment of airlines, which will ensure the U.S. industry, continues to contract. There is precedent for ignoring market realities and the implications for economy, and that is 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. It sunk beneath a pile of regulation and taxation. Better precedent exists for changing course and getting it right. The U.S. railroad industry was failing 40 years ago. Then, from 1970-1980, Congress passed three laws that put U.S. railroads on the right track and the industry was able to move from worst to first. These are actually good comparisons, as like maritime and rail in the past, airlines today have tax and regulatory mandates and restrictions that are unheard of for other industries. Through a National Airline Policy, the government can put a regulatory and tax structure in place that will enable the airline industry to function as a business, be sustainably profitable create jobs and grow the economy. A couple of weeks ago at the International Aviation Club, I talked about governments in other countries that view airlines differently; seeing airlines as a growth enabler and as a strategic asset. To be relevant in the 21st century, every country that wants to be competitive in a dynamic global market will need access to the most efficient physical connections across a worldwide aviation network. This would be a good time for our government to take note and step up into a leadership position to ensure the future role of aviation for the United States. PubZone2	A4A is a leading source for key aviation information.