Thank you, Mr. Chairman, Senator Hollings. I am Jim May, President and CEO of the Air Transport Association of America.
Security has become a principal focus for all of our members - passenger and cargo airlines, traditional network airlines and point-to-point carriers. Indeed, it would be difficult to overstate the degree to which security has become central to U.S. airline operations. This morning I’ll give you a snapshot of security in aviation today, and then address the impact of aviation security on the industry.
The level of security today, in our view, is better than it ever has been. An extensive array of initiatives provides a robust, layered security system to defend passenger and cargo aircraft from acts of terrorism, as our written statement describes in detail. Overall, DHS and TSA are doing a very good job executing their mission. While we may not always agree with their decisions and choices, they have made great strides in protecting America. The summer travel season, with increased passenger volumes, will give TSA an opportunity to demonstrate if it has made the right adjustments to meet a ten-minute standard for processing passengers through check-point security.
The impact of the new security paradigm is best understood when put into context. To do that, I would like to offer some observations.
The first observation is that aviation security is a function of national security. This principle was a foundation of the Aviation and Transportation Security Act – ATSA. The Conference Report accompanying ATSA states:
"The conferees recognize that the safety and security of the civil air transportation system is critical to the security of the United States and its national defense, and that a safe and secure United States civil air transportation system is essential to the basic freedom of America …"
Unfortunately, we continue to face a threat of terrorism aimed at bringing down our political and economic institutions with the ultimate goal of critically harming our country; the airline industry is one such institution.
That said, let me briefly review the impact of post-9/11 security measures on the industry. I will give you the facts as we know them – without judgment or characterization – concerning three specific areas: Fees, Foregone Revenue and Out-of-Pocket Mandates.
Fees. Airlines and their passengers pay four separate fees that help fund DHS operations. Our preliminary CY 2004 projections for these fees are $1.59 Billion from the September 11th Fee, $315 million from the ASIF, $464 million from the INS Inspection Fee, and $209 million from the Customs Inspection Fee. This comes to a total of $2.5 billion in direct fee payments.
Foregone Revenue. Certain security requirements, including freight and mail restrictions, and seats for air marshals, prevent airlines from collecting revenue from business operations. These items will total an estimated $518 million this year.
Out-of-Pocket Mandates. Several regulatory mandates, which we have broken down into eight separate categories, impose additional security costs that the airlines pay for. These unreimbursed expenditures will reach an estimated $739 million in CY 2004.
Taken together, the fees, foregone revenue and unfunded mandates on the industry will have a total estimated impact of $3.8 Billion in CY 2004. To the best of our knowledge, no other transportation sector – indeed, no other U.S. industry – subsidizes national defense like the airlines.
Mr. Chairman, this is the current security reality of the airline industry. But there are even more costly measures in the works.
MANPADS countermeasures, for example, are being studied, and their deployment seems to be almost a foregone conclusion, which causes us great concern. Acquisition, installation and maintenance we estimate will cost as much as $100 Billion over 20 years, and that is not even the highest estimate out there. Other potential mandates include pass-through costs representing each airport’s share to acquire and install in-line EDS equipment, costs associated with the airport opt-out program for passenger screening; CAPPS II; expanded cargo security requirements; and the US VISIT program, to name a few.
The simple truth is that the airline industry shoulders extensive post-9/11 security-related mandates, and related security taxes and fees. We understand and expect to contribute; to bear some reasonable share of the costs of aviation security. My point, however, is that it is time for Congress to review the frequency and magnitude of what the industry is being asked to bear. The Federal government cannot continue to impose new unfunded mandates and new exactions on airlines and expect this industry – which is pivotal to the national economy – to survive, much less prosper and grow.
President Bush’s former senior economic adviser, Larry Lindsey, said it quite well in an April 2003 letter to the Wall Street Journal:
"September 11 necessarily increased the number of unfunded mandates on air travel. Obviously security is a prime concern. …Any industry requires sensible regulatory and tax policies to survive. Setting up a workable regulatory and tax framework for the nation’s airlines should be a top priority. The status quo won’t fly."
Coming full circle, if aviation security truly is a function of national security, then it is time for Congress to take a hard look at the level of excise taxes, unfunded mandates and related impositions placed on the U.S. airline industry to pay for aviation security. We firmly believe that these costs should be funded in the same manner as other national defense priorities.
The appropriators in both Houses rejected the Administration’s effort to increase the ASIF by some $435 million, and we greatly appreciate that action, as well as the support of our unions. It was the right thing to do, and we are hopeful that it marks the beginning of a new trend.
Our written statement addresses in detail numerous other issues I have not touched on in this testimony. These include war-risk insurance, the importance of CAPPS II, implementing a registered traveler program, screener levels and TSA’s summer plan. I am happy to answer any questions on these or other matters.