Federal Aviation Administration Financing Proposal

Statement of James C. May

President and CEO

Air Transport Association of America, Inc.

before the

Subcommittee on Aviation

of the

House Committee on Transportation and Infrastructure

March 21, 2007

All who are interested in the future of civil aviation in our nation are witnessing a historic convergence of factors that will shape aviation for decades to come – the closely approaching deadline to enact reauthorization legislation for the Federal Aviation Administration (FAA), the undisputed imperative to modernize the ATC system, and the well-recognized need to return to an ATC funding mechanism that matches the costs that users impose on the system with the fees that they pay for ATC services. The inescapable reality is that the ever-growing demand of passengers and shippers for air transportation cannot continue to be met by an ATC system that was introduced in the mid-20^th century and that relies on a decades-old funding scheme that has strayed far from its original intent.

The stakes are enormous; the public-interest considerations are clear; and the need for prompt, decisive action is undeniable.

Overview

The benefits of a modernized and equitably funded ATC system will be considerable and widely distributed throughout our society:

• Safety – Will provide more precise information about aircraft locations, both in the air and on the ground, and will enable aircraft to constantly know one another’s locations.
• Passengers and Shippers – Will ensure needed growth in capacity to satisfy customers’ expanding demands for air service.
• ATC System Users – Will enable the ATC system to continue to accommodate all users – general aviation, corporate aviation, airlines and the military – and to do so more efficiently than today; careful project justification will assure stakeholders that modernization projects are necessary and their costs are contained.
• FAA – Will assure a stable, predictable revenue stream, thereby enabling the orderly and efficient transformation of the ATC system.
• Equity – Will assure that each user pays its fair share but no more, unlike today where airlines pay for 94 percent of Airport and Airway Trust Fund (AATF) revenues but only account for 69 percent of all flights.
• Environment – Will reduce aircraft emissions through fuel conservation that more efficient flight paths and separation standards will achieve.
• Communities – Will promote air service to communities, large and small, and the economic benefits that flow from being linked to the air transportation system.
• U.S. Economy – Will assure that the economy continues to benefit from air transportation’s ability to move people and goods quickly and economically.

What We’re Not Saying

Rhetoric sometimes does not coincide with reality in the ongoing debate about FAA reauthorization legislation. We want to make a few preliminary points to set the record straight:

• We are not saying that piston-powered general aviation aircraft should pay the same as turbine-powered aircraft. Piston-powered general aviation aircraft generally fly at different altitudes than turbine-powered aircraft and therefore often impose no or few demands on ATC system resources. Any funding mechanism should reflect that difference, just as it can reflect the difference between daytime and nighttime operations.
• We are not saying that small communities should be left to fend for themselves. Small communities have unique air service needs. Reauthorization legislation should recognize those needs in its funding and Essential Air Service (EAS) program provisions.
• We are not saying that Congress should end its role of guiding the direction of the air traffic control system. We are not trying to strip Congress of its role of overseeing ATC funding decisions. On the contrary, we are upholding Congress’ historic view that funding should be cost based.
• We are not saying that the air traffic control system should be privatized. The ATC system must be modernized and its funding mechanism reformed but the FAA should continue to be the supplier of air traffic control services. Modernization and reform should not be equated with privatization.
• We are not saying that airlines should control who has access to the nation’s airspace. Instead, we are saying that unless the system is modernized and a sound funding mechanism for it is created, capacity constraints will increasingly limit the access of all users – general aviation, corporate aviation, airlines and the military.

The Indispensable Role of the Airline Industry in the U.S. Economy

The U.S. airline industry is not simply an important sector of the national economy; its services fuel our entire economy. Air transportation is an indispensable element of America’s infrastructure and our nation’s economic well-being. Individuals, businesses and communities depend on the national air transportation system. U.S. airlines transport more than two million passengers on a typical day and directly employ 550,000 persons to do so; they provide just-in-time cargo services; they are the backbone of the travel and tourism industry; and airlines link communities throughout our nation and to the world.

Moreover, the airline industry is the foundation of the commercial aviation sector, which is comprised of airlines, airports, manufacturers and associated vendors. U.S. commercial aviation ultimately drives $1.2 trillion in U.S. economic activity and 11.4 million U.S. jobs. By any measure, the U.S. airline industry is a valuable national asset and its continued economic health should be a matter of national concern.

We also recognize how critical air service is to the small communities of our nation. For that reason, we firmly support the continuation of a strong Essential Air Service program. Any reauthorization needs to include such a continuation.

This key element of our nation’s infrastructure cannot sustain its vital role of transporting people and goods if the government infrastructure that it depends upon, the ATC system, becomes an impediment. Air transportation risks becoming a wasting national asset if three of its most distinguishing characteristics – speed, dependability and efficiency – are encumbered by an increasingly obsolescent ATC system.

Today’s Air Traffic Control System Is Shortchanging Our Future

The current system is based on 1950s architecture. It was cutting edge during the era of Ozzie and Harriet but not today. Although the ATC system in the past has served users well, this outdated infrastructure cannot meet the operational needs of 21^st century civil aviation. It will not be able to serve the needs of passengers and shippers, private pilots, and corporate aircraft or accommodate the ongoing introduction of unmanned aerial vehicles.

The current ATC system relies on a series of ground-based platforms. Navigational aids, radar and controllers are all terrestrial. They are linked to form a very complex network system that supports airways, through which aircraft fly. The system was designed to create point-to-point routings, which by their very nature are finite. Its components reflect that paradigm.

Airways, unfortunately, increasingly resemble many highways – they have become saturated. What we have come to realize is that the ground-based system that supports point-to-point airways cannot produce substantial new capacity. We have no choice but to introduce new technology to generate needed capacity.

Obsolescent ATC technology and the operating procedures that are tied to them mean that many aircraft routings – for airline, corporate and general aviation aircraft – are inefficient and will become increasingly so as we move further into the new century. Because of these inherent technological limitations, today’s ATC system cannot – and never will be able to – take full advantage of available technology or integrate and fully exploit emerging technology. Potential capacity enhancements and efficiency improvements, so critical to meeting growing air traffic demand and responding to environmental concerns, will remain unrealized unless the ATC system is promptly and thoroughly transformed.

Imperiling needed improvements is the fact that the ATC system’s funding mechanism is a relic of 1970. Such an artifact has no place in the 21^st century. It was created when corporate and general aviation aircraft were insignificant users of the system. This is no longer so. Today corporate and general aviation consume 26 percent of the system’s services but contribute only 6 percent of Trust Fund revenues.

As Secretary of Transportation Peters said recently, “Under the current tax structure, it is clear that taxes paid by different user categories do not generally reflect the costs those users impose on the system.”¹ Corporate aircraft will use an even greater proportion of system resources in the future as thousands more business aircraft and very light jets (VLJs) are introduced. Funding for a modernized ATC system must reflect that changed – and changing – reality.

What Delays Cost Today

Airlines schedule their flights based on demand; i.e., when people want to fly and when cargo needs to be delivered. Airlines don’t create that demand, customers do. Aviation infrastructure must respond to what consumers want.

The Department of Transportation has estimated that in 2005 the cost of delays to U.S. airline passengers was $9.4 billion. The cost to airlines is also tremendous. Every minute of flight delay experienced in 2005 imposed an estimated $62 in direct costs on airlines. The 94.1 million cumulative delay minutes in 2005 therefore generated $5.9 billion in costs to the airline industry and a total projected cost to the U.S. economy of $15.3 billion. Expressed differently, 2005 delays cost $484 per second.

ATC system capacity must be dramatically expanded – and soon. Flight delays, as noted above, are bad today and they will get worse. The current system cannot handle what is coming. ATC system users and the ultimate beneficiaries of aviation services – travelers, shippers, businesses and communities – need an air traffic control system that can make the most of contemporary technology.

“Airlines don’t create that demand, customers do.
Aviation infrastructure must respond to what
consumers want.”

The Need for Immediate Action

Secretary of Transportation Peters only five weeks ago said, “The current aviation system simply cannot handle future traffic increases without major delays, making system transformation necessary.”² The Secretary’s assessment is indisputable. The nation’s airways will become more and more congested as increasing demand, particularly from rapidly rising numbers of corporate and VLJ aircraft, overwhelms existing capacity.

The best estimates inform us that, without prompt and thorough modernization, the ATC system will progressively asphyxiate. More and more airports and more and more airspace will become congested, increasingly choking civil aviation in our country. Gridlock will become a common word in aviation parlance.

Numbers starkly tell the story. The FAA projects that one billion passengers will be enplaned in 2015, up from nearly 750 million enplanements in 2006. That projection reflects an unabated demand for air transportation – no “breathing spell” is forecast. The FAA also predicts that 10,000 corporate aircraft, including traditional business jets, turboprops and VLJs, will be added to the fleet between 2007 and 2017. This will significantly shift the proportion of air carrier to business aircraft using ATC services.
It will also generate extraordinary new demands for those services. Instrument flight rule operations – the most significant source of demand on the ATC system – are projected to rise by 36 percent, from roughly 45,000 per day to over 61,000 per day, in the next decade. That new burden will be on top of an ATC system that today is displaying unmistakable evidence of strain. To place this in some perspective, that strain is evident on days when at any given time, on average, only 6,000 aircraft are flying in the ATC system.

Change Required to Meet Growth

FAA Projects 36% increase in daily flights in 10 years

Source: FAA Aerospace Forecasts 

“If the government does not embark on the necessary transformation of
the ATC system, it risks becoming the regulator of inconvenience.”

The existing ATC system cannot absorb that anticipated demand. It suffers from fundamental structural limitations, principally attributable to the system’s reliance on ground-based navigation, radar and communications facilities. The result is that the current system is not scalable; the system cannot be expanded to meet upcoming demand. It is not the system to meet the future growth of civil aviation – airline, corporate or general aviation.

The ominous consequence of all of this is that delays are forecast in 2014 to increase by 62 percent over 2004 levels. That level of delays will be intolerable. Such an increase will have profound repercussions on airlines, ATC operations and airline customers, and will ripple across our economy. The effect on the total U.S. economy is likely to be immense. The Joint Planning and Development Office has estimated that the cost of failing to meet future airspace demand could approach $40 billion annually by 2020.³

The nature and extent of these anticipated delays need to be understood. An increase in delays of that magnitude will mean that airspace and airports that have not experienced chronic delays will routinely experience them in the future. It will not simply be that afflicted airports will get worse, the affliction will spread.

Schedule reliability will be the immediate casualty of such a surge in delays. Not only will flights be delayed, connections will be missed and chronically delayed flights will be cancelled. Service unpredictability at a level not previously experienced could materialize. Passengers and shippers and those who rely on the transportation of those people and products will suffer, and their suffering will worsen month by month, year by year. Industries and communities dependent on civil aviation, whether for scheduled airline service or general aviation operations, will be similarly affected.

While customers will not accept such a result, neither will airlines nor the FAA. Both airlines and the FAA will reconfigure their operations to respond to worsening ATC system performance. It will certainly not be business as usual if gridlock begins to cascade through the system. Sooner or later, access to airline services and ATC services will be limited in some way or ways. If flight schedule reliability deteriorates, airlines will stretch out their schedules and flight connection times. That, of course, will make airline operations less efficient and more costly. It also will diminish the attractiveness of air transportation and some customers will look for substitute means of transportation, thereby exposing airlines to further financial distress. Were ATC operational performance to worsen, the FAA would predictably explore measures to ration demand on the system. We have experienced that before with the High Density Airport Rule and its progeny, and in the aftermath of the Professional Air Traffic Controllers Organization (PATCO) strike during the first half of the 1980s. We do not want to repeat that experience.

If the government does not embark on the necessary transformation of the ATC system, it risks becoming the regulator of inconvenience. That is not the role that any of us wants it to assume.

The Solution – Technology and Fair Funding Will Prevent Gridlock

A satellite-based air traffic control system will provide the means to reduce delays and congestion that otherwise will occur. The benefits of a technologically up-to-date ATC system that is equitably financed will be extensive and will be widely distributed throughout the user community. Equitable financing must be based on four complementary principles: cost-based usage fees; a robust general fund contribution; innovative financing, such as bonding authority; and the realization of savings from FAA Air Traffic Organization (ATO) efficiency improvements.

A Modern Air Traffic Control