[Senate Hearing 108-933]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-933
 
                          FAA REAUTHORIZATION

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 10, 2003

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation



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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey
      Jeanne Bumpus, Republican Staff Director and General Counsel
             Robert W. Chamberlin, Republican Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 12, 2003................................     1
Statement of Senator Brownback...................................     6
Statement of Senator Fitzgerald..................................     4
Statement of Senator Lautenberg..................................    42
Statement of Senator Lott........................................     2
Statement of Senator McCain......................................     1
Statement of Senator Rockefeller.................................     5
Statement of Senator Smith.......................................     3
Statement of Senator Stevens.....................................    34

                               Witnesses

Blakey, Hon. Marion C., Administrator, Federal Aviation 
  Administration.................................................     7
    Prepared statement...........................................     9
Dillingham, Gerald L., Director, Civil Aviation Issues, U.S. 
  General Accounting Office......................................    16
    Prepared statement...........................................    18
Van De Water, Hon. Read C., Assistant Secretary for Aviation and 
  International Affairs, Department of Transportation............    11
    Prepared statement...........................................    14

                                Appendix

Response to written questions submitted to Hon. Marion C. Blakey 
  by:
Hon. Maria Cantwell..............................................    61
Hon. Ernest F. Hollings..........................................    53
Hon. Daniel K. Inouye............................................    54
Hon. Frank Lautenberg............................................    62
Hon. John McCain.................................................    45
Hon. Ron Wyden...................................................    59
Response to written questions submitted by Hon. John McCain to:
    Gerald L. Dillingham.........................................    72
    Hon. Read C. Van De Water....................................    64


                          FAA REAUTHORIZATION

                              ----------                              


                        THURSDAY, APRIL 10, 2003

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:30 a.m. in room 
SR-253, Russell Senate Office Building, Hon. John McCain, 
Chairman of the Committee, presiding.

            OPENING STATEMENT OF HON. JOHN McCAIN, 
                   U.S. SENATOR FROM ARIZONA

    The Chairman. The purpose of today's hearing is to consider 
S. 824, the Aviation Investment and Revitalization Act. This 
legislation was introduced earlier this week by Senators Lott, 
Rockefeller, Hollings, myself. S. 824 would authorize the 
Federal Aviation Administration for 3 years, authorize funding 
levels for the FAA's major programs, authorize funding for 
aviation security capital costs at airports, and make policy 
changes to a number of the FAA's and the Department of 
Transportation's aviation programs.
    It is our intention to mark up this bill soon after we 
return from the April recess and to have it ready for floor 
consideration during May. I believe that this is a critically 
important bill for the aviation community, which is facing 
very, very difficult times. The industry is in a crisis that 
deeply concerns this committee. However, we must be equally 
concerned about the FAA and its programs, and work to ensure 
that our Nation's aviation system has proper oversight.
    Our aviation system has been the leader in safety and 
efficiency. We must act this year to ensure that this remains 
the case. This bill continues the investments in the aviation 
system that began under AIR-21. We have made great progress in 
capacity and infrastructure improvements, but we must work to 
ensure that infrastructure is further improved, our safety is 
maintained, and the security of our aviation passengers remains 
a priority.
    We must also ensure that the FAA manages its resources 
wisely. This bill includes provisions first proposed by former 
Administrator Garvey and endorsed by the current administrator 
to improve FAA management. The FAA's management of its 
programs, especially its modernization efforts, will continue 
to be of particular concern to this committee.
    I am also concerned about the diversion of Airport 
Improvement Program funds away from safety and capacity 
projects to fund security improvements. While security is 
paramount, Congress never intended a substantial portion of AIP 
funds to be applied to security projects. To address this, S. 
824 includes a new aviation security capital fund to finance 
such security costs and to reduce the funding pressure on AIP.
    Finally, I remain concerned about competitive issues in the 
airline industry. While the industry has strong low-cost 
carriers which act to ensure a competitive marketplace, there 
are still competitive issues that must be addressed. I look 
forward to working with the members of this committee on these 
issues as we move forward with this bill.
    I want to thank Senator Lott, the Chairman of the Aviation 
Subcommittee, for his hard work, as well as Senator Hollings 
and Senator Rockefeller and others who have been involved in 
this issue. And I now recognize Senator Lott, who is the 
Chairman of the Aviation Subcommittee, for his comments, and 
then Senator Smith and Senator Fitzgerald.

                 STATEMENT OF HON. TRENT LOTT, 
                 U.S. SENATOR FROM MISSISSIPPI

    Senator Lott. Thank you, Mr. Chairman, for having this 
hearing today. It keeps us on track to move forward toward 
getting this legislation completed as soon as possible so that 
we do not get caught in the traffic jam as we get into the 
summer and the fall. The legislation, of course, does expire at 
the end of Fiscal Year 2003, so it will be very important that 
we go ahead and complete this action.
    It has been a pleasure working with Senator McCain. I have 
enjoyed working with Senator Rockefeller and Senator Hollings 
to develop this preliminary bipartisan bill that will 
reauthorize FAA. We hope that when we hear from the 
Administration officials today we can further consider any 
necessary modifications to the legislation and be ready to go 
to a mark-up when we return from the Easter recess, as the 
chairman just said, and that would make it possible for us to 
possibly have this legislation considered later on that week, 
or the first week in May.
    I want to thank the Administration for coming forward with 
their recommendations. While we obviously would not agree 100 
percent with those recommendations, it was important we hear 
from the Administration before we developed the legislation, 
and you have cooperated with that, and I thank our witnesses 
here today and the Administration for doing that.
    This bill does include numerous provisions that will help 
sustain and enhance safety, security, efficiency, and 
competition in the national aviation system. It will give some 
reliability, because it will be a multiyear program. We need to 
discuss exactly how many years that should be, but that in 
itself gives reliability to the industry and some certainty 
that I think would be helpful.
    We are particularly interested in the Airport Improvement 
Program. It is very critical to our airports as they plan for 
construction projects such as runways, taxiways, aprons, noise 
abatement, land purchase, safety, and--since 9/11--security. As 
we have discussed, $500 million of the IAP funds have gone into 
security. There has been some suggestion that that amount would 
be needed again this year. Senator McCain and I have both 
indicated we have serious reservations about that, because the 
AIP funds have a purpose, and if we divert $1 billion to 
security, then we are putting a lot of other programs on hold, 
or delaying them, which could create other problems, including 
safety.
    The Essential Air Service program is a very important part 
of the AA reauthorization. Right now we are basically saying we 
will extend the existing program, but we are going to need to 
look at that and work with the Administration, work with the 
Senators on this committee on both sides of the aisle to come 
up with some improvements.
    For instance, we do know that the total passenger traffic 
at EAS subsidized communities decreased by 20 percent since 
1995, and the median number of passenger enplanements fell to 
an estimated 10 per day, just over three passengers per flight.
    Now, I am from a State where obviously EAS is important. In 
order to have the total package of access for our constituents, 
some of these smaller airports do need this EAS program, but we 
need to look at how much is going to be authorized, how much of 
a local match is going to be required. The Administration 
actually considered, or recommended 25 percent local match 
except for communities that were more than 210 miles from the 
nearest large or medium hub, in which case it would be 10 
percent match.
    I do personally support the idea of some match. I think 
airports, these local airports provide a benefit to the local 
people, it provides jobs. They can and should make some 
contribution to the program, but that is an area where when you 
look at the make-up of the Committee, a West Virginia Senator, 
Maine, Mississippi, North Dakota, Hawaii, Alaska, we all have 
very strong feelings about how this program should be run.
    I would also like to see the continuation of the Small 
Community Air Service Development Pilot Program. I think it has 
worked well. In Ms. Van de Water's--I believe it was your 
testimony earlier--you said we only authorized 40 communities 
of $20 million, and basically you have committed to that and 
can go no further. Those grants have, I think, provided some 
incentives for these communities like one in my own State to do 
more on their own and use this program and benefit from it, and 
so I hope we can look at that, but the most important thing, 
Mr. Chairman, is for us to have this hearing, hear further from 
the Administration, have a chance to ask some questions, and 
then move toward a package that we can report out and send to 
the floor. And I thank you again for giving me the opportunity 
to work hard in this area and have the hearings we have had. I 
believe we have laid the groundwork to produce a good bill.
    Thank you, Mr. Chairman.
    The Chairman. Well, I congratulate you for outstanding 
work, Senator Lott. Senator Smith.

                STATEMENT OF HON. GORDON SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. Thank you, Mr. Chairman. This is a very 
important hearing to reauthorize the Federal Aviation 
Administration. It is my belief that this bill must promote 
safety and economic growth while improving aviation capacity 
and mobility. I want to urge my colleagues that as we review 
the FAA's major Federal programs we need to provide the 
necessary authorization for funding for transponder landing 
systems and radar coverage to small community airports.
    For example, in Central Oregon, adequate radar coverage is 
becoming a very significant issue to users of six--and I 
repeat--six nearby airports which support both commercial and 
general aviation users. Flight safety has become a major 
regional concern, and Central Oregon's lack of digital radar 
coverage is seen as a liability to further growth in commercial 
carriers, and continues to hamper air accessibility to a large 
geographical region. It frequently experiences inclement 
weather.
    Currently there is no radar below 8,000 feet in the entire 
region, and only one aircraft can be in the air space under IFR 
conditions at a time. The FAA began survey and design work for 
a Central Oregon digital radar in Fiscal Year 1999. That site 
study is now complete, and the installation of the facility is 
now ready to proceed. It is my understanding that the FAA Air 
Traffic Division has decided that Central Oregon does not meet 
the criteria for purchase and installation of the radar in the 
region, and bases this information, I believe, on inaccurate 
FAA data, so I would plead with the Secretary, Secretary 
Blakey, to help me resolve this. The longer the FAA delays the 
radar to be installed and operated in Central Oregon, the more 
dangerous that air space is going to become.
    I would like to make sure we are on the same page as to the 
criteria by which this decision was arrived at, because I see a 
real problem in Central Oregon and would like to resolve it. 
Thank you, Mr. Chairman.
    The Chairman. Thank you. Senator Fitzgerald.

            STATEMENT OF HON. PETER G. FITZGERALD, 
                   U.S. SENATOR FROM ILLINOIS

    Senator Fitzgerald. Thank you, Mr. Chairman, and thank you 
for convening this hearing. Ms. Blakey, thank you so much for 
being here, and Ms. Van de Water and Dr. Dillingham. We look 
forward to hearing from you. I think this hearing is extremely 
important, as I believe how we go about reauthorizing the FAA 
and what path we choose to take in expanding capacity for 
aviation in this country is extremely important.
    As you know, this has been an enormous issue in my State of 
Illinois, and particularly in the city of Chicago. Sometimes I 
feel like I am more an aviation commissioner than a Senator 
coming from the State of Illinois, but there are big issues 
here, and one of the concerns I would say at the outset that I 
have about the proposed legislation is that I am afraid we may 
be going too far in the direction of just expanding existing 
airports.
    I do not think we want to foreclose the possibility of 
building new airports in this country. I wonder, if this 
legislation had been in place, whether Dallas-Fort Worth would 
have ever been built, or Denver would have ever been built. We 
might have just expanded Love Field and expanded Stapleton, and 
I do not think that those would have been the right solutions.
    Now, no aviation hearing in the Commerce Committee would be 
complete if I did not bring up O'Hare, but this is germane, and 
it is directly on point, because in recent days, The Chicago 
Tribune ran a front page article that disclosed that the city 
of Chicago's own studies and own modeling, that they have now 
filed with the FAA with respect to O'Hare, show that the whole 
O'Hare plan that they tried to lock into law last year would 
not get anywhere near the capacity they were promising, and it 
would not have cut down delays.
    In fact, they stopped their modeling at a certain point 
because delays got so bad, the runways would be so close 
together that three of them would be closed down in bad 
weather, and the problem with getting more capacity out of 
existing airports, at least in the case of O'Hare, is they do 
not have enough land. You need a lot of space to get more 
capacity, and in the case of O'Hare they only have 8,300 acres. 
They were going to put the runways 1,200 feet apart.
    Well, those runways are going to have to be shut down in 
bad weather, and certainly you have the operators of existing 
airports, wherever they are in this country, they do not want 
new airports coming in, and since deregulation, passenger 
travel has gone up something like 200, 300, 400 percent, but we 
have built only Dallas-Fort Worth and Denver International 
Airport. We have not added new airports.
    So I am very concerned about the issue of, are we going to 
build some new airports? We desperately need capacity. I know I 
have been a crusader the last few years on Chicago, that we get 
more capacity more quickly at far less cost, about a third less 
cost, by going forward with a third airport, so I hope we do 
not go so far down the road that we are foreclosing the 
possibility for additional airports in this country, and I know 
there are lobbies that do not want additional airports. That 
includes the hub carriers who have a dominant market position 
in the city, or maybe the Airport Operators Association, which 
I understand was very involved in drafting this bill. They do 
not want new airports, but we have got to be very careful here, 
because this is a very important issue.
    And with that, Senator McCain, thank you very much. 
Incidentally, I did leave on every Senator's desk a couple of 
articles on that issue, because we did the right thing by not 
passing that bill last year. We would have locked into law a 
big waste of money with respect to O'Hare.
    Thank you.
    The Chairman. Thank you very much. It is always good to get 
an update on the status of O'Hare Airport, and we thank you, 
Senator Fitzgerald. Many of us have to use that airport, so we 
are very pleased.
    Senator Rockefeller.

           STATEMENT OF HON. JOHN D. ROCKEFELLER IV, 
                U.S. SENATOR FROM WEST VIRGINIA

    Senator Rockefeller. I will be brief. I have my information 
on O'Hare, and I tucked it right over here. I am very proud to 
be a cosponsor of S. 824. I really enjoy working with Senator 
Lott as my new compatriot, and there is a lot of good stuff, 
the fact that EAS is continued. But on the other hand, Senator 
Lott and I, we have sort of agreed to talk about the program as 
we go forward. We are going to work together on that.
    I like the fact that AIDP--or the Small Community Air 
Service Development Pilot Program now--is continued and 
expanded, and I look forward to working on this, Mr. Chairman. 
We did this once before, and we can do it again. We have to 
protect all our communities.
    The Chairman. Thank you, Senator Rockefeller. Thank you for 
your outstanding work on this legislation, as you have been on 
many other aviation issues before this committee.
    Welcome, Ms. Blakey.
    Senator Brownback. If I could, Mr. Chairman----
    The Chairman. I apologize, Senator Brownback. I thought you 
were still in mourning because of Kansas' loss and I did not 
know if you were ready to speak yet.
    [Laughter.]
    The Chairman. I apologize.

               STATEMENT OF HON. SAM BROWNBACK, 
                    U.S. SENATOR FROM KANSAS

    Senator Brownback. But I am still celebrating that Arizona 
victory we had.
    [Laughter.]
    Senator Brownback. That was one of the richest ones we have 
had.
    The Chairman. That is what you get.
    Senator Brownback. I thought that is why you overlooked me, 
you were still mad about that.
    [Laughter.]
    Senator Brownback. Thank you, witnesses, for being here, 
and I thank the chairman for holding the hearing. I appreciate 
this. It is an important topic. I want to focus on one narrow 
area, continuation and research, to be able to continue to lead 
the world in the aviation work that we do.
    The United States has revolutionized the way that people 
travel, developing new technologies and aircraft to move people 
more efficiently and more safely around the world. Past Federal 
investment in aeronautics research and development has 
benefited the economy and national security of our Nation. The 
total impact of civil aviation on our economy exceeds $900 
billion, 9 percent of the gross national product. Future growth 
in civil aviation will be increasingly constrained by concerns 
related to aviation system safety, security, aviation system 
capabilities, aircraft noise, emissions, and fuel consumption.
    Last year the Commission on the Future of the U.S. 
Aerospace Industry recommended to Congress that the United 
States bolster investment in aeronautics and aerospace 
research. U.S. leadership in aerospace is threatened by our 
international competitors. The revitalization and coordination 
of our efforts to maintain leadership in aeronautics and 
aviation are critical and must begin now. Global leadership in 
aerospace is a national imperative.
    I have worked with Senator Hollings on introducing a bill 
regarding this issue. I would just point out to the Chairman 
and my colleagues on the Committee, the aviation manufacturing 
industry is centered in Wichita. They are increasingly 
concerned about their loss of global edge in the research and 
the development of cutting-edge technologies. They are fearful, 
that they are seeing loss of these jobs systemically going to 
places willing to invest in the research and development of new 
engines, new wings, and new products to come along.
    I think we have got to match and meet that challenge for us 
to be able to sustain our leadership in the field that we 
started 100 years ago with the Wright Brothers. It is important 
that we invest in that research agenda, and invest heavily.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Brownback.
    Ms. Blakey, who is the Administrator of the Federal 
Aviation Administration, and Ms. Read Van de Water, Assistant 
Secretary for Aviation and International Affairs, U.S. 
Department of Transportation, and Dr. Gerald Dillingham, 
Director of Physical Infrastructure Issues, General Accounting 
Office.
    Could I ask the witnesses as a part of their statement to 
address this issue that all of us have alluded to, and that is 
this tension now between funds for security and funds for 
continued aviation improvement and expansion. I think that is a 
major concern and challenge we are going to have to deal with.
    Welcome back, Ms. Blakey. Thank you, and please proceed, 
and all of your written statements will be made a part of the 
record.

      STATEMENT OF HON. MARION C. BLAKEY, ADMINISTRATOR, 
                FEDERAL AVIATION ADMINISTRATION

    Ms. Blakey. Thank you very much, and I do want to say how 
pleased I am to be back here able to discuss the 
reauthorization of the FAA with you all again.
    Chairman McCain, Senator Lott, all of those on the 
Committee who have worked so very hard on this reauthorization 
effort, I do want to say thank you, and I am pleased to be able 
to discuss the Administration's proposal, The Centennial of 
Flight Aviation Authorization Act, or Flight-100.
    I would like to start by thanking Secretary Mineta, 
thanking Deputy Secretary Michael Jackson, Read Van de Water, 
Jeff Shane, and so many people in the policy shop who worked 
hard on this long before I got to FAA. A great deal of thought 
has gone into the Administration's proposal, and so I am 
pleased to have a chance to capitalize on that.
    I was particularly pleased to see that the leadership of 
this committee has fielded a reauthorization proposal as well. 
I think it is very striking that while we have not had an 
opportunity to analyze it in real depth, there are many areas 
of shared vision, of like concerns in these proposals, and I 
think it gives us a tremendous way to work together to build on 
those concerns.
    I would particularly highlight there the issue of increased 
support for small airports, that is very clear in both of these 
bills, concern for the way we are developing our flight service 
from that standpoint, and our effort to reduce aviation's 
impact on the environment both through having a coherent, 
streamlined process and looking for ways, through research and 
elsewhere, to mitigate the effect.
    I think there is also a shared concern on all of our parts 
to address Senator McCain's concern and all of your concern 
about security in that we do understand that AIP funds are 
being tapped and stretched to address security issues. As many 
of you know, roughly $561 million last year went into 
additional security-related projects at the airport. We are 
prepared this year to come forward with similar sums.
    It is very clear from the early applications that we are 
getting from our airports around the country that that is their 
need, that is their request, but I think we all understand at 
the same time that while we are trying to get over a certain 
hump at this point in terms of security needs, we cannot 
sustain it at this level within AIP funding and still meet the 
kind of ongoing maintenance, much less capacity and safety 
improvement, that we all believe AIP funds need to address, so 
I think it is a shared area of concern.
    Now, having said that, let me briefly talk for a moment 
about the proposal I know the best, and that is Flight-100, the 
Administration's proposal. It also builds on AIR-21, and I 
think this is a very fundamental point here, because this 
committee and the Congress did formidable work with AIR-21. 
That statute resulted in real innovations in safety, and the 
environment, and significantly increased funding. I think we 
are very much on board with saying that provides the foundation 
and both the continuity and stability that I think the industry 
needs right now in terms of moving forward.
    Given the state of the aviation industry, I would make one 
point right up front. The Administration's proposal does not 
have any additional new taxes, no new economic demands on the 
industry, no financial burdens on the flying public that are 
additional, and I think that is important to say.
    We are following the lead of AIR-21 elsewhere and, of 
course, that means first and foremost we are highlighting 
improvements in safety. The funding levels there will allow us 
to support important infrastructure improvements, safety 
initiatives, and yes, important safety research. I was very 
pleased to hear Senator Brownback's concern about research 
broadly, and I would highlight that as a feature of our bill.
    Second, Flight-100 does expand environmental streamlining 
initiatives really by providing, I think, greater efficiency in 
that review. This committee has identified this as a real 
priority, and we see it as a cornerstone of Flight-100. Our 
proposal gives the FAA the ability to look at critical safety 
recommendations in a timely manner when it comes to our 
airports, and designate those projects as priorities in terms 
of environmental review.
    It also is a way of dropping back protracted decisions. I 
think if we all look back on the summer of 2000 gridlock, we 
will all acknowledge that a lot of that very slow 
decisionmaking really was a major contributor to the gridlock, 
and we have got to avoid it.
    I want to, though, go back to commending the Committee on 
taking the lead on this issue of environmental streamlining 
both in AIR-21 and subsequent deliberations you have had, and 
now in your current bill. I do think this is very important.
    We are also proposing some new initiatives that I would 
like to see the Committee consider strongly, and they have to 
do with mitigating the effects of not just noise, but emissions 
when it comes to aviation's impact on the environment. For 
example, we propose to establish voluntary programs to reduce 
aviation emissions by converting airport infrastructure, and 
here I am talking about vehicles, any of the sort of power 
plants that could contribute to this, and airport-owned ground 
support equipment to new low-emission technologies.
    We also hope to increase prospective homebuyers' awareness 
of potential noise before they move close to airports. They 
need to know from Federal lenders what the noise factors are, 
and this needs to be something that we require.
    We are also looking to increase our commitment on the 
capacity front by proposing adjustments in AIP formulas that 
allow us the discretion to focus resources on projects of 
national significance. We think it is very important that we 
ensure that needed capacity-enhancing projects at the Nation's 
most congested airports will be funded by an increasing amount 
of discretionary dollars, and I would like to highlight that 
again in our bill.
    We have got an important opportunity. I think we have all 
talked informally about this together. With the decrease in 
traffic, we have a chance to catch up from a capacity 
standpoint, and we need to take that opportunity.
    Then finally, just as in the reauthorization proposal that 
you have introduced this week, assistance to smaller airports 
is a focal point of Flight-100. I understand the pressing needs 
of these airports. You all have talked in great depth about 
this, and I do appreciate the fact that we have all got to step 
forward on it. Our proposal provides additional money to help 
smaller airports through the kinds of market fluctuations, and 
the periods of declining traffic that they are experiencing 
right now.
    Non-hub airports will be permitted to use entitlement 
dollars to fund security-related requirements as well, and here 
I am talking about, ongoing operating problems. Small airports 
should not be required to choose between improving airport 
security and funding other important projects.
    Mr. Chairman, I understand this committee is planning a 
very aggressive reauthorization schedule. Senator Lott has 
talked with me about this in detail, and I am delighted. I 
would like to end my remarks simply by emphasizing the 
Administration's commitment to work closely with you for our 
shared goals in aviation.
    Thank you very much.
    [The prepared statement of Ms. Blakey follows:]

      Prepared Statement of Hon. Marion C. Blakey, Administrator, 
                    Federal Aviation Administration

    Chairman McCain, Senator Hollings, members of the Committee, thank 
you for the opportunity to appear before you today to discuss the 
Administration's proposal to reauthorize our aviation programs. 
Recently, I testified before you on the state of the Federal Aviation 
Administration (FAA). The question I was most frequently asked at that 
hearing was when the Administration's reauthorization proposal would be 
made available. I am happy to report that on March 25, 2003, Secretary 
Mineta sent to Congress the Administration's reauthorization proposal, 
the Centennial of Flight Aviation Authorization Act, or Flight-100.
    I would very much like to thank both Secretary Mineta and Deputy 
Secretary Michael Jackson for their tireless efforts in developing and 
clearing this proposal. I would also like to thank them for challenging 
all of us at the Department of Transportation (DOT) to be Safer, 
Simpler, and Smarter. These three principles developed by the Secretary 
not only form the basis of Flight-100, but they also describe a 
Department that puts a premium on performance, flexibility, and 
accountability. And we at FAA intend to do our part to meet the 
Secretary's challenge.
    I am also grateful for the dedication and input of Under Secretary 
Jeff Shane and his Policy office since, when my tenure as Administrator 
began, the development of a reauthorization proposal was already under 
way. To that end, we believe the Administration's proposal will serve 
as a strong foundation for the development of reauthorization 
legislation.
    When the Wendell H. Ford Aviation Investment and Reform Act for the 
21st Century (AIR-21) was passed almost three years ago, it contained 
some truly innovative provisions that improved safety, airport 
development and system efficiency. It was landmark legislation that has 
provided a firm foundation upon which to build. The Administration's 
reauthorization proposal does just that--it takes its direction from 
AIR-21 and proposes a four-year authorization that would continue 
investment in safety, air traffic control modernization and operations, 
airport capacity improvements, and environmental stewardship.
    With AIR-21 as a foundation, let me take a moment to describe for 
you the substance of our proposal.
Funding Levels
    Because safety remains our number one priority, continued 
investment in the aviation system is critical. Although the devastating 
events of September 11th continue to impact the number of people flying 
in this country, recovery of the system is inevitable. As I discussed 
with you when I last testified before this committee, the temporary 
downturn in air travel affords us a great opportunity to continue to 
focus on increasing airport capacity without unacceptable disruption to 
the system. Under AIR-21, the annual authorized levels for the Airport 
Improvement Program (AIP) increased substantially, and FAA's other 
accounts also received appreciable increases. The funding levels the 
Administration recommends for AIP, Facilities and Equipment (F&E), and 
FAA Operations will support the achievement of several goals. They 
maintain the level of investment for major airport capacity projects 
that provide great benefits to the National Airspace System (NAS). They 
enable us to continue to update the NAS infrastructure, expand air 
traffic control automation and communications tools, and implement 
needed operational capability and risk-mitigating precision landing 
navigation. They support implementation of FAA's Operational Evolution 
Plan (OEP) and efforts to accelerate airspace redesign, sector 
reconfiguration, and chokepoint solutions.
    Although the proposed funding level for Research, Engineering and 
Development represents a decrease from current levels as a result of 
the transfer of security technology responsibilities to the 
Transportation Security Administration (TSA), Flight-100 reflects our 
continued focus on safety in FAA's research program. FAA also benefits 
from a significant amount of forward-looking research funded by the 
National Aeronautics and Space Administration (NASA) that is aimed at 
improving the long-term safety, security, and efficiency of the 
national airspace.
    I believe these funding recommendations are sound and represent a 
strong signal that investment in safety and in the NAS is critical to a 
healthy economy and the future of the country.
Programmatic Changes
    With respect to the AIP, Flight-100 places major emphasis on 
helping smaller airports and projects of national significance. 
Therefore, the Administration proposes a restructuring of the formulas 
and set-asides to allow more funds to be targeted to those airports and 
projects with the greatest dependence on Federal assistance. In Fiscal 
Year 2004, our proposal would transfer more funding than in Fiscal Year 
2003 to small airports. These airports are essential to the vitality of 
the NAS and have limited funding options other than Federal assistance. 
We estimate this funding shift to be approximately $87 million. We also 
recommend simplifying the grant formulas by eliminating unnecessary or 
outdated set-asides. For example, the set-aside for the Military 
Airport Program was created to ensure funding when it was a new concept 
and it was unclear if it would compete well for grant dollars. Today, 
the program is well established and its airports routinely receive more 
than the amount guaranteed by the existing formulas. The changes we 
propose will have the effect of increasing the amount of discretionary 
funding available, which we believe is essential to help fund the key 
capacity projects in our national system that we all agree are 
necessary to prevent future gridlock.
    Just as the Committee leadership has identified environmental 
concerns as a priority in their reauthorization proposal, the 
Administration's environmental concerns are cornerstone of Flight-100. 
While FAA's primary mission is to ensure a safe and efficient NAS, we 
also take our environmental responsibilities quite seriously. The 
environmental initiatives in this proposal will contribute to continued 
success of our investment in safety and capacity projects by providing 
for prompt and more effective environmental review of significant 
projects while continuing to exercise strong environmental stewardship. 
I know that environmental streamlining is a top priority for this 
committee and I look forward to working with you to meet our mutual 
goal.
    We also propose new initiatives to mitigate the impacts of aviation 
emissions and noise. For example, we propose to establish voluntary 
programs to reduce aviation emissions by converting airport 
infrastructure, airport vehicles, and airport-owned ground-support 
equipment to new low emission technologies. In addition, our noise 
initiatives include using some of the AIP noise set-aside for research 
aimed at reducing community exposure to aircraft noise or emissions. We 
also hope to increase prospective homebuyers' awareness of areas near 
airports that are exposed to aircraft noise by requiring federal 
lenders to inform prospective homebuyers of properties within airport 
noise contours.
    The aviation insurance program authority in chapter 443 of title 49 
is scheduled to expire at the end of 2003. In the past, 
reauthorizations of the program were enacted periodically and, if the 
program lapsed between authorizations, the lapses were brief and 
without incident. In the current climate, however, a lapse in the 
defense and foreign commerce related program could have extreme 
consequences. To avoid that future possibility, Flight-100 would repeal 
the periodic renewal requirement of that portion of the program, 
thereby making it permanent. The provisions that enable DOT to offer 
insurance to airlines flying within the United States would be extended 
for a two-year period and would be subject to the reauthorization 
process at that time. Of course, the actual provision of insurance will 
remain at the discretion of the President, based on a Presidential 
Determination Order.
    Our proposal sets forth certain structural reforms that could 
assist agency efforts to transform air traffic control and its 
supporting functions into an effective, performance-based Air Traffic 
Organization. The structural reform provisions in our reauthorization 
proposal would reinforce this goal by clarifying and enhancing 
management reforms that Congress has already put in place for the FAA.
Increasing FAA's International Profile
    Recently, I made a commitment to you, the agency, and the aviation 
community that I would work to increase the FAA's international 
profile. We all have an obligation to continue to look for innovative 
ways to use our resources to improve worldwide aviation safety while 
maintaining our leadership role in the international aviation 
community. Toward that end, I recently created a separate International 
Office. Mr. Chairman, although FAA faces numerous international 
challenges over the next five years, I am confident that we will 
succeed in increasing our leadership role.
Defenders of the Homeland
    Finally, for over a year and half Congress, and particularly this 
committee, has appropriately focused on security matters. At this time, 
I would like to note that the shift of FAA's former security programs 
to the TSA was a smooth one. FAA continues to work closely with TSA 
even as TSA has transitioned from the Department of Transportation to 
the Department of Homeland Security. Although FAA's role with respect 
to security has changed, we remain defenders of the Homeland in a very 
real sense. Security remains a vital component of safety. The current 
threat level means we all have a role to play in protecting our 
country. On behalf of the FAA, I am committed to continuing to work 
closely with TSA to protect our country from having aviation used 
against us as a weapon of mass destruction.
Conclusion
    In conclusion, I believe that the Administration's proposal will 
serve as a strong foundation for aviation reauthorization and I look 
forward to working with this committee and industry stakeholders 
towards the development of legislation.
    This concludes my prepared statement. I am happy to answer your 
questions at this time.

    The Chairman. Thank you, Ms. Blakey. Ms. Van de Water.

STATEMENT OF HON. READ C. VAN DE WATER, ASSISTANT SECRETARY FOR 
       AVIATION AND INTERNATIONAL AFFAIRS, DEPARTMENT OF 
                         TRANSPORTATION

    Ms. Van de Water. Thank you, Mr. Chairman, Senators. I am 
pleased to be here this morning to discuss one part of the 
reauthorization proposal, and that is that of Essential Air 
Service and service to small communities, a very high priority 
for the Administration.
    My experience involving the EAS program has reinforced for 
me the absolute need to reform how the Government supports 
small community service and transportation. Without fundamental 
changes to the way the Federal Government addresses these 
transportation issues, communities will have little, if any, 
control over the service that is provided, and the service in 
many cases may be only partially responsive to the community 
needs.
    Moreover, there is no doubt that it will be increasingly 
more expensive for the Government to support these services. 
Even before September 11, which affected air service throughout 
the country, but certainly small communities greater than 
others, the cost under the EAS program had grown tremendously, 
but the use of the services still remained poor.
    Since September 11, we have received 44 notices of the last 
service at a community which will trigger a hold-in subsidy for 
most of those communities. There are about 70-some communities 
left that have single-carrier service that could enter the EAS 
program statutorily at any time, and we have no say-so over 
that.
    In the Flight-100 proposal that the Administrator has 
outlined, the Administration has proposed a comprehensive new 
program for small community transportation service that will 
change both the dynamics and the participants in the process, 
and all for the better, we think. The key substantive reforms 
in the program go to the heart of what has been recognized as a 
significant omission in how we address small community 
transportation, and that is participation by the communities 
themselves.
    First, we will ask communities to participate directly in 
developing a plan for responding to their transportation needs. 
Throughout the history of the program, the Federal Government 
has determined what services the communities will receive, and 
judging from the number of calls I receive from people in the 
community and people here in Washington, most of them do not 
like it.
    Under our proposed reform for small community 
transportation service, communities for the first time will 
take a leadership role in designing the services that best meet 
their individual community's needs, rather than the Federal 
Government. We think that communities themselves are in the 
best position to know their needs, and their ability to support 
the service to meet those needs.
    By participating in the design of the services provided, 
the community and the Government can help ensure more effective 
decisions on how best to address those needs. Our experience 
with the Small Community Air Service Development Pilot Program 
has confirmed the strong desire of communities to be active 
participants in this process. And a GAO report on small 
community service that I suspect will be addressed momentarily, 
also emphasized that service initiatives are the most 
successful when the communities have had active participation 
in the process.
    Second, we want communities to have flexibility in meeting 
their transportation needs. Traditional EAS service has been 
one-size-fits-all, two or three round trips a day to a 
designated hub with a small aircraft. In the early stages of 
EAS, that system worked relatively well, but as a result of the 
growth and evolution of air service and over the 25-years 
since, including expanded hub-and-spoke systems, the recent 
growth of low-fare carriers and changes in regional air carrier 
services, this model is no longer a good template for us to 
use.
    Our proposal provides communities a broader range of 
options available to address their air service needs, including 
less frequent or charter service, use of smaller aircraft, 
ground service alternatives, and regional service initiatives. 
Again, our experience with the pilot program has been very 
instructive. Many communities recognize that their needs have 
changed, and that a broader range of options may be the 
difference between successful service and service that is 
rarely used, as, in general, the EAS service is now. Greater 
flexibility will make it possible for communities and the 
Government to respond more effectively and efficiently with the 
service the community needs.
    Third, communities will be asked to participate financially 
in their service plans. We know this is the most controversial 
part of our proposal, but we believe that the service at small 
communities will be more effective if the community is a full 
partner with the Government, and in addition to drawing up the 
proposal and taking a leadership role in that side, we ask for 
support for that service, support not only in ridership, but 
also financially.
    As a stakeholder in the transportation, the community gains 
greater control over how the service is provided, and its 
potential for success and, of course, the amount of community 
contribution, as you have seen in our proposal, would be 
determined by the degree of isolation.
    In last year's grant process, over 70 percent of the 
communities in the small community pilot programs were prepared 
to contribute at least 10 percent of the proposed initiative. 
Nearly half were prepared to contribute at least 25 percent. I 
want to emphasize that we recognize that there are certain 
circumstances under which a community might not be required to 
make a financial contribution due to special geographic 
considerations, and we would be prepared in the Secretary's 
Office to address those on a case-by-case basis.
    In summary, under our new program, all communities that are 
now part of the EAS program would be eligible to stay so, as 
long as they contribute toward the cost of their service. These 
EAS communities will have the opportunity to enhance their 
service with more frequency or larger equipment as long as they 
increase their contribution to the service, and communities 
closest to jet service would be eligible for surface 
transportation only at a 50-50 match with the Federal 
Government.
    Communities more than 210 miles from the largest hub, large 
or medium hub, or those who are not accessible to a large or 
medium hub, would be eligible for only a 10 percent match. All 
other communities would be eligible for a 25 percent match.
    Small communities that are not currently in the EAS program 
would have the opportunity to seek financial assistance to 
facilitate their transportation needs as long as they make a 25 
percent match, and we are pulling from part of the Small 
Community Air Service Development Pilot Program in that 
initiative, but we think these changes will require communities 
and States to rethink carefully their air transportation needs 
as well as the most effective ways of meeting those needs.
    Doing so in some cases will require them to make very tough 
choices, and we certainly acknowledge that, but we believe that 
under the new program, more participation at the State level 
and the community level will more accurately assess the 
services throughout the State in conjunction with other 
transportation initiatives to ensure a coordinated, effective 
approach to addressing the State's transportation requirements. 
We think these reforms will better serve small communities, 
provide them with greater participation, flexibility, and 
control in tailoring their services.
    In closing, Mr. Chairman, I do want to reaffirm Secretary 
Mineta's and the Administration's commitment to service to 
small communities. I will be happy to take any questions.
    [The prepared statement of Ms. Van de Water follows:]

 Prepared Statement of Hon. Read C. Van De Water, Assistant Secretary 
  for Aviation and International Affairs, Department of Transportation

    Good morning Mr. Chairman and members of the Committee. I am 
pleased to be here today to discuss more fully the Administration's 
Flight-100 reauthorization proposal for small community transportation 
service. My experience involving what is now the Essential Air Service 
Program has reinforced for me the absolute need to reform how the 
government supports small community transportation. Without fundamental 
changes to the way in which the Federal Government addresses these 
transportation issues, communities will have little, if any, control 
over the service that is provided--the service in many cases may only 
be partially responsive to the community needs. Moreover, there is no 
doubt that it will be increasingly more expensive for the government to 
support those services. Even before September 11, which affected air 
service throughout the country, including smaller communities, the 
costs under the EAS program had grown substantially, but use of the 
services was generally poor. Since September 11, we have received 44 
notices by carriers to terminate the last service at a community, most 
of them triggering first-time EAS subsidy.
    In Flight-100, the Administration has proposed a comprehensive new 
program for small community transportation service that changes both 
the dynamics and the participants in the process. The key substantive 
reforms in the program go to the heart of what has been recognized as a 
significant omission in how we address small community transportation--
participation by the communities involved.
    Under our proposal, communities will:

   Participate directly in developing a plan for responding to 
        their transportation needs. Throughout the history of the 
        Essential Air Service program, the Federal Government has 
        determined what service the community would receive. Under our 
        proposed reforms for small community transportation service, 
        communities will have a leadership role in designing the 
        transportation service that will best meet their individual 
        community's needs. Communities themselves are in the best 
        position to know their needs and their ability to support the 
        services to meet those needs. By participating in the design of 
        the services provided, the community and the government can 
        help ensure more effective decisions on how best to address the 
        community's needs. Our experience with the Small Community Air 
        Service Development Pilot Program has confirmed the strong 
        desire of communities to be active participants in this 
        process. The GAO report on small community service also 
        emphasized that service initiatives were most successful where 
        the communities had active participation in the solutions and 
        were committed to those solutions.

   Have flexibility in meeting transportation needs. 
        Traditionally, under the EAS program there has been a ``one 
        size fits all'' service plan. In the early stages of the EAS 
        program, that system actually worked well and, more often than 
        not, was responsive to the needs of most small communities. As 
        a result of the growth and evolution of air service since then, 
        including expanded hub-and-spoke systems, the more recent 
        growth of low-fare carrier services, and changes in regional 
        air carrier services, this model is no longer a universal 
        template. Our proposal provides communities a broader range of 
        options available to address their air service needs, including 
        less frequent or charter type service, use of smaller aircraft 
        better matched to the actual demand for service, ground service 
        alternatives, and regional service initiatives where several 
        communities could be served through one airport, but with 
        larger aircraft or more frequent flights. Again, our experience 
        with the Pilot Program has been very instructive. Many 
        communities recognize that their needs have changed and that a 
        broader range of options may be the difference between 
        successful service and service that is rarely used. Greater 
        flexibility will make it possible for communities and the 
        government to respond more effectively and efficiently with the 
        service that the community needs.

   Participate financially in the service plan. We believe that 
        services at small communities will be more effective if the 
        community is a full partner with the government. In addition to 
        participating in the design of the service provided, this also 
        involves support for that service--support not only in 
        ridership, but also financially. As a stakeholder in the 
        transportation, the community gains greater control over how 
        the service is provided and its potential for success. The 
        amount of community contribution would be determined by the 
        degree of isolation. Our proposal calls for a sliding scale for 
        financial contributions to the service with the most remote 
        communities contributing at a lower level and the least 
        isolated contributing at a higher level. While this has been 
        the most criticized aspect of the proposal, the Pilot Program 
        has shown that communities are able and willing to participate 
        financially in their transportation services. In last year's 
        grant process, over 70 percent of the communities were prepared 
        to contribute at least 10 percent of the cost of the proposed 
        initiative. Nearly half were prepared to contribute at least 25 
        percent. I want to emphasize that we recognize that there are 
        certain circumstances under which a community might not be 
        required to make a financial contribution due to special 
        geographical considerations, and we would be prepared to 
        consider those on a case-by-case basis.

    Under this new program:

   All communities that are now under the EAS program would be 
        eligible for financial assistance for their transportation 
        services, provided that they contribute toward the cost of the 
        service.

   Those communities will have the opportunity to enhance their 
        service with more frequency or larger equipment (air or 
        surface) with an additional financial contribution. They may 
        also seek additional financial assistance for other components 
        of their air service plan, such as marketing and other 
        promotional initiatives.

   Communities close to jet service (within 100 highway miles 
        of a large or medium hub, 75 from a small hub, or 50 from a 
        non-hub with jet service) would be eligible for surface 
        transportation only, splitting the cost of the service with the 
        Federal Government--50/50.

   Communities more than 210 miles from the nearest large or 
        medium hub are eligible for any type of air or ground service, 
        with a contribution of at least 10 percent of the cost of the 
        service.

   All other communities are eligible for any type of air or 
        ground service, with a contribution of at least 25 percent of 
        the cost of the service.

   Small communities (small hubs and smaller) not encompassed 
        by the existing EAS program may also seek financial assistance 
        to facilitate their transportation needs, provided that they 
        make a financial contribution of at least 25 percent.

    These changes will require communities to rethink carefully their 
air transportation needs, as well as the most effective ways of meeting 
those needs; doing so in some cases will also require making some very 
tough and unpopular decisions. I also believe that under the new 
program more participation at the state level will be necessary to 
assess the services throughout the state in conjunction with other 
transportation initiatives to ensure a coordinated, effective approach 
to addressing the state's transportation requirements. I am confident 
that the reforms proposed by the Administration will better serve small 
communities, providing them with greater participation, flexibility, 
and control in tailoring service to their individual needs, and will 
more effectively direct Federal funds to where they are needed most.
    In closing, Mr. Chairman, I want to reaffirm the Administration's 
commitment to small community transportation. With this proposal, the 
Administration has taken a necessary and important step to develop a 
more responsive and efficient system of transportation for smaller 
communities. We look forward to working with you and members of this 
committee toward accomplishing these objectives. Thank you again for 
inviting me today to this hearing. This concludes my prepared 
statement. I will be happy to answer any of your questions.

    The Chairman. Thank you. Dr. Dillingham, before we proceed 
to you, I note Senator Stevens is here and he has a very busy 
schedule. I wonder if Senator Stevens has any comments he would 
like to make before we move to Dr. Dillingham.
    Senator Stevens. Thank you very much, Mr. Chairman. I am on 
my way to a conference here in a minute, and I am taking the 
time to read Ms. Blakey's statement and Ms. Van de Water's 
while I am listening to Dr. Dillingham, so I will be here a few 
minutes. Thank you for your courtesy. Thank you very much.
    The Chairman. Thank you. Dr. Dillingham, welcome back.

  STATEMENT OF GERALD L. DILLINGHAM, DIRECTOR, CIVIL AVIATION 
               ISSUES, GENERAL ACCOUNTING OFFICE

    Dr. Dillingham. Thank you, Mr. Chairman.
    As we all know, the circumstances for aviation have changed 
dramatically since AIR-21 was enacted. The downturn in the 
Nation's economy, the terrorist attacks of 9/11, the war in 
Iraq, and more recently the SARS health crisis have all taken a 
toll on aviation. We think that the current slowdown in the 
economy and in the aviation industry has created a window of 
opportunity to prepare for the system's inevitable rebound and 
projected growth without the pressures of congestion and delay.
    There are also some challenges that need to be addressed in 
order to take advantage of this window of opportunity. My 
testimony this morning will identify some of the key challenges 
that reauthorization could address to enhance the capacity, 
efficiency, and safety of the national air space system, as 
well as some management issues at FAA.
    Chief among the challenges associated with increasing 
system capacity is ensuring the continued availability of funds 
for airport capital development. Over the last 5 years, funds 
for capital projects have increased, in part due to the 
increase in the Federal funding available through the AIP 
program.
    The future availability of AIP funds for airport 
development may be affected by the continued use of large 
amounts of funds for security projects. As several have 
mentioned this morning, last year there was an 800 percent 
increase in the use of AIP funds for security projects. As the 
Administrator said, FAA expects to use another half billion 
dollars of AIP funds for security again this year. Our work has 
shown that there was a direct effect on the availability of 
funding for capital development as a result of the use of AIP 
funds for security. The effect for this year should be looked 
at very carefully.
    Runway development is also central to the challenge of 
increasing system capacity. The consensus is that building 
runways is one of the most effective ways to increase capacity. 
Many stakeholders believe that if the environmental review 
process is streamlined, it will ease the 10- to 14-year 
timeframe for building a runway. In our work, we also found 
that reaching agreement with community groups about quality-of-
life issues such as noise could be just as difficult and time-
consuming as the environmental review process. This finding 
suggests that initiatives aimed at addressing other community 
concerns are at least as important as the environmental review 
process.
    Turning to the challenge related to the efficiency of the 
National Airspace System, many of the efforts to improve the 
system efficiency are focused on modernizing the air traffic 
control system, and over the years, Congress and the 
Administration have taken several significant actions to 
address the chronic problems associated with the modernization 
program.
    In 1995, Congress granted FAA unique and unprecedented 
acquisition in human capital flexibility, and although many key 
air traffic control projects continue to experience cost 
schedule and performance problems, our work has shown that 
these flexibilities have contributed to some improvement in 
FAA's ability to manage the modernization program and its 
ability to implement some systems.
    We have also found that in both of these areas, FAA has not 
yet fully implemented the flexibilities. Elements not fully 
implemented include processes for evaluating the results of the 
reforms, and for using that information to modify or change the 
reform. In 2000, a three-part structure to improve the 
oversight, management, and operation of the air traffic control 
system was enacted.
    One of the three elements, the oversight element, which is 
the Air Traffic Services Subcommittee, has been implemented. It 
has emphasized performance management, accountability, and the 
development of a more business-like structure to the management 
of the air traffic control system, but neither the key 
management element, the chief operating officer, nor the key 
operations element--a performance-based organization--have been 
implemented.
    Not surprisingly, the new structure is not yet functioning 
as it was intended. Completing the implementation of these 
reform efforts is critical to enhancing the efficiency of 
modernizing and operating the air traffic control system.
    Turning now to the safety challenge, our work shows that 
safety is still paramount at FAA. Safer Skies and the Air 
Traffic Oversight System, or ATOS, are the principal safety 
initiatives underway at FAA. In both cases, we identified some 
problems in the early stages of these initiatives. However, 
they both show promise for enhancing safety. Again, complete 
and full implementation of the initiatives needs to occur, 
along with the evaluation of the outcomes, which can then be 
used to modify and strengthen the program.
    We agree with the Administrator about the importance of FAA 
and TSA maintaining close coordination. Because of the often 
vital link between aviation safety and security, we believe it 
should be viewed as a new challenge in the aviation safety 
area.
    Turning to our last key challenge of FAA's business 
operations, with declining resources and increasing demands, it 
is especially important that FAA seek to improve its business 
operations by controlling or reducing costs. We think that 
strong internal controls are essential to ensure that programs 
run efficiently and to prevent potential fraud, waste, and 
abuse.
    In our work, we found that FAA faces some significant 
challenges in the area of internal controls. For example, we 
found instances in which internal control weaknesses in FAA's 
purchase card program contributed to almost $5.5 million of 
improper purchases by employees and over a half million dollars 
in purchases that were considered wasteful or questionable in a 
1-year period. To its credit, FAA immediately implemented 
program reforms to address our findings. It is important that 
FAA stay the course in this area and ensure full implementation 
of these reforms.
    The DOT Inspector General reported similar concerns with 
FAA's internal controls for accounting and for distributing 
labor costs for air traffic controllers. Fixing this internal 
control weakness is particularly important, because FAA needs 
accurate data for workforce planning. Accurate workforce data 
is especially important as FAA plans for the expected attrition 
of thousands of air traffic controllers in the next few years.
    Thank you, Mr. Chairman, for inviting GAO to be here this 
morning. Our office stands ready to assist this committee in 
any way we can as it proceeds with its very important 
reauthorization.
    [The prepared statement of Dr. Dillingham follows:]

         Prepared Statement of Gerald L. Dillingham, Director, 
         Civil Aviation Issues, U.S. General Accounting Office

    Mr. Chairman and members of the Committee:
    We are here today to discuss the reauthorization of Federal 
aviation programs and issues relevant to ensuring the safe and 
efficient operation of the National Airspace System. \1\ Much has 
changed since the Wendell H. Ford Aviation Investment and Reform Act 
for the 21st Century (AIR-21) reauthorized the Federal Aviation 
Administration's (FAA) programs 3 years ago. At that time, as you know, 
air traffic was increasing, and concerns about congestion and flight 
delays were paramount. Since then, the downturn in the nation's 
economy, the terrorist attacks of September 11, 2001, and, most 
recently, the war in Iraq have taken a heavy toll on aviation. Flights 
that were once filled are now being canceled for lack of business, and 
major air carriers are in serious financial difficulty. Furthermore, as 
the Federal budget deficit has increased, competition for federal 
resources has intensified. Analysts nonetheless expect the demand for 
air travel to rebound, and the Nation's aviation system must be ready 
to accommodate the projected growth safely and securely. The current 
slowdown in the economy and in the aviation industry has created a 
window of opportunity to prepare for this growth without the pressures 
of congestion and flight delays. My statement today focuses on the 
challenges that the Congress, the Administration, and FAA face in 
increasing aviation capacity, efficiency, and safety, and maintaining 
controls over costs. My statement is based primarily on our published 
reports, as well as our ongoing work for this committee discussed in 
the scope and methodology section at the end of the statement.
    In summary:

   Increasing capacity and service in the National Airspace 
        System poses several challenges for the Congress and the 
        Administration during this reauthorization process. Chief among 
        them is deciding how much of airports' planned capital 
        development should be funded to increase capacity and service, 
        as well as improve the efficiency and safety of the National 
        Airspace System. Funds for airports' capital development have 
        increased over the last 5 years, in part because of increases 
        in the Federal grant funding provided to airports under the 
        Airport Improvement Program. Current funding levels are 
        sufficient to cover much of the estimated cost of planned 
        capital development. However, future funding levels may be 
        affected by changes in the allocation of Airport Improvement 
        Program grant funds and by projected decreases in the Airport 
        and Airway Trust Fund, which supports the Airport Improvement 
        Program and other FAA accounts. Other challenges include 
        building runways expeditiously to increase capacity and 
        providing air service to small communities. Runway development 
        now takes 10 to 14 years, primarily because of time-consuming 
        environmental reviews and community concerns. Two Federal 
        programs, the Essential Air Service and the Small Community Air 
        Service Development Pilot programs, help bring air service to 
        small communities, but the costs of this service are increasing 
        while passenger ticket revenues are declining. The 
        Administration is proposing an approach to streamline the 
        environmental reviews required for runway development, and 
        intermodal alternatives, such as rail or bus service, could 
        provide access to the national air transportation system for 
        some small communities.

   Efforts to improve the efficiency of the National Airspace 
        System by modernizing its principal component, the air traffic 
        control system, face ongoing challenges despite actions taken 
        by the Congress and the Administration to eliminate the cost 
        overruns, schedule delays, and performance shortfalls that have 
        plagued FAA's air traffic modernization program and led us to 
        designate this program as high risk. These actions include 
        granting FAA acquisition and human capital flexibilities in 
        1996 and creating a new, three-component structure to improve 
        the oversight, management, and operation of the air traffic 
        control system in 2000. Our work has shown that FAA has 
        responded to these actions to varying degrees, but more remains 
        to be done. Overall, FAA is improving its management of the air 
        traffic modernization program and has implemented some systems, 
        but key projects continue to experience cost, schedule, and 
        performance problems. Additionally, FAA has used its 
        acquisition flexibilities to establish an acquisition 
        management system and its human capital flexibilities to fully 
        or partially implement human capital reform initiatives. The 
        acquisition management system has provided FAA with a 
        structured management approach for selecting and controlling 
        its investments, and the human capital reform initiatives are 
        affording opportunities for FAA to manage its workforce more 
        efficiently. However, in implementing both of these reforms, 
        FAA has not yet incorporated important processes or elements 
        for evaluating the results of its efforts, modifying these 
        efforts as necessary, and holding its managers accountable. 
        Finally, one of the three components of the new structure for 
        improving the performance of the air traffic control system has 
        been implemented. The oversight component, the Air Traffic 
        Services Subcommittee, has been meeting since January 2001 and 
        emphasizing performance management, but without the management 
        and operating components, the new structure is not yet 
        functioning as intended. Completing the implementation of, and 
        continuing to improve, these efforts will be important to 
        enhancing the efficiency of the air traffic control system.

   Important steps have been taken to enhance aviation safety, 
        but some challenges remain. Safer Skies, an initiative designed 
        by FAA and the aviation industry to reduce the nation's fatal 
        aviation accident rate by 80 percent by 2007, is the 
        centerpiece of these efforts to improve aviation safety. This 
        initiative began in 1998, and many preventive actions are under 
        way but have not yet been fully implemented. Another key effort 
        to improve aviation safety is FAA's Air Transportation 
        Oversight System, which was redesigned to provide more 
        effective inspections of the Nation's airline operations. In 
        reporting on this system in 1999, we noted that it incorporated 
        important features to ensure that airlines have systems to 
        control risks and prevent accidents, but that it had 
        encountered startup problems with data collection and program 
        guidance. \2\ Many of these problems were not yet fully 
        resolved when the Department of Transportation's Inspector 
        General reported on the inspection system last year. \3\ 
        Finally, because of the often vital link between aviation 
        safety and aviation security, it will be critical for FAA to 
        ensure that aviation safety is maintained as the Department of 
        Homeland Security's Transportation Security Administration 
        implements new security enhancements.

   With the decline in revenues to the Airport and Airway Trust 
        Fund--the principal source of funding for most of FAA's 
        operations, facilities and equipment, and grant programs--it is 
        especially important that FAA control or reduce costs, run its 
        programs efficiently, and detect and prevent fraudulent 
        activities. FAA, however, faces challenges in implementing 
        controls over its costs. For example, during Fiscal Year 2000, 
        weaknesses in the internal controls over FAA's purchase card 
        program contributed to $5.4 million in improper purchases by 
        FAA employees and over $630,000 in purchases that were 
        considered wasteful or questionable. In addition, FAA has 
        partially implemented a new cost accounting system that enables 
        it to track 70 percent of its air traffic services costs; 
        however, according to the Department of Transportation's 
        Inspector General, this system lacks internal controls over 
        $3.1 billion in labor costs. The Inspector General further 
        noted that a portion of this system, if implemented as 
        designed, could provide workforce data that would be helpful in 
        determining how many controllers are needed and where. These 
        data would assist FAA in planning for the anticipated 
        retirement of large numbers of air traffic controllers in the 
        near and long term.

Efforts to Increase Aviation Capacity and Service Face Funding and 
        Other Challenges
    During this reauthorization period, the Congress and the 
Administration face several key challenges in attempting to increase 
the capacity of the National Airspace System and expand service to 
small communities. These challenges include determining (1) how much 
airport capital development is needed, (2) how that development will be 
funded, (3) how assistance for enhancing air service to small 
communities will be provided, and (4) how the current process for 
enhancing capacity, particularly the runway development process, can be 
expedited.
FAA and the Airport Industry Have Developed Different Estimates of 
        Airports' Planned Capital Development Costs
    FAA and the Airport Council International (ACI), an organization 
representing the airport industry, have developed two different 
estimates of airports' planned capital development costs that are based 
on two different sets of projects. According to FAA's estimate, which 
includes only projects that are eligible for Airport Improvement 
Program (AIP) grants, such as runways, taxiways, and noise mitigation 
and noise reduction efforts, the total cost of airport development will 
be about $46 billion, or over $9 billion per year, for 2001 through 
2005. FAA's estimate is based on the agency's National Plan of 
Integrated Airport Systems, which FAA published in August 2002. ACI's 
estimate includes all of the projects in FAA's estimate, plus other 
planned airport capital projects that may or may not be eligible for 
AIP grants. Projects that are not eligible for AIP funding include 
parking garages, hangars, and expansions of commercial space in 
terminals. ACI estimates a total cost of almost $75 billion, or nearly 
$15 billion per year, for 2002 through 2006. Neither ACI's nor FAA's 
estimate includes funding for the terminal modification projects that 
are needed to accommodate the new explosives detection systems required 
to screen checked baggage. ACI estimates that these projects will cost 
about $3 billion to $5 billion over the next 5 years.
    Although there is a difference of $6 billion a year between FAA's 
and ACI's estimates of planned development costs, both estimates cover 
projects for every type of airport. As table 1 indicates, the estimates 
are identical for all but the large-and medium-hub airports, which are 
responsible for transporting about 90 percent of the traveling public. 
For these airports, ACI's estimate of planned development costs is 
about twice as large as FAA's. As the Congress moves forward with 
reauthorizing FAA's programs, it will have to determine what level of 
planned capital development is appropriate to increase the capacity, 
efficiency, and safety of the National Airspace System.

 Table 1: Average Annual Planned Development Costs Estimated by FAA and ACI, by Airport Type, 2001-2006 (Dollars
                                                  in millions)
----------------------------------------------------------------------------------------------------------------
                                                                              Estimated average annual costs
                    Airport type                      Number of airports ---------------------------------------
                                                                                  FAA                 ACI
----------------------------------------------------------------------------------------------------------------
Large hub                                                            31              $4,855              $8,554
Medium hub                                                           37               1,073               3,109
Small hub                                                            71                 675                 675
Nonhub                                                              280                 807                 807
Other commercial service                                            124                 142                 142
Reliever                                                            260                 526                 526
General aviation                                                  2,558               1,167               1,167
----------------------------------------------------------------------------------------------------------------
    Total                                                         3,364              $9,245             $14,980
----------------------------------------------------------------------------------------------------------------
Source: FAA and ACI.


Airports' Ability to Fund Planned Capital Development Has Improved
    Over the past 5 years, the ability of airports--especially smaller 
airports--to fund their capital development projects has improved, in 
part because AIR-21 increased both the total amount of funding for AIP 
grants and the proportion of AIP funding that went to smaller airports. 
In 1998, we reported that large-and medium-hub airports could fund 
about 79 percent of their planned capital development and smaller 
airports could fund about 52 percent of their planned capital 
development if they continued to receive funding at prior years' 
levels. In 2003, the funding ability of both groups of airports 
increased. As shown in figure 1, large-and medium-hub airports could 
fund about 80 percent of their planned capital development, an increase 
of 1 percentage point, while smaller airports could fund about 73 
percent of their planned capital development, an increase of 21 
percentage points, assuming the continuation of prior years' funding 
levels. \4\


    The primary reason why smaller airports are able to fund 73 percent 
of their planned development in 2003, rather than the 52 percent we 
reported in 1998, is that they have benefited significantly from the 
increases in AIP grants, which are a larger source of funding for 
smaller airports than for larger airports. In addition, smaller 
airports have received an increasing share of AIP grants because of 
statutorily required changes in the distribution of AIP grants. For 
example, in AIR-21, the Congress increased the funding for two grant 
categories that primarily or exclusively benefit smaller airports--the 
state apportionment fund and the small airport fund--and created 
general aviation entitlement grants, which also benefit smaller 
airports. The Senate's and the Administration's reauthorization 
proposals continue to support increases in the amount of AIP grant 
funding awarded to smaller airports. In spite of the progress that has 
been made, over 25 percent of planned capital development is not 
funded. The Congress needs to be mindful of this situation as it 
considers reauthorization issues.
Changes in the Use of AIP Grants and Additional Decreases in Trust Fund 
        Revenue Could Affect Airports' Future Funding Ability
    The use of AIP grants to fund new airport security requirements and 
additional decreases in the Airport and Airway Trust Fund's \5\ 
revenues could affect the future ability of airports to fund their 
planned capital development. In recent fiscal years, airports obtained 
most of their funding for planned capital development from bonds, AIP 
grants, and passenger facility charges. \6\ Because the Trust Fund is 
the source of funding for AIP grants, its financial condition is 
important to the ability of airports to fund capital development, and 
decreases in its revenues could reduce the amount of funding for 
airport planned capital development. Reductions in AIP grant funds 
would have the greatest effect on smaller airports, which derive most 
of their planned capital development funding from AIP grants, whereas 
large-and medium-hub airports derive most of their funding from bonds.
Continued Use of AIP Grant Funds for Security Projects Would Reduce 
        Funding for Capacity Projects
    According to FAA officials, FAA plans to allocate the same amount 
of AIP grant funds for new security projects at airports in Fiscal Year 
2003 as it allocated in Fiscal Year 2002--$561 million. As we reported 
in October 2002, \7\ the use of AIP grants for security projects 
reduced the funding available for other airport development projects, 
such as projects to bring airports up to FAA's design standards and 
reconstruction projects, and caused FAA to defer three letter-of-intent 
payments totaling $28 million to three airports until Fiscal Year 2003 
or later. \8\ Among the key reauthorization issues facing the Congress 
are how the funding needs for capacity and security projects will be 
balanced and how the new security requirements, including the terminal 
modification projects that are expected to cost $3 billion to $5 
billion, will be funded.
Additional Declines in Airport and Airway Trust Fund Revenue Could Also 
        Affect Amount of AIP Grant Funds Available for Future Capital 
        Development
    The future ability of airports to fund planned capital development 
may be affected by uncertainties surrounding the condition of the Trust 
Fund. As you know, the Trust Fund is the source of funding not only for 
AIP grants but also for other FAA accounts, including facilities and 
equipment; research, engineering, and development; and most operations. 
Revenues to the Trust Fund come from several types of taxes, including 
passenger ticket and fuel taxes. Although projections made in November 
2002 indicate that the Trust Fund will be able to meet its traditional 
obligations over the next 10 years, the financial outlook for the next 
5 to 8 years is uncertain, in part, because passenger traffic has 
decreased with the slowdown in the economy. Current estimates indicate 
that between Fiscal Year 2003 and Fiscal Year 2007, the Trust Fund's 
2002 uncommitted balance of about $4.8 billion will decline by about $4 
billion, leaving a balance of less than a billion dollars. In addition, 
if revenues fall short of current projections, the Trust Fund's 
uncommitted balance may be zero. Under this scenario, AIP grants and 
other FAA accounts supported by the Trust Fund could potentially 
receive less funding, and the Congress and the Administration would 
have to decide how to offset the potential decreases.
    As figure 2 shows, from 1999 through 2002, revenues to the Trust 
Fund have declined, while expenditures from the fund have increased. 
Revenues fell from about $11 billion in 1999 to almost $10 billion in 
2002, a decrease of almost 10 percent. During the same period, 
expenditures increased from about $8 billion to about $12 billion, an 
increase of about 47 percent. As a result, the uncommitted balance 
(surplus) has fallen by nearly 35 percent, from $7 billion in 1999 to 
almost $5 billion in 2002. 



    The major reason for the decline in Trust Fund revenues was a drop 
in passenger ticket tax revenues, which fell by nearly $1.2 billion 
from 1999 to 2002. The increase in Trust Fund expenditures from 1999 
through 2002, amounting to almost $4 billion, can be attributed 
primarily to increases in funding for FAA operations and AIP grants, 
which accounted for about 47 percent and about 34 percent of the total 
increase, respectively.
    In addition, the Administration is proposing actions that would 
further reduce the Trust Fund balance over the next several years. 
Specifically, the President's Fiscal Year 2004 budget request would 
increase the percentage of FAA operations funded by the Trust Fund from 
75 percent \9\ to 79 percent. The decrease in Trust Fund revenues and 
increase in Trust Fund expenditures presents an issue that the Congress 
may want to address as it moves forward with the reauthorization 
process.
Resolving Challenges to Runway Development Remains an Important Issue
    While there is a general consensus that building runways is one of 
the most effective ways to increase capacity in the National Airspace 
System, resolving the challenges associated with planning and building 
runways is an important issue that is directly related to enhancing 
capacity. In December 2002, FAA published the most recent version of 
its Operational Evolution Plan, a 10-year plan to increase the capacity 
and efficiency of the National Airspace System, primarily by building 
runways. \10\ Figure 3 illustrates how capacity will be increased at 
one airport through runway construction. 



    If successfully carried out, FAA's Operational Evolution Plan would 
substantially increase capacity and improve efficiency. However, FAA 
faces several challenges in implementing the plan. First, the success 
of the plan depends on adequate funding and on the consensus of FAA's 
aviation industry partners. Yet according to the most recent version of 
the plan, the timing and implementation of some activities may be in 
jeopardy because of the current economic situation and the uncertain 
viability of some industry participants. For example, the plan calls 
for the airline industry to invest $11 billion in new equipment for 
aircraft. FAA is currently reviewing the ability of the airlines to 
make this investment. Second, as noted, the plan relies heavily on 
runway development to increase capacity, but the most recent version of 
the plan reports mixed results in building new runways. While the plan 
indicates that one new runway will be built during the next 10 years, 
it points out that another runway has been canceled and the 
construction of six additional runways has been delayed because of 
local situations.
    In January 2003, we reported that airports spent about 10 years 
planning and building recently completed runways and expect to spend 
about 14 years on runways that are not yet completed. \11\ We also 
reported that several external factors affect how much time is spent 
planning and building runways, and several airports with unfinished 
runway projects identified significant challenges that had delayed the 
completion of their projects. While many airports believed that 
completing the environmental review phase was a significant challenge 
and is an issue that warrants immediate attention, airports also faced 
obstacles that some said were as onerous as the environmental review 
phase. They identified significant challenges in reaching agreement 
with community interest groups during the planning phase and in 
mitigating the potential impact of aircraft noise on the surrounding 
community. Although there may be no single solution to resolving all of 
the issues involved in planning and building runways, the Federal 
Government and airport authorities are taking some action. For example, 
the Senate's and the Administration's reauthorization proposals call 
for streamlining the environmental review of transportation 
infrastructure projects.
    Recognizing that building new runways is not always a practicable 
way to increase capacity at some airports, we identified three 
alternatives to building runways in our December 2001 report: \12\

   Find ways to manage and distribute demand within the 
        system's existing capacity at busy airports such as LaGuardia, 
        by, for example, limiting the number of takeoffs and landings 
        during peak periods or limiting the ability of general aviation 
        aircraft to use especially congested airports (under current 
        law, all aircraft have equal access to even the largest 
        airports). Airports are restricted in using pricing to reflect 
        the scarcity and congestion of airspace.

   Add capacity by using nearby airports that have available 
        capacity.

   Examine other modes of intercity travel, such as high-speed 
        rail, where metropolitan areas are relatively close, to form an 
        integrated, intermodal transportation network.

    Accordingly, we recommended that the Department of Transportation 
(DOT) begin a more extensive evaluation of initiatives, including 
intermodal solutions and a dialogue with transportation stakeholders, 
as a basis for developing a comprehensive blueprint for addressing the 
nation's long-term transportation needs. DOT has recognized the need 
for more and better long-range planning on the potential use of such 
measures and agreed with our recommendation. The Department's 
evaluation efforts are in the beginning stages. The current hiatus in 
air traffic growth creates an opportunity for the development of long-
term transportation plans.
Federal Programs to Help Small Communities Improve Air Service Face 
        Budgetary Pressures and Questions about Their Effectiveness
    While the need for greater capacity is a vital issue for some 
large-and medium-hub airports, the primary issue at other airports that 
serve small communities is to obtain or retain commercial air service. 
The reauthorization process provides an opportunity for the Congress to 
clarify the Federal strategy for helping small communities acquire the 
commercial air service they desire. Currently, the challenges that 
small communities have long faced in obtaining or retaining commercial 
air service are increasing as many U.S. airlines try to stem 
unprecedented financial losses through numerous cost-cutting measures, 
including reducing or eliminating service in some markets. Small 
communities feel such losses disproportionately because they may have 
service from only one or two airlines. For them, reductions can mean no 
air service at all.
    The Essential Air Service (EAS) program, authorized under the 
Airline Deregulation Act of 1978, guarantees that small communities 
served before deregulation will continue to receive a certain level of 
scheduled air service. Its costs have more than tripled since Fiscal 
Year 1995, and indications are that without changes to the program, the 
demand for subsidies will soon exceed the program's $113 million 
appropriation for Fiscal Year 2003. At the same time, aggregate 
passenger levels at EAS-subsidized airports continue to fall. Often 
fewer than 10 percent of a community's potential passengers use the 
subsidized local service; the rest choose to drive to their destination 
or drive to a larger airport that offers lower fares or more frequent 
service to more destinations. In 2000, the median number of passengers 
on each EAS-subsidized flight was three. The Administration's budget 
proposal for Fiscal Year 2004 would substantially reduce the federal 
subsidy for small community air service and require communities that 
wish to retain the service to help subsidize it. Specifically, the 
budget proposal would reduce federal EAS funding from $133 million in 
2003 to $50 million in 2004, alter the eligibility criteria for 
funding, and require nonfederal matching funds. Consistent with its 
budget proposal, the Administration's reauthorization proposal would 
restructure the EAS program to direct its resources to the small 
communities with the greatest need to maintain access to national air 
transportation service. The Senate bill proposes to reauthorize funding 
for the program at current levels.
    The Small Community Air Service Development Pilot Program, 
authorized as part of AIR-21, provides grants to communities to enhance 
local air service. In Fiscal Year 2002, 180 communities requested over 
$142 million in air service development grants, and $20 million was 
appropriated. In March 2003, we reported that the program funded some 
innovative approaches. \13\ For example, Mobile, Alabama, received 
about $450,000 to provide ground-handling services to an airline, and 
Caspar, Wyoming, received $500,000 to purchase and lease back an 
aircraft to an airline to ensure service to the community. The program 
also funded the same types of projects that many small communities have 
undertaken in recent years, such as evaluations of marketing activities 
and the use of financial incentives to encourage airlines to either 
start or enhance service. According to our analysis of similar 
approaches used by about 100 small communities, financial incentives 
offered the most promise for attracting new or additional service. 
However, the additional service typically ended with the incentives. 
The sustainability of such improvements in air service over the longer 
term appeared to depend on the community's size and ability to 
demonstrate a commitment to that air service, either by providing a 
profitable passenger base or through direct financial assistance. As 
you know, the Administration's Fiscal Year 2004 budget proposal would 
eliminate the funding for this pilot program. It is too soon to 
determine how effective the various types of initiatives funded through 
this program might prove to be. Other options for making the national 
air transportation system more accessible to small communities might 
include intermodal initiatives such as those we proposed as 
alternatives to runway development.
Efforts to Improve the Efficiency of the Air Traffic Control System 
        Face Ongoing Challenges
    Improving the efficiency of the air traffic control system will be 
important to accommodate the expected return to pre-September 11 air 
traffic levels. Efforts to achieve this improvement pose continuing 
challenges, as FAA attempts to put acquisition management and human 
capital reforms in place and establish an effective oversight and 
organizational structure to help ensure that resources are spent cost- 
effectively and improvements are realized.
FAA's Air Traffic Modernization Remains High Risk
    To increase the safety, capacity, and efficiency of the National 
Airspace System, FAA undertook a major effort in 1981 to modernize and 
replace aging air traffic control equipment. This effort, which 
includes major projects in such areas as communications, surveillance, 
navigation, and weather, has been plagued by cost overruns, schedule 
delays, and performance shortfalls. As a result, we designated FAA's 
air traffic modernization program as high risk in 1995, and we continue 
to designate it as such. \14\ Figure 4 combines our and the DOT 
Inspector General's analysis of FAA's progress in meeting cost and 
schedule goals for selected air traffic control projects--the Standard 
Terminal Automation Replacement System (STARS), Wide Area Augmentation 
System (WAAS), Next-Generation Air/Ground Communication (NEXCOM), free 
flight, Local Area Augmentation System (LAAS), and Integrated Terminal 
Weather System (ITWS).



    FAA is making progress in managing the air traffic control 
modernization effort and has implemented some key projects. For 
example, the agency has replaced the automated color display equipment 
used by air traffic controllers to control traffic in some facilities 
(Display System Replacement); installed the initial phase of the 
computer that receives, processes, and tracks aircraft movement 
throughout the airspace system (HOST computer); and implemented some 
free flight technologies that are expected to allow for more efficient 
use of the system by improving operations in various segments of 
flight. Figure 5 shows an FAA representative using the Display System 
Replacement to monitor and handle air traffic.



    However, other key projects continue to experience cost, schedule, 
and performance problems. The Inspector General has reported that the 
costs of five acquisitions have grown by $3 billion--the equivalent of 
1 year's budget for the modernization program--and the delay in 
completing these acquisitions has ranged from 3 to 5 years. \15\ 
Problems in implementing the Standard Terminal Automation Replacement 
System are indicative of the problems that have plagued the 
modernization program. Since September 1996, FAA has been developing 
the STARS project to replace the outdated computer equipment that air 
traffic controllers currently use in some facilities to control air 
traffic within 5 to 50 nautical miles of an airport.
    The current program presently bears little resemblance to the 
program envisioned in 1996. Initially FAA anticipated very little 
software development, planned to install STARS in 172 facilities at a 
cost of $940 million, and expected implementation to begin in 1998 and 
end in 2005. In 1999, FAA modified its acquisition approach (from off-
the-shelf software to a combination of customized and off-the-shelf 
software) and increased to 188 the number of facilities scheduled to 
receive STARS. Then the agency concluded that it did not have adequate 
funding to deploy STARS to 188 facilities, and in March 2002, it 
received approval to deploy STARS at 74 facilities that had frequent 
equipment failures, were new, or had the digital radar needed to 
operate STARS.
    FAA does not yet know to what extent its estimate of STARS's 
remaining development costs is reliable because, as we reported in 
January 2003, FAA lacks accurate, valid, current data on the STARS 
program's remaining costs and progress. \16\ Without such data, FAA is 
limited in its ability to effectively oversee the contractor's 
performance and reliably estimate future costs. Although FAA has 
adopted clear procurement management policies and procedures, it did 
not consistently apply this guidance in managing the STARS contract. 
For example, the development cost estimate is based on the contractor's 
projections, which FAA had not yet independently analyzed as its 
guidance directs. We made several recommendations to improve the 
management of STARS and subsequent terminal modernization programs and 
to provide the Congress with more reliable information for oversight. 
FAA agreed with our recommendations and is implementing them.
Acquisition Management System Is in Place, but Weaknesses Limit FAA's 
        Ability to Manage Its Investments Effectively
    As part of its procurement reforms, FAA introduced an acquisition 
management system in 1996 to reduce the time and cost to deploy new 
products and services. In 1999, we reported that this system provided a 
structured management approach for selecting and controlling 
investments, but still had weaknesses, such as incomplete data on 
projects' costs, schedule, benefits, performance, and risks, that 
limited FAA's ability to manage its investments effectively. We made 
several recommendations to address these weaknesses and FAA has made 
changes to better manage its investments. We have since found that FAA 
is overseeing investment risk and capturing key information from the 
investment selection process in a management information system and is 
also developing guidance for validating costs, benefits, and risks. 
However, FAA is not yet incorporating actual costs from related system 
development efforts in its processes for estimating the costs of new 
projects. Moreover, FAA has not yet implemented processes for 
evaluating projects after implementation in order to identify lessons 
learned and improve the investment management process. These weaknesses 
have impeded FAA's ability to manage its investments effectively and 
make sound decisions about continuing, modifying, or canceling 
projects. Because its acquisition reform effort is not complete, major 
projects continue to face challenges that could affect their costs, 
schedule, and performance.
Human Capital Reform Initiatives Do Not Incorporate Elements Important 
        for Effective Management
    In response to claims by FAA that burdensome government-wide human 
capital rules impeded its ability to hire, train, and deploy personnel, 
the Congress exempted FAA from many Federal laws \17\ governing human 
capital, and the agency began implementing sweeping human capital 
reforms in 1996. \18\ These reforms addressed three broad areas. (1) 
compensation and performance management, (2) workforce management, and 
(3) labor and employee relations. Figure 6 summarizes our analysis of 
FAA's progress in implementing initiatives in each of these areas.



    While FAA has fully or partially implemented the initiatives in 
each of its three broad reform areas, it has not fully incorporated 
elements that are important to effective human capital management into 
its overall reform effort. These elements include data collection and 
analysis, performance goals and measures, and links between reform 
goals and program goals. Furthermore, as we reported in February 2003, 
FAA has not developed specific steps and time frames for building these 
missing elements into its human capital management and for using these 
elements to evaluate the effects of its personnel reform initiatives, 
make strategic improvements, and hold the agency's leadership 
accountable.
New Structure for Improving the Performance of the Air Traffic Control 
        System Has Not Been Fully Implemented
     In 2000, AIR-21 and an executive order established a new structure 
to accelerate the modernization and improve the performance of the air 
traffic control system. This structure was to consist of (1) a five- 
member board, called the Air Traffic Services Subcommittee 
(Subcommittee), to oversee the air traffic control system, (2) a chief 
operating officer to manage the air traffic control system, and (3) a 
new performance-based organization, to be known as the Air Traffic 
Organization, to operate the air traffic control system. Under the act, 
the Subcommittee provides oversight by, among other things, reviewing 
and approving strategic plans, large contracts, and budget requests for 
the air traffic control system.
    The Subcommittee has been meeting since January 2001, but a chief 
operating officer has not yet been appointed, and FAA is waiting for an 
appointment before putting the new air traffic organization in place. 
To date, the Subcommittee has focused on bringing performance 
management, accountability, and a more businesslike structure to the 
air traffic control system, and it has taken some specific actions, 
including reviewing and approving performance metrics, a budget, and 
three large procurements that FAA initiated. However, without a chief 
operating officer or a performance-based organization, the new 
structure is not functioning as intended.
    FAA and other stakeholders have suggested reasons for the 
difficulties in implementing the new structure and have proposed 
changes to AIR-21 that they believe would address these reasons. For 
example, they have noted that the Subcommittee's authority to approve 
the budget request for the air traffic control system challenges the 
Administration's prerogative to submit a budget request reflecting its 
priorities, and they have cited uncertainties in the responsibilities 
and reporting relationships of the chief operating officer, the FAA 
Administrator, and the Subcommittee that, they say, have made it 
difficult to hire a chief operating officer. To address these issues, 
the Administration's reauthorization proposal would (1) eliminate the 
Subcommittee's approval authority, making the Subcommittee an advisory 
body, and (2) designate the FAA Administrator as the chair of the 
Subcommittee, thereby strengthening the Administrator's authority over, 
and accountability for the performance of, the chief operating officer. 
While these changes would eliminate the challenge that the 
Subcommittee's approval authority poses to the Administration's 
prerogatives; would clarify the lines of authority between the chief 
operating officer, the FAA Administrator, and the Subcommittee; and 
could make it easier to hire a chief operating officer, they would also 
limit the power of the Subcommittee. The Senate's reauthorization 
proposal would also designate the FAA Administrator as the chair of the 
Subcommittee, but it would retain the Subcommittee's approval 
authority. The merits of these and other proposed changes depend, in 
large part, on the extent to which approval authority is viewed as 
necessary or desirable to bring about improvements in the performance 
of the air traffic control system.
FAA Is Implementing Safety Initiatives and Faces New Challenges in 
        Ensuring That Security Enhancements Maintain Aircraft Safety
    Safety has always been and continues to be FAA's highest priority. 
FAA has taken a number of important steps to improve aviation safety; 
however, its planning and implementation could sometimes be more 
effective. In addition, with the transfer of most aviation security 
responsibilities to the Transportation Security Administration (TSA), 
FAA faces the challenge of maintaining close coordination with TSA to 
ensure that aircraft safety is maintained as TSA implements new 
security enhancements.
FAA and Industry Have Taken Actions to Reduce the Fatal Accident Rate
    Reducing fatal aviation accidents is key to improving aviation 
safety. FAA's centerpiece for reaching this goal is Safer Skies, an 
initiative that dates back to 1998, when FAA and aviation industry 
representatives worked together to identify the major causes of fatal 
accidents and to design and implement actions to prevent future 
accidents. Safer Skies is intended to reduce the fatal accident rate 
for commercial aviation by 80 percent and to reduce the number of fatal 
accidents for general aviation to 350 a year by 2007. \19\ Because many 
preventive actions have not yet been fully implemented, it may be too 
early to assess their effectiveness. Achieving the initiative's goals 
will require FAA to systematically implement preventive actions, such 
as requiring additional safety inspections of aircraft, and to maintain 
good data to monitor the progress of these actions and evaluate their 
effectiveness. As of February 2003, 44 preventive actions had been 
undertaken--of which 16 are completed and 28 are under way, according 
to FAA.
FAA's New Safety Inspection System Offers Promise, But Problems Still 
        Need to Be Addressed
     Improving the effectiveness of FAA's inspections of airline 
operations is key to improving aviation safety. The FAA Administrator 
has noted that perhaps the greatest support the agency can provide to 
the industry is a robust safety oversight role that will not waver in 
difficult times. FAA's new inspection program, the Air Transportation 
Oversight System, is central to this oversight role. This program, 
which was implemented in 1998, aims to ensure not only that airlines 
comply with FAA's safety requirements but also that they have operating 
systems to control risks and prevent accidents. Figure 7 shows an FAA 
inspector inspecting an aircraft for compliance with FAA's safety 
requirements.



    We reported in 1999 that FAA had not completed many critical steps, 
such as developing guidance for inspectors and creating databases to 
use in prioritizing inspection resources, before implementing the new 
inspection system in 1998. \20\ As a result, the agency's ability to 
conduct effective inspections remains limited. FAA has begun to address 
some of the problems that we identified with the guidance and the 
databases. However, according to a 2002 review by the DOT Inspector 
General, many of the problems that we identified persist, and the 
program's implementation remains inconsistent because FAA has not 
established strong oversight and accountability procedures. \21\ This 
situation limits FAA's ability to conduct more systematic, structured 
inspections; analyze the resulting data to identify safety trends; and 
target its resources to the greatest aviation safety risks.
Aviation Safety and Security Require Close Coordination Between FAA and 
        TSA
    Some key efforts under way to improve aviation security require 
interagency coordination between FAA and TSA because they could also 
affect aircraft safety. While TSA is responsible for most issues 
related to aviation security, FAA retains responsibility for those 
related to aviation safety, including approving the initial aircraft 
design, structural modifications, and procedures for emergency 
evacuation and the transportation of hazardous cargo. \22\ For example, 
strengthening cockpit doors to increase cockpit security during flights 
was one of the government's earliest responses to the September 11 
terrorist attacks. Because the modifications could increase the weight 
of the doors and change the way they are attached to the aircraft, FAA 
has been certifying these modifications to ensure that they will not 
cause decompression during flight or affect the aircraft's structural 
integrity. In addition, new security procedures require that the 
cockpit door remain locked during flight and that access to the cockpit 
be restricted to the flight crew. As a result, senior flight attendants 
will no longer carry keys to the cockpit, and FAA is approving changes 
to the procedures for rescuing the flight crew in an emergency.
    FAA is also responsible for the safe transport of dangerous 
materials onboard aircraft. Dangerous goods are chemical (including 
infectious) substances (or anything containing such substances) that 
pose a threat to public safety or the environment during 
transportation. When these goods are properly packaged, labeled, and 
stowed onboard, they can be transported safely, but when they are not, 
they can pose significant threats to people and property. TSA is 
responsible for screening all passengers and property, including cargo, 
that will be carried aboard an aircraft. If, during the screening of 
passengers or baggage, TSA discovers dangerous goods that are not 
properly packaged or labeled, TSA will need to coordinate and share 
information with FAA, which is responsible for enforcing any regulatory 
violations.
    In addition, aircraft crashes could fall under the jurisdiction of 
either FAA or TSA, depending on whether they were the results of 
accidents (FAA) or deliberate acts (TSA). It will be important for the 
two agencies to work together closely during the initial stages of 
crash investigations. To facilitate coordination on these and other 
security issues that affect aviation safety, TSA and FAA signed a 
memorandum of agreement on February 28, 2003. In addition, on March 4, 
2003, the Secretary of Transportation agreed to assign a senior 
official within the Office of the Secretary to serve as DOT's primary 
liaison to TSA. It is important that both FAA and TSA remain committed 
to coordinating closely on safety and security issues and that 
congressional oversight ensures that the memorandum of agreement is 
implemented.
FAA Faces Challenges in Implementing Controls Over Its Costs
    As the Administration and the Congress focus on increasing aviation 
capacity, efficiency, and safety, they do so in an extremely 
challenging fiscal environment--the federal budget deficit has 
increased and competition for federal resources has intensified. 
Moreover, as we mentioned previously in this statement, revenues to the 
aviation Trust Fund, which is the source of funding for most of FAA's 
operations, facilities and equipment, and grant programs, have declined 
in recent years while outlays have increased. It is, therefore, 
especially important that FAA control or reduce costs, run its programs 
efficiently, and detect and prevent fraudulent activities. We and DOT's 
Inspector General have reported that improvements are needed in these 
areas.
    For example, in March 2003, we reported that weaknesses in FAA's 
purchase card \23\ controls resulted in instances of improper, 
wasteful, and questionable purchases, as well as missing and stolen 
assets. \24\ These internal control weaknesses included inadequate 
segregation of duties (i.e., the cardholder requested the purchase, 
placed the order, and picked up or received the goods without any other 
review or approval), lax supervisory review and approval, missing 
purchase documents, inadequate training, and insufficient program 
monitoring activities, all of which created an environment vulnerable 
to fraud, waste, and abuse. During Fiscal Year 2000, these weaknesses 
contributed to $5.4 million in improper purchases by FAA employees and 
over $630,000 in purchases that were considered wasteful or 
questionable because they were missing a receipt to show what was 
actually purchased. To reduce the likelihood of improper and wasteful 
purchases, we recommended a number of actions to strengthen the 
internal controls over FAA's purchase card program, such as developing 
detailed procedures that specify the type and extent of review or 
approval that is expected. FAA agreed with our recommendations.
    In addition, DOT's Inspector General reported in January 2003 that 
FAA needs to contain increases in its operating costs and improve its 
internal controls over costs. \25\ Over the past 6 years, FAA's 
operations budget, which is 73 percent personnel costs, increased by 
over 41 percent, from $5.3 billion in Fiscal Year 1998 to $7.5 billion 
in Fiscal Year 2003. The Inspector General noted that FAA has made 
extensive use of its human capital flexibilities to substantially 
increase salaries, but has done little to reduce operating costs. FAA 
has improved its ability to track its costs by partially implementing a 
new cost accounting system that the Congress directed it to develop in 
1996. The new system, which FAA expects to be fully operational by the 
end of 2003, now tracks 70 percent of the personnel, overhead, and 
other costs related to air traffic services. However, DOT's Inspector 
General has reported problems with the labor distribution system, which 
is part of the cost accounting system and is used to account for and 
distribute air traffic controller labor costs of about $3.1 billion 
annually to specific facilities and functions. The Inspector General 
noted that the system omitted important internal controls needed to 
ensure that the time worked by air traffic controllers would be 
accurately recorded in the accounting system and paid from the proper 
account. The Inspector General brought these deficiencies to the 
attention of FAA, and the Administrator agreed to correct them. The 
Inspector General further noted that the system as designed could 
provide workforce data that would help determine how many controllers 
are needed and where. These data would assist FAA in planning for the 
anticipated retirement of large numbers of air traffic controllers in 
the near and long term. \26\ Congressional oversight is important to 
ensure that FAA follows through and corrects the problems that we and 
the Inspector General have identified so that FAA can spend its 
resources on projects and services that will provide the greatest 
return on the public's investment.
Scope and Methodology
    This statement is based primarily on issued reports that are listed 
under Related GAO Products. However, the sections on the Airport and 
Airway Trust Fund and the Air Traffic Services Subcommittee reflect our 
ongoing work for this committee. As a result, the results of this work 
that we discuss in this testimony are still preliminary.
    To assess the current and projected financial status of the Airport 
and Airway Trust Fund, we obtained financial data from FAA and 
interviewed FAA officials familiar with the information. To assess the 
status of efforts to implement the new structure established under AIR-
21 to improve the oversight, management, and operation of the air 
traffic control system, we analyzed the legislation and related 
executive order, the Administration's reauthorization proposal, and the 
first report of the Air Traffic Services Subcommittee. We also 
interviewed officials from FAA, the Air Traffic Services Subcommittee, 
and aviation industry organizations. We performed our work in 
accordance with generally accepted government auditing standards.
Contact Information
    For further information on this testimony, please contact Gerald 
Dillingham at (202) 512-2834. Individuals making key contributions to 
this testimony include Tammy Conquest, Howard Cott, Elizabeth 
Eisenstadt, Edward Laughlin, Belva Martin, Maren McAvoy, John W. 
Shumann, Teresa Spisak, and Richard Swayze.

                          Related GAO Products

    FAA Purchase Cards: Weak Controls Resulted in Instances of Improper 
and Wasteful Purchases and Missing Assets. GAO-03-405. Washington, DC: 
March 21, 2003.
    Commercial Aviation: Issues Regarding Federal Assistance for 
Enhancing Air Service to Small Communities. GAO-03-540T. Washington, 
DC: March 11, 2003.
    Airport Finance: Past Funding Levels May Not Be Sufficient to Cover 
Airports' Planned Capital Development. GAO-03-497T. Washington, DC: 
February 25, 2003.
    National Airspace System: Reauthorizing FAA Provides Opportunities 
and Options to Address Challenges. GAO-03-473T. Washington, DC: 
February 12, 2003.
    Aviation Finance: Implementation of General Aviation Entitlement 
Grants. GAO-03-347. Washington, DC: February 11, 2003.
    Human Capital Management: FAA's Reform Effort Requires a More 
Strategic Approach. GAO-03-156. Washington, DC: February 3, 2003.
    National Airspace System: Better Cost Data Could Improve FAA's 
Management of the Standard Terminal Automation Replacement System. GAO- 
03-343. Washington, DC: January 31, 2003.
    Aviation Infrastructure: Challenges Related to Building Runways and 
Actions to Address Them. GAO-03-164. Washington, DC: January 30, 2003.
    Aviation Safety: Undeclared Shipments of Dangerous Goods and DOT's 
Enforcement Approach. GAO-03-22. Washington, DC: January 10, 2003.
    High-Risk Series: An Update. GAO-03-119. Washington, DC: January 
2003.
    Air Traffic Control: Impact of Revised Personnel Relocation 
Policies Is Uncertain. GAO-03-141. Washington, DC: October 31, 2002.
    Airport Finance: Using Airport Grant Funds for Security Projects 
Has Affected Some Development Projects. GAO-03-27. Washington, DC: 
October 15, 2002.
    National Airspace System: Status of FAA's Standard Terminal 
Automation Replacement System. GAO-02-1071. Washington, DC: September 
17, 2002.
    Options to Enhance the Long-term Viability of the Essential Air 
Service Program. GAO-02-997R. Washington, DC: August 30, 2002.
    Air Traffic Control: FAA Needs to Better Prepare for Impending Wave 
of Controller Attrition. GAO-02-591. Washington, DC: June 14, 2002.
    Aviation Finance: Distribution of Airport Grant Funds Complied with 
Statutory Requirements. GAO-02-283. Washington, DC: April 30, 2002.
    Department of Transportation, Transportation Security 
Administration: Aviation Security Infrastructure Fees. GAO-02-484R. 
Washington, DC: March 11, 2002.
    Applying Agreed-upon Procedures: Airport and Airway Trust Fund 
Excise Taxes. GAO-02-380R. Washington, DC: February 15, 2002.
    National Airspace System: Long-Term Capacity Planning Needed 
Despite Recent Reduction in Flight Delays. GAO-02-185. Washington, DC: 
December 14, 2001.
    National Airspace System: Free Flight Tools Show Promise, but 
Implementation Challenges Remain. GAO-01-932. Washington, DC: August 
31, 2001.
    Air Traffic Control: Role of FAA's Modernization Program in 
Reducing Delays and Congestion. GAO-01-725T. Washington, DC: May 10, 
2001.
    Aviation Safety: Safer Skies Initiative Has Taken Initial Steps to 
Reduce Accident Rates by 2007. GAO/RCED-00-111. Washington, DC: June 
30, 2000.
    National Airspace System: Problems Plaguing the Wide Area 
Augmentation System and FAA's Actions to Address Them. GAO/T-RCED-00-
229. Washington, DC: June 29, 2000.
    National Airspace System: Persistent Problems in FAA's New 
Navigation System Highlight Need for Periodic Reevaluation. GAO/RCED/
AIMD-00-130. Washington, DC: June 12, 2000.
    Federal Aviation Administration: Challenges in Modernizing the 
Agency. GAO/T-RCED/AIMD-00-87. Washington, DC: February 3, 2000.
    Air Traffic Control: Status of FAA's Implementation of the Display 
System Replacement Project. GAO/T-RCED-00-19. Washington, DC: October 
11, 1999.
    Aviation Safety: FAA's New Inspection System Offers Promise, but 
Problems Need to Be Addressed. GAO/RCED-99-183. Washington, DC: June 
28, 1999.
    General Aviation Airports: Oversight and Funding. GAO/T-RCED-99-
214. Washington, DC: June 9, 1999.
    Passenger Facility Charges: Program Implementation and the 
Potential Effects of Proposed Changes. GAO/RCED-99-138. Washington, DC: 
May 19, 1999.
    Airport Improvement Program: Analysis of Discretionary Spending for 
Fiscal Years 1996-98. GAO/RCED-99-160R. Washington, DC: May 18, 1999.
    Air Traffic Control: FAA's Modernization Investment Management 
Approach Could Be Strengthened. GAO/RCED/AIMD-99-88. Washington, DC: 
April 30, 1999.
    Air Traffic Control: Observations on FAA's Air Traffic Control 
Modernization Program. GAO/T-RCED/AIMD-99-137. Washington, DC: March 
25, 1999.
    Federal Aviation Administration: Financial Management Issues. GAO/
T-AIMD-99-122. Washington, DC: March 18, 1999.
    Airport Financing: Smaller Airports Face Future Funding Shortfalls. 
GAO/T-RCED-99-96. Washington, DC: February 22, 1999.
    Airport Financing: Annual Funding As Much As $3 Billion Less Than 
Planned Development. GAO/T-RCED-99-84. Washington, DC: February 10, 
1999.
ENDNOTES
    \1\ See the Aviation Investment and Revitalization Vision Act, a 
Senate bill to reauthorize federal aviation programs and the 
Administration's draft reauthorization proposal, the Centennial of 
Flight Aviation Authorization Act, or ``Flight-100.''
    \2\ U.S. General Accounting Office, Aviation Safety: FAA's New 
Inspection System Offers Promise, but Problems Need to Be Addressed, 
GAO/RCED-99-183 (Washington, DC: June 28, 1999).
    \3\ U.S. Department of Transportation, Office of Inspector General, 
Report on the Air Transportation Oversight System: Federal Aviation 
Administration, AV-2002-088 (Washington, DC: Apr. 8, 2002).
    \4\ Over the past 5 years, the amount of funding available to 
airports for planned capital development ranged from about $7 billion 
to $13 billion annually.
    \5\ The Airport and Airway Trust Fund was established by the 
Airport and Airway Revenue Act of 1970 (P.L. 91-258) to aid in funding 
the development of a nationwide airport and airway system and to fund 
FAA investments in air traffic control facilities. The Trust Fund is 
supported by a number of excise taxes, including taxes on passenger 
tickets, fuel, and cargo.
    \6\ Under the Passenger Facility Charge program, airports with 
FAA's approval may charge passengers up to $4.50 for boarding airplanes 
at their facilities.
    \7\ U.S. General Accounting Office, Airport Finance: Using Airport 
Grant Funds for Security Projects, GAO-03-27 (Washington, DC: Oct. 15, 
2002).
    \8\ Letters of intent represent a nonbonding commitment from FAA to 
provide multiyear funding to an airport beyond the current AIP 
authorization period.
    \9\ This was the average for 1998 through 2002.
    \10\ In addition to runways, the plan addresses capacity 
enhancements designed to make more efficient use of the airspace.
    \11\ U.S. General Accounting Office, Aviation Infrastructure: 
Challenges Related to Building Runways and Actions to Address Them, 
GAO-03-164 (Washington, DC: Jan. 30, 2003).
    \12\ U.S. General Accounting Office, National Airspace System: 
Long- term Capacity Planning Needed Despite Recent Reduction in Flight 
Delays, GAO-02-185 (Washington, DC: Dec. 14, 2001).
    \13\ U.S. General Accounting Office, Commercial Aviation: Issues 
Regarding Federal Assistance for Enhancing Air Service to Small 
Communities, GAO-03-540T (Washington, DC: Mar. 11, 2003).
    \14\ U.S. General Accounting Office, High-Risk Series: An Update, 
GAO-03-119 (Washington, DC: Jan. 2003).
    \15\ These five programs are the Wide Area Augmentation System, 
Standard Terminal Automation Replacement System, Airport Surveillance 
Radar-11, Weather and Radar Processor, and Operational, Supportability, 
and Implementation System. See U.S. Department of Transportation, 
Office of Inspector General, Reauthorization of the Federal Aviation 
Administration, CC-2003-058 (Washington, DC: Feb. 12, 2003).
    \16\ U.S. General Accounting Office, National Airspace System: 
Better Cost Data Could Improve FAA's Management of the Standard 
Terminal Automation Replacement System, GAO-03-343 (Washington, DC: 
Jan. 31, 2003).
    \17\ This is a result of 1995 legislation that granted FAA broad 
exemptions from laws governing federal civilian personnel management 
found in title 5 of the United States Code.
    \18\ U.S. General Accounting Office, Human Capital Management: 
FAA's Reform Effort Requires a More Strategic Approach, GAO-03-156 
(Washington, DC: Feb. 3, 2003).
    \19\ Commercial aviation includes both large air carrier operations 
and smaller commuter operations. General aviation includes a wide 
variety of aircraft, ranging from corporate jets to small piston-engine 
aircraft as well as helicopters, gliders, and aircraft used in 
operations such as firefighting and agricultural spraying.
    \20\ U.S. General Accounting Office, Aviation Safety: FAA's New 
Inspection System Offers Promise, but Problems Need to Be Addressed, 
GAO/RCED-99-183 (Washington, DC: June 28, 1999).
    \21\ U.S. Department of Transportation, Office of Inspector 
General, Report on the Air Transportation Oversight System: Federal 
Aviation Administration, AV-2002-088 (Washington, DC: Apr. 8, 2002).
    \22\ FAA has responsibility for maintaining the security of its air 
traffic control facilities and computer systems.
    \23\ As of January 2002, over 8,000 FAA employees (17 percent of 
its workforce) had been issued commercial purchase cards. In Fiscal 
Year 2001, FAA made over 364,000 purchases using these cards.
    \24\ U.S. General Accounting Office, FAA Purchase Cards: Weak 
Controls Resulted in Instances of Improper and Wasteful Purchases and 
Missing Assets, GAO-03-405 (Washington, DC: Mar. 21, 2003).
    \25\ Department of Transportation, Office of Inspector General, 
DOT's Top Management Challenges (Washington, DC: Jan. 21, 2003).
    \26\ U.S. General Accounting Office, Air Traffic Control: FAA Needs 
to Better Prepare for Impending Wave of Controller Attrition, GAO-02-
591 (Washington, DC: June 14, 2002).

    The Chairman. Thank you, Dr. Dillingham. Senator Stevens.

                STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    Senator Stevens. Thank you very much. I have to go back to 
that conference, but Ms. Van de Water, I do not know if you 
realize it, but the Essential Air Service was created by this 
committee at the time of the deregulation of the airlines and 
elimination of CAB specifically for the Alaska communities that 
were small communities that had only access to the world by 
air, and there are some, almost 200 of those. Many of them, in 
terms of today, now have unemployment ratios of 80 to 90 
percent. They have no tax base because they are surrounded by 
Federal lands that have been withdrawn for parks and wildlife 
refuges and wild and scenic rivers, and forests.
    I would urge you to come up with Ms. Blakey and visit us, 
because I do read with interest your statement that said we 
recognize there are certain circumstances under which a 
community might not be required to make a financial 
contribution due to special geographical considerations. I 
think inability to pay ought to be one of the considerations, 
too. Have you taken that into consideration?
    Ms. Van de Water. That is not specifically contemplated in 
the drafting language, but I think your State, as well as the 
State of Hawaii, would qualify under the special geographic 
considerations. Your communities generally are only accessible 
by air, and we are aware of that. That is also the case with 
some of the communities in Hawaii.
    Senator Stevens. I understand the geographical concept, but 
there are some that even including geographical location just 
have an inability to pay. I would urge you to consider that. I 
think some of them even have an inability to pay to go through 
the process to make applications. I would urge you to come take 
a look at some of those areas.
    I do not know what to do about them. They are totally 
isolated. They are totally impoverished. Their economy is gone. 
The mining operations are gone, the timber operations are 
closed, the oil and gas wildcatting is closed, tourism is 
impossible, and they have no basic income, other than what they 
get from the State or Federal Government. I just would like you 
to visit a couple of those places, if you can.
    Thank you, Mr. Chairman.
    The Chairman. Ms. Blakey, more than $560 million in the AIP 
was used for security-related expenses in Fiscal Year 2002, 
which was up from $57 million the previous year. Earlier this 
year, TSA Under Secretary Loy testified that TSA would like to 
have, quote, one more bite at the apple, unquote, in 2003, and 
use a similar amount of AIP for high-priority security 
projects.
    Now, in the bill we are considering we block the use of 
those funds, although it may be too late for the 2003, it may 
not. What is your view on this one more bite at the apple idea 
that Secretary Loy seems to be supporting?
    Ms. Blakey. Well, I do not want TSA to bite too close to 
the core, I will tell you that, so the bite analogy makes me a 
little nervous. That said, I believe that we have factored in 
the needs for these airports this year again in a way that we 
can sustain the requests that are coming in for security 
projects up to about the same point as last year, somewhere 
above $500 million.
    By virtue of the kinds of approach this committee and 
others took with AIP funding previous to 9/11 we got a little 
bit ahead of the curve on some of the maintenance areas with 
our airports, therefore things like pavement, for example, we 
are still not in a situation this year where we are likely to 
really be undercutting absolutely required work that has to be 
done from a deteriorating standpoint.
    We have got a number of projects that are underway, and we 
will be able to sustain them, but come next year I think there 
is no question about the fact that we will then be cutting in 
both to the kinds of ongoing work that has to be done to 
maintain our capacity, and certainly in terms of improvements 
we will have some problems.
    The Chairman. Well, I want to assure you that we will take 
this issue seriously in consideration in this legislation. I do 
not think we can continue to take that much money out of AIP 
without paying a very heavy price later on.
    Do you agree with that, Dr. Dillingham?
    Dr. Dillingham. Yes, I do, Senator. Last year, because of 
that half billion dollars bite, I think our research showed 
there was close to $148 million in funding for reconstruction, 
$156 million for bringing airports up to standards, and three 
letters of intent for runways that were not issued, so it can 
definitely have an effect.
    The Chairman. Ms. Blakey, the DOT Inspector General 
recently noted, and I quote, cost control must become an 
imperative for FAA, which has not been the case for sometime. 
First of all, Dr. Dillingham, do you agree with that statement 
of the DOT Inspector General?
    Dr. Dillingham. Yes, Mr. Chairman, we do. As we said in our 
statement, there are at least a couple of places where cost 
controls are very important in a time when resources are 
becoming more and more limited.
    The Chairman. Now, Ms. Blakey, I was part of the 
legislation that we gave the FAA unusual authority to set up 
its own personnel system because we thought that the FAA could 
probably do it better. I have been one who disagrees with 
micromanagement by Congress in legislation, but clearly, you 
failed, the FAA--not you personally, but the FAA has failed 
miserably in the view of every watchdog organization. Now, you 
have got to get these costs under control.
    I do not know if we need a legislative remedy. I think 
Senator Lott may have some views on that, as well as Senator 
Rockefeller, but (1) you have got to get it under control, and 
(2) do you believe that we need some legislative remedies?
    Ms. Blakey. Well, as you know, I have been there a full 7 
months, so I will not pretend I have all the answers on this 
front right now. The Congress did give the FAA a very unusual 
charge as a part of the personnel reform, having us negotiate 
with our employees for compensation. It is virtually 
unprecedented in the Federal Government, because obviously this 
is not the same as the private sector, where at the end of the 
day one can increase profit, therefore change the dynamics on 
the budget.
    The budget is a fixed matter, and with that in mind I think 
it has certainly proven that that in particular has driven up 
the operating costs of the FAA. 80 percent of our operating 
cost is in personnel, so one has to look at that very 
carefully.
    At this point, I am committed to working through the 
negotiations we have with our unionized workforce. Most of the 
parts of the FAA right now are without a working contract. We 
are still trying to make that possible, but I will tell you it 
is a great challenge, and I think that the Congress will 
probably be seeing, therefore, some of these negotiations come 
to an impasse and come to the Congress unless we are able to 
work through more successfully than the last Administration was 
on that front.
    The Chairman. Thank you. Dr. Dillingham, do you have any 
comments on that issue, and thank you for your good works, by 
the way.
    Dr. Dillingham. Thank you, Mr. Chairman. I think that some 
of the remedies that Congress has already provided need to work 
themselves out a little more before legislation would be 
necessary.
    As you know, prior to Administrator Garvey's tenure I think 
the average tenure for the Administrator was about 18 months, 
so priorities kept shifting. We have said all along that the 
remedies are there, but they need to be fully implemented, and 
the Congress can help by making sure that they are fully 
implemented.
    The Chairman. Would you do us the favor of providing us, 
the Committee, with the specific remedies you think need to be 
enforced that are existing, for the record?
    Dr. Dillingham. Yes, sir.
    The Chairman. Thank you. Senator Rockefeller.
    Senator Rockefeller. Thank you, Mr. Chairman. I want to get 
back, Ms. Van de Water, on this EAS thing. Senator Stevens 
really did make a point, the geography is one part of it. I do 
not know, have you ever been to West Virginia?
    Ms. Van de Water. Yes, sir.
    Senator Rockefeller. Where?
    Ms. Van de Water. In the Shenandoah River, rafting. It was 
a vacation.
    Senator Rockefeller. There are no airports near there.
    Ms. Van de Water. I drove.
    Senator Rockefeller. But it is a nice ride. It is a nice 
ride.
    The question of airports, not having the money to pay, is 
very real. Now, you can take the point of view that, well, air 
traffic is down, the economy is bad, and you can react to that 
in two ways. One, you can say, well, because the economy is 
down, we do not have the money, or you can say, because the 
economy is down it is because there is something called the 
FAA, the Department of Transportation, we have an obligation to 
make sure that transportation works, and I would assume if I 
were working for the DOT I would take that second point of 
view.
    I really believe that if you end Essential Air Service and 
the ability for communities to improve their prospects through 
lengthening runways or whatever, it is like rolling up the 
interstate highway system. I do not think there is any 
difference. I mean, I make a point, which is either right or 
wrong, and I do not really care at this point, that airline 
travel and air cargo travel is as important to this country as 
truck travel and passenger car travel on highways. I think they 
are about equal, and for the future I think airlines continue 
to grow in importance, and air travel, air cargo continues to 
grow in importance.
    Now, all of that identifies a very interesting question. If 
a community is small and remote, but has, for example, 
Americans living close by, we generally in America do not 
distinguish between Americans who live in cities as being more 
important than Americans who live in rural areas. We do 
understand sometimes they have more services available. We do 
not decide to cutoff services.
    You did that actually in Essential Air Service, and you 
cutoff the Small Community Air Service Development Pilot 
Program, and then you created the Small Community 
Transportation Service, and when I see a name like that I get 
nervous, because I cannot identify with what it is going to do, 
and I do not know what it is going to do.
    Now, you have indicated that you will look at exceptions 
and take into consideration geography, and then you have made 
another statement as to Alaska and Hawaii, but airports can 
survive and be essential in their air service and not have the 
money to pay. Now, if you get to that situation you can say, 
well, I am going to push you to your limits. You have not done 
it before. You do not want to, I understand that, or some of 
you have not, and I am going to push you to your limits, but 
what if their limits, in fact, are because of those precise 
lacks of passenger and therefore revenue to them, and security, 
this and that. What if they really cannot pay.
    Ms. Van de Water. Senator, we would like to give as much 
discretion to the Secretary as possible in these programs.
    Senator Rockefeller. That makes me nervous, too. You see, 
discretion means that there is no pattern. There is nothing 
that any airport can count on and plan on.
    Ms. Van de Water. But if we do not have discretion, we are 
forced to treat a community that, for instance, is under 60 
miles from Syracuse, New York, which has dozens and dozens of 
jet flights a day to several different hubs, including low-fare 
service by Jet Blue, we are statutorily required to treat that 
community just like we treat a community in the middle of 
Montana that is 6 hours from a hub, or one in West Virginia 
that may be several hours from a hub, maybe not on a good road, 
and maybe cannot afford to pay, but if we do not have 
discretion, we quickly run out of money, because we have to 
treat each EAS community exactly the same, and that is the 
problem we face in the program now.
    The New York community--which can hop in a car, it is a 
straight interstate shot down to Syracuse, be at Syracuse in an 
hour, and fly many places across the country--has the same 
right as your community does, or a community in Montana, or in 
Nebraska, which might be just as isolated, so if we do not have 
the discretion, we do not have any way to effectively manage 
the resources for the program.
    Senator Rockefeller. So you would divide your discretion 
sort of literally into those which are close to major hubs and 
those which are not? I mean, our hubs are Pittsburgh, which is 
fine if you are in the northern part of the State, and Atlanta, 
which is a great distance off, and, to some extent, Dulles, but 
we just have Bluefield, West Virginia; Beckley, West Virginia; 
Huntington, West Virginia.
    I mean, I watched, like Senator Stevens, when all of these 
Eastern, United, all had jets flying in and out, and then 1978 
came and wise people voted against deregulation. I was not 
here, so I could not do that, but I would sure love to.
    But it is a very, very damaging situation, the same 
situation in Mississippi. California north of San Francisco is 
rural. Every State has rural places, and I just want to make 
sure that--I mean, did you talk with any of these EAS 
communities?
    Ms. Van de Water. Yes, sir, we did, and we looked at the 
GAO report and other studies have been done, and we have 
extensive experience with EAS, too. I think I mentioned in my 
hearing a few weeks ago I spend more time on EAS than any other 
airline issue out there, including security and including the 
war, including SARS or any other aviation issue that might be 
up. We work a whole lot with EAS communities.
    Senator Rockefeller. Good. OK, well, that is good.
    Ms. Blakey, I would just ask a question of you. 
Fundamentally, GAO suggested you may have as many as 5,000 air 
traffic controllers retiring in the next 3 to 5 years.
    Ms. Blakey. That is correct.
    Senator Rockefeller. How long does it take you to train?
    Ms. Blakey. This varies, of course, with the facility. 
Somewhere between 2 and 4 years. I think GAO used 3 as a good 
number, and so I would suggest it depends, but 3 is a good 
number.
    Senator Rockefeller. Are you going to be able to do this?
    Ms. Blakey. I think so. Certainly we see from the numbers 
we have right now that we are requesting for next year just 
over 300 additional controllers to overlap with the existing 
workforce to start ramping up on this training.
    It is certainly our anticipation that we are going to have 
to do that for a number of years to come to cover this 
anticipated bubble. There is nothing very scientific, of 
course, about retirements. You cannot predict exactly how this 
is going to fall, nor from which facility and how it will work, 
but we are working carefully this year to try to fine-tune this 
projection. I think the work GAO did, though, is fundamentally 
sound, and we are trying to build on that.
    Senator Rockefeller. Are you going to have the money to do 
this, the training and hiring?
    Ms. Blakey. The training and the money for the work that we 
are projecting, yes. In fact, we have built it into the request 
for $14 billion for next year's budget.
    Senator Rockefeller. Will the FAA Director and the 
Department of Transportation and the Secretary be willing to 
contemplate with a warm smile a bill that might emerge from 
this committee?
    Ms. Blakey. As to the reauthorization broadly? Well, I 
should certainly think so. We are looking forward to working 
with you.
    Senator Rockefeller. I mean, we are good people. You like 
to work with us, right?
    Ms. Blakey. Absolutely. We are impressed by the momentum, 
certainly, and we are impressed by the areas of real consensus 
that are clearly there, so we look forward to working with you 
on it.
    Senator Lott. How about that. That is good.
    Senator Rockefeller. I think that is good. Thank you, all 
of you.
    Senator Lott. (presiding) Thank you, Senator Rockefeller. 
We are glad to have Senator Lautenberg with us, and I will call 
on you in a moment, Senator Lautenberg, but let me ask a couple 
of questions that I have been sort of saving up here.
    Administrator Blakey, thank you again for your work. Now, 
our bill makes this a 3-year bill. Your proposal was 4 years. 
Some on the Committee would like for it to be only 2. I hear 
the House is thinking 4. What difference does it make? What 
would be the preferred number? Obviously, you have suggested 4.
    I am inclined to like it longer, personally, because of 
what I said at the beginning. It gives predictability and 
stability, what they can count on. They can look down the road, 
and that is what I am hoping, that in a year or two we are 
going to see the aviation industry, having gone through all 
kinds of changes, gaining strength and making a profit again, 
and I think the reliability of the program would help in that.
    Ms. Blakey. Well, certainly I would agree with you. I think 
that principle is a very sound one, and whether it is 3 or 4 I 
think certainly could be debated. The reason we selected 4 is 
that the revenue streams that support the trust fund, in other 
words the tax base and the statutory requirement for those 
taxes expire in 2007, and so in light of that, we felt that 
that would probably be a good year to consider, then, 
reauthorization, because at that point, there will be the 
opportunity to look at the revenue streams going into the trust 
fund and, as you know, between now and then we are all 
projecting that the trust fund will diminish.
    Senator Lott. We have a problem with the cost in providing 
for the new explosive detection devices, the EDS, and very 
large estimates of what that is going to cost over the next few 
months, and I guess the next couple of years, and we are trying 
to find a funding mechanism that would help pay for that and 
not have it come out of the AIP fund, as we have all talked 
about and Dr. Dillingham has spoken about, and Senator McCain 
and I care about it.
    Now, we do have in our bill, I believe, a proposal that 
would say it would take the security fund piece and put that 
into a fund for grants to pay for this. That was one way to go. 
I can imagine the airlines do not particularly like that 
either. They would like that fee to go away. What do you think 
about that mechanism, or do you have any other ideas of how we 
might do this?
    Ms. Blakey. Well, certainly we were glad to see that it was 
not looking to the AIP funds for the ongoing support for EDS 
and other security requirements. The $2.50 security fee that, 
of course, is currently being charged is much debated at the 
moment, and I know that in some of the various stimulus 
packages that are being considered by this Congress it is 
therefore in play, but certainly from the standpoint of the 
FAA, since this is not a fee of ours, I would simply say that I 
was glad to see that you all did not look to AIP.
    Senator Lott. Have you got any other ideas?
    Ms. Blakey. This is the hard one. I am afraid I do not.
    Senator Lott. Ms. Van de Water, thank you for your 
testimony. The Small Community Air Service Development Pilot 
Program you talked about the last time, you said you still did 
not have perhaps enough information about the results. I hear 
it has worked well. Does the Administration have a problem with 
us extending that program?
    Ms. Van de Water. I think we would like to have more time 
to get feedback. Your community of Meridian has done very well. 
It started up quickly. Not all communities have started up 
quickly. Some have not even expended any of their funds yet. I 
think we would like some more time to look at it, but we tried 
to take some of the more attractive parts of it and put it into 
our central transportation service to let more communities 
participate.
    Senator Lott. Now, on the local match proposal, do you want 
to expand any more on the local match? You are going to get 
resistance from this community about any kind of local match, 
25 percent, 10 percent, or even 5 percent, but I maintain--and 
I must state it is hard for us to come up with a match, we are 
one of the poorest States in the Nation, but I view it as 
anyone who gets a benefit ought to pay a little.
    Ms. Van de Water. Meridian came up with a match.
    Senator Lott. Especially when it creates growth in the 
economy and creates jobs, some sort of match it seems to me is 
defensible.
    Ms. Van de Water. And Meridian came up with a good match. 
They got a $500,000 grant from the Federal Government. They 
came up with $140,000 of local match. We have some communities 
that came up with over $1 million of their own match. The match 
does not have to come just from the community. It can come from 
the State, it can come from business sources, it can be a 
travel bank. We have a lot of flexibility there, but we think 
that is the best way for a community to get vested in their 
service, and to have a true incentive to actually use the 
service.
    We have a community now, for example, that is enplaning 
three passengers a day on over 50 seats a day, and they are 72 
miles away from a major hub, and they came in to see us 
recently very upset that we would contemplate not extending 
their EAS service, which has gone over the statutory maximum of 
$200 per person. They are enplaning three people a day, so 
until there is some buy-in, we are not going to get the kind of 
support we need for the program.
    Senator Lott. Dr. Dillingham, thank you again for your 
appearance. In a previous GAO report you found that Federal 
fiscal discipline may require various changes in the EAS 
program, and you put forth a set of options changing 
eligibility criteria requiring community matches, consolidating 
service to multiple communities, and changing the subsidy to a 
grant.
    Do you still stand by that, or do you have any other 
suggestions you might want to offer on EAS, because that is an 
area where our bill is not set yet, and we are going to be 
considering a number of options there to try to make it the 
best program we can.
    Dr. Dillingham. Chairman Lott, many of the things that we 
suggested in our earlier report are contained in the proposal 
that is on the table now for the small community service, and 
we stand by that. I would like to add, there are going to be 
pockets of pain, particularly in those places that will not 
have a subsidy, whether it is 10 percent or 5 percent. That 
have to be addressed.
    For some communities, coming up with the 5 percent match 
will be difficult. As such, I think it is important that some 
of the alternative transportation modes that are a part of the 
service will be really strong if we come to that point.
    Senator Lott. Because of time considerations, and I know 
Senator Lautenberg will have some questions or make some 
comments, two sections I wish you would take a look at, 
Administrator Blakey, are section 212 of the bill, prohibition 
on requiring airports to provide rent-free space for FAA or 
TSA. I think there is a big problem with TSA taking space and 
not paying for it.
    I think TSA is demanding things now that are unfunded 
mandates, like telling small regional airports you have got to 
reinforce the east front of your terminal, which they cannot 
afford, it is ridiculous, and you must do random searches of 
cars in public airports. What I tell my local officials is, 
tell them no. Justify it, or give me the money, or no.
    So I do hope you will take a look at that. Some of the 
things that have been happening in the name of security, 
legitimately I think we did everything possible, and I think 
maybe we have overreached a little bit, and we begin to be a 
little more practical and use a little more common sense, and 
also section 502, cost-sharing of air traffic modernization 
projects, I invite your attention to that section. Let me know 
what you think about it later on, perhaps.
    Senator Lautenberg.

              STATEMENT OF HON. FRANK LAUTENBERG, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Lautenberg. Thank you, Mr. Chairman, and thank you, 
Ms. Blakey and Ms. Van de Water and Dr. Dillingham. I am 
particularly focused in one area at the moment, and I greatly 
respect the responsibility and the work that is done by each of 
you in connection with our aviation interests, and the 
condition of our system, and what we might be looking for in 
the future, and there are so many important issues facing us 
and I look forward to working with our Chairman to see if we 
can make some improvements here.
    We all know that it costs more, and we are trying to do 
more for less, and that is a tough situation. I am particularly 
concerned about the moves that are suggested toward the 
privatizing of the air traffic control system. I know Ms. 
Blakey has heard me talk about this before.
    In the aftermath of September 11, the American people 
demanded one thing in particular of their Government, and that 
is, they wanted committed, trained personnel to perform 
security screenings of baggage at our Nation's airports. We saw 
that mammoth change that took place with the baggage handlers. 
Salaries went up, thank goodness, for people who were doing the 
screening, to an extraordinary pace, because the pay scale was 
unfair to those who would have talent and ability, so we made 
the change, and at the same time now we are taking a look at 
the possibility of taking our Federal air traffic controllers 
and flight specialists, flight service station controllers, who 
are top flight professionals, very well-trained in every one of 
those positions.
    That is a skill, and you have to develop a kind of a sixth 
sense to do that job properly, but when you come to air traffic 
controllers and recognize that it is not a single bag that you 
are trying to pick up, but rather trying to protect lives of a 
few hundred people aboard, or whatever it is, it is an enormous 
responsibility, and to suddenly turn to the cheaper way of 
doing things does not sound like it is the right way to go for 
me. I think our colleagues here will agree, as the testimony 
that we gather, the information that we develop is put in front 
of everybody.
    So I was so surprised to hear that the Administration's air 
traffic control of its, ``inherently governmental,'' status 
last year setting the stage for privatization. To me that makes 
no sense, especially after September 11. The people felt safer 
with Government staff in control rather than private 
contractors, and the job that was done that day to close down 
the system in an orderly fashion was quite an undertaking, and 
very well done, and I do not think that the public, hearing the 
details here, would be particularly happy to understand that we 
are gong to put it out to the lowest bidder.
    Ms. Blakey, I understand that the FAA is conducting a study 
for contracting out flight service station controllers. How 
much is this study costing?
    Ms. Blakey. The study that was done looked at the flight 
service station services, which are largely providing weather 
information--this is not, of course, the group that controls 
traffic.
    Senator Lautenberg. But they are all included in the not 
inherently Government, right?
    Ms. Blakey. The distinction I would make is this. The 
flight service stations are a group of employees, who are 
largely providing for the general aviation community and some 
of the business community weather information, and it is 
something that, after a study was done to see if they could be 
a market alternative, that determination was made that we 
could.
    Now, the work we are doing otherwise is internal, and it 
will take a couple of years to go through what is called A-76 
process, which allows the opportunity for the existing pool of 
employees to put forward a proposal to do this as efficiently 
as possible and provide for others in the private sector to do 
the same thing.
    The A-76 process is one that has proven to result, in an 
average of about a 30 percent reduction in cost, whether or not 
the ultimate contract stays within house--within the 
Government--or goes into the private sector. I would point out 
that our employees have an advantage. If they are within 10 
percent of the bids that come in from the private sector, they 
will be able to provide the work, but right now, this is a 
significant area of cost for the FAA, over $300 million a year, 
and we have definitely found that the same services can be 
offered from the private sector.
    This is a process that the Congress put in place with the 
A-76 process many years ago, and as we analyzed it, this is an 
area I think for the FAA to look for some cost savings.
    Senator Lautenberg. I wonder whether, if we were doing 
cancer research and research on other diseases and problems of 
humankind and said, OK, we are going to get into the 
laboratory, but you have got to be the cheapest, or among the 
cheapest ones in town, how Americans would feel about that, or 
go to the Bethesda Naval Hospital and say, OK, what we are 
going to do is, we are going to find the cheapest way to do it. 
There are some jobs you would not dream of doing a cost search 
on before you determined whether or not that ability is there.
    I would hate to have my family flying around up in the sky 
while there is a labor dispute in a given company, and there 
might be an agreement that that would be excluded from any 
negotiation, that the rules would be strict and so forth, but I 
would not want to have a disgruntled person out there managing 
the flight service or doing the work at an airport and saying, 
well, we have been a little skinny on the wages, but this guy 
works hard so let him stay at the desk, even though the price 
factor was the one that got us there.
    Ms. Blakey. Let me just reaffirm for you the fact that we 
do not have any intent to move toward privatization of any of 
our towers, air traffic control facilities, centers, et cetera. 
This is really those that are actually controlling traffic. 
There is no move to move further into privatization. As you 
know, the contract tower program has proven to be one that has 
worked well over many years.
    Senator Lautenberg. And small centers.
    Ms. Blakey. Exactly, and those are little activity airports 
where in fact in some cases we simply would not have towers at 
all and be able to provide service, so that is something that 
for over 20 years has worked well, but we are not talking about 
substantially increasing it nor making any change for our 
controllers in terms, as I say, of our towers, TRACON's, and 
centers.
    Senator Lautenberg. If that is the case, why don't we 
immediately in our statements eliminate that group from any 
consideration and say, look, they are outside the loop. We are 
not going public-to-private ownership with that.
    When we look at the countries that have gone private, the 
U.K. and Canada and so forth, there have been all kinds of 
problems, Mr. Chairman, where we have had to bail out a couple 
of the companies because they could not make it under the 
rules, under the conditions that they took the contracts, and 
imagine that.
    I mean, we are so dependent on aviation and the progress we 
have made in our system, to have a price of service become a 
debate while maybe a million people a day are flying across 
America, you get the sense, Ms. Blakey, I do not like the idea.
    Ms. Blakey. I definitely do.
    Senator Lautenberg. I did not mean to convey that.
    But anyway, Mr. Chairman, I have several other questions. I 
wanted to tell you, Ms. Blakey and I have had conversations. 
She is really a top flight executive and doing a good job, and 
I am sure down deep she really hates to scream with me, but I 
thank all of you for your participation.
    Thank you, Mr. Chairman.
    Senator Lott. Thank you, Senator Lautenberg, and I want to 
thank the panel again. We are looking forward to working with 
you over the next month and getting this legislation into law. 
Thank you.
    Senator Lautenberg. I would submit other questions.
    Senator Lott. Yes. Any questions you would like to submit 
for the record, I am sure the witnesses would be glad to 
respond in writing.
    The hearing is adjourned.
    [Whereupon, at 11:25 a.m., the Committee adjourned.]

                            A P P E N D I X

    Response to Written Questions Submitted by Hon. John McCain to 
                            Marion C. Blakey

    Question 1. More than $560 million in AIP was used for security-
related expenses in FY 2002, up from only $57 million the previous 
year. Earlier this year, TSA Under Secretary James Loy testified that 
the TSA would like to have ``one more bite at the apple'' in FY 2003 
and use a similar amount of AIP for high priority security projects. 
What effect has the use of the $560 million in AIP in FY 2002 had on 
other safety- and capacity-related airport improvement projects? What 
is your view on the use of AIP funds for even more security costs in FY 
2003? What affect would the use of AIP at FY 2002 levels have on other 
projects in FY 2003? Long-term, what is your view on the use of AIP 
funds for security-related projects?
    Answer. Despite record levels of AIP expenditures in FY 2002 to 
help airports meet new security requirements imposed in the wake of the 
terrorist attacks of September 11, the FAA was able to fund all AIP 
requests for safety projects, including runway safety areas and runway 
safety action team recommendations; letter of intent commitments; noise 
mitigation and reduction projects, ongoing phased projects; and 
congressional earmarks. The LOIs and phased projects represent 
commitment of significant AIP resources to capacity projects. The FAA 
also provided substantial AIP funding for rehabilitation projects, 
though there was a reduction in reconstruction and standards projects.
    Working collaboratively with TSA and the Department of 
Transportation, the FAA has committed to make a comparable level of AIP 
funding available for security projects in FY 2003--with a significant 
share going toward terminal modification and reconfiguration costs 
associated with in-line EDS deployment. These costs were made eligible 
for AIP funding for the first time in the Aviation and Transportation 
Security Act. We are confident that the system can sustain this level 
of AIP support for security for one more year without compromising 
other national objectives in building and sustaining this nation's 
system of airports.
    The FAA does not anticipate that the unprecedented level of 
security needs will be sustained on a continuous basis, once deployment 
of explosive detection systems for check baggage is fully implemented. 
Therefore, we do not anticipate that this tension will be sustained on 
a long-term basis. In the mean time, the FAA will continue to work 
closely with the Secretary of Transportation, the TSA and this 
committee to assure that the appropriate balance is struck between 
funding for security and other national priorities.

    Question 2. The Administration bill contained a number of changes 
related to FAA management. Which of these do you believe would be the 
most useful to you as the FAA's Administrator?
    Answer. It would be difficult to choose one--as all of the proposed 
changes improve the management of the FAA. The changes related to the 
COO improved the ability to recruit for the position and will make the 
job more easily defined as a COO. The changes proposed for the 
Management Advisory Council and Air Traffic Services Subcommittee 
reflect how they interact with the FAA, therefore making the changes to 
law a requirement. We would hope Congress would appreciate the need for 
all of these management changes.

    Question 3. In its reauthorization proposal and in its budget 
request, the Administration proposes a major ``spend down'' of the 
Airport and Airway Trust Fund over the next several years. How would 
the ``spend down'' of the Trust Fund affect capital programs like AIP? 
Doesn't such a ``spend down'' mean that a tax increase is needed after 
FY 2007?
    Answer. We remain committed to using the Airport and Airway Trust 
Fund (AATF) only to fund the Department's aviation programs, but in a 
change from AIR-21, the Administration is proposing to increase our use 
of balances that have built up in the Trust Fund.
    The Administration's spend down proposal does not impact capital 
programs. These programs are maintained at comparable levels to those 
provided under AIR-21.
    Under our budget and reauthorization proposals, we are projecting 
an uncommitted balance of just over $1.1 billion at the end of FY 2007. 
This balance would be down from a $4.8 billion uncommitted balance at 
the end of FY 2002.

                     FY 2004 Funding ($ in millions)
------------------------------------------------------------------------
     FAA Account        Under AIR-21 formula      Under FY04 Pres. Bud.
------------------------------------------------------------------------
Facilities &                            2,916                     2,916
 Equipment
Grants-in-Aid for                       3,400                     3,400
 Airports
Research,                                 100                       100
 Engineering &
 Development
Operations (Trust                       4,511                     6,000
 Fund)
Operations (General                     3,080                     1,591
 Fund)
------------------------------------------------------------------------
    Total                              14,007                    14,007
------------------------------------------------------------------------

    At this time it does not appear that a change in the current 
aviation excise tax structure is warranted in order to maintain a 
positive uncommitted balance even though the AATF is being spent down 
over the next few years.

    Question 4. As you know, the FAA was given unusual authority by the 
Congress to set up its own personnel system, including setting its own 
pay structure. The expectation was that in return, the FAA would hold 
its employees more accountable and develop more of a performance based 
culture. Based on work by the GAO and the Inspector General, it is fair 
to conclude that this hasn't happened.

   How are you addressing this issue?

   Do you believe that any legislative changes are needed to 
        the FAA's legislative authority in this area?

   Do you believe you can achieve a truly performance based 
        culture at the FAA?

    Answer. I believe that since the implementation of personnel reform 
in April 1996, the FAA has made significant progress in implementing 
innovative human capital management policies, systems and practices 
that supported achievement of the agency's mission, business objectives 
and goals, and helped transition the organization to a more 
performance-based work culture.
    In a 1999 congressionally mandated evaluation of personnel reform, 
the National Academy of Public Administration's Center for Human 
Resource Management described the scope of FAA human capital reform as 
a large scale change management initiative that was unparalleled in the 
Federal sector. Change of this magnitude takes on average seven to even 
10 or more years to implement successfully. Based on this benchmark, 
the FAA is on course in moving away from an entitled and bureaucratic 
work culture to one driven by performance and innovation.
    The existing personnel reform flexibilities related to staffing and 
pay have significantly increased managers' accountability for 
strategically managing their workforce. We have delegated flexibility 
to FAA lines of business to determine recruitment sources, methods of 
advertising jobs, and methods for evaluating and interviewing 
applicants. Managers have flexibility in setting pay and the use of 
recruitment and retention incentives under a market-based compensation 
system. These reform initiatives have allowed the FAA to be more 
competitive in acquiring and retaining the talented workforce necessary 
to perform our mission and meet emerging business challenges.
    We established annual corporate Organizational Success Increase 
goals, which are aligned with satisfactory performance against FAA 
mission objectives and directly linked to pay increases to achievement 
of organizational goals. As part of our market-based compensation 
system, annual Superior Contribution Increases are provided to top 
performers, who make superior individual performance contributions. For 
each FAA executive, we established annual Short Term Incentive stretch 
goals, directly aligned with accomplishing results beyond normal 
performance expectations. Alignment of individual employee performance 
expectations with agency goals created an important line of sight 
between individual performance contributions and organizational goals, 
and improved the FAA focus on obtaining results.
    We further strengthened the agency's performance culture by 
developing and implementing a new performance management system that 
was designed to ensure effective employee feedback, performance 
coaching, recognition, and communication of performance expectations. 
This increased emphasis on managing performance reinforces continuous 
improvement aligned with obtaining mission results.
    Using the tools provided to us by Congress, FAA has become a more 
accountable and performance-based work culture by designing and 
implementing human capital best practices that meet our business needs. 
We successfully implemented key human capital initiatives in staffing, 
compensation, performance management and executive systems for our 
large 50,000 member mostly technical workforce that is highly 
unionized, deployed globally, and operated in a business environment 
driven by dynamic change.

    Question 5. The DOT Inspector General recently noted that: ``Cost 
control must become an imperative for FAA, which has not been the case 
for some time.'' What can you do, and what can we do to help you, 
change the culture of the FAA to make cost control imperative?
    Answer. FAA's Management Team is now completing a new Strategic 
Plan. One of the four goal areas is ``Organizational Excellence'' which 
has as one of its three objectives to ``Deliver services to our 
customers while controlling costs.'' A key initiative is to develop and 
implement an agency-wide cost control program using data from the Cost 
Accounting and Labor Distribution Reporting systems. The creation of 
this objective and the associated cost control program signals a major 
cultural shift in the FAA, which underscores my personal commitment to 
control costs.

    Question 6. The Inspector General (OIG) also noted that five major 
acquisitions out of 20 that the OIG tracks have experienced substantial 
cost growth totaling more than $3 billion (from $2.8 billion to $5 
billion), which is equivalent to an entire year's budget for FAA's 
modernization account. Also, these same five acquisitions have 
experienced schedule slips of 3 to 5 years. What can we do in this 
area?
    Answer. The FAA is working to improve methods for controlling the 
growth of baselines for major programs. We have changed our process to 
allow for additional time to develop accurate cost and schedule 
estimates prior to award of a contract. This has resulted in more 
stable baselines. In addition, the FAA has identified its highest 
priority programs in order to ensure that resources are made available 
as required to complete development of planned capabilities as 
scheduled.
    The FAA has incorporated a series of management control processes 
and tools that will improve the tracking and reporting of costs, 
management of schedules, and the technical performance on major 
acquisition programs. We are also implementing core management training 
with the objective of obtaining program management certification for 
our executives, project managers, and supervisors.
    Data is collected and analyzed on a monthly basis and incorporated 
into the agency's decision process for managing program tasks and 
goals. Senior level managers are provided detailed program performance 
status through periodic Acquisition Program Reviews, reports, and 
briefings.

    Question 7. Do you have any progress to report in the hiring of a 
Chief Operating Officer (COO) for the air traffic control system? What 
is you timeframe for having a COO on board?
    Answer. As you know, the search for the right candidate to fill 
this important position has been one of Secretary Mineta's and my top 
priorities, and we have found that person. Recently, we selected 
Russell G. Chew to serve as Chief Operating Officer for the 
performance-based Air Traffic Organization (ATO) within the FAA. I am 
delighted to have someone of his caliber join our team.
    Mr. Chew has nearly two decades of broad aviation industry 
experience including service on many aviation industry committees in 
support of national airspace modernization as well as his work for a 
major airline. Mr. Chew will report for duty August 1, 2003.

    Question 8. The airline industry is fundamentally restructuring 
itself due to the economic crisis it is facing. Some airlines are 
changing how they are operate--for example, some are increasing 
reliance on regional jets or are increasing point to point service, 
rather than using hubs. These changes will affect how and where air 
traffic will occur. What is the FAA doing to adapt to this reshaped 
industry?
    Answer. It is clear that this is a critical time for the aviation 
industry, as they cope with issues of terrorism, war, disease, and 
overall economic conditions. Air carrier activity levels--both 
enplanements and operations--are well below those of 2000. We currently 
forecast that it will take until 2005 or 2006 for industry to regain 
those highs.
    While the industry is restructuring, it is not yet clear exactly 
what forms will emerge. However, we are confident that growth will 
resume and recognize a need to make certain that sufficient capacity 
will exist to serve resumed demand, even as it takes new form. To help 
industry rebound from its current financial difficulty, I am asking FAA 
executives to identify and pursue items to help improve efficiency as 
soon as possible--an expedited OEP.

    Question 9. How has the FAA responded to the Canadian 
Transportation Safety Board's findings that indicates that the FAA's 
oversight of its third party certification program (Designated 
Alteration Station) failed to identify and correct anomalies that 
existed in the design and integration of a ``non-essential'' system on 
the MD-11 involved in the September 2, 1998 tragedy of Swissair Flight 
111 which departed from New York, on route to Geneva, Switzerland, with 
215 passengers and 14 crew members on board?
    Answer. The FAA has taken steps to ensure that its certification 
personnel are aware of the potential hazards introduced by non-
essential systems, especially those that might affect power load-
shedding procedures during an emergency. In September 2000, the FAA 
issued policy requiring that flight crews have a means to manually 
remove power from such in-flight entertainment systems. Additionally, 
the FAA is considering new regulations that require circuit breakers 
not be used as the primary means to remove or reset system power.
    The FAA has incorporated guidance in its policy addressing 
Designated Alteration Station (DAS) programs that require:

        --a DAS to consider aircraft manufacturer design philosophies 
        during the supplemental type certification (STC) process;

        --a DAS to determine that they have appropriate knowledge and 
        experience prior to performing the STC;

        --FAA to assess the DAS's knowledge and experience relative to 
        these issues prior to delegating the program; and

        --in-house DAS training to highlight the importance of these 
        considerations in the STC process.

    Question 10. How does the FAA verify that ``non-essential'' system 
electrical requirements are not on the same electrical cabin buses as 
``essential'' flight control systems?
    Answer. The current transport category airworthiness requirements 
do not prohibit ``non-essential'' electrical system loads to be 
connected to an ``essential loads'' electrical bus. However, the 
regulations require that ``non-essential'' loads not interfere with 
operation of essential systems during normal operations and failure 
conditions.
    The FAA has published policy regarding the connection of ``non-
essential'' cabin equipment to the same electrical buses as 
``essential'' systems. These policies are available to the public. 
While not legally binding, the policies are used by Aircraft 
Certification Offices and designees as part of the normal certification 
process, when reviewing proposed electrical system designs, to ensure 
compliance with applicable airworthiness regulations.
    In addition, FAA has drafted nearly two dozen new and revised 
aircraft certification regulations that specifically address aircraft 
wiring issues. Aviation industry wiring experts and foreign aircraft 
certification authorities have participated in this process. Some of 
the proposed requirements are power switches for non-essential 
equipment, improved wire separation criteria, and a wire system safety 
analysis.

    Question 11. Currently, the FAA requires cockpit voice recorders to 
have a 30-minute recording duration for transport category aircraft. 
However, the international joint aviation requirements require that 
airline transport category aircraft be equipped with two-hour CVR 
recording capability. Are there any plans to require that U.S. planes 
are equipped with two-hour CVR capability?
    Answer. The FAA is finalizing a notice of proposed rulemaking to 
address National Transportation Safety Board recommendation A-99-17 
regarding the mandatory equipage of 2-hour cockpit voice recorders. 
Currently, the proposed language is in executive-level coordination.

    Question 12. What aircraft certification standards currently exist 
regarding material flammability that are pertinent to the Swissair 
Flight 111 case? Are there any changes planned as a result of this 
crash?
    Answer. The pertinent regulation that covers the certification 
standards for passenger cabin and cargo compartment flammability is 14 
CFR 25.853, Compartment Interiors. This regulation describes the 
specific areas and items within the compartments occupied by crew or 
passengers that must meet FAA flammability tests articulated in 
Appendix F to Part 25.
    As a direct result of the crash of Swissair Flight 111, the 
metalized polyethyleneterephthalate (MPET or metalized Mylar) cover 
material used on the thermal acoustic insulation blankets was ordered 
removed from the fleet. Only the MD-80/90, MD-11 and ATR-42/72 models 
were found to use the MPET insulation. The Airworthiness Directives 
(AD) ordering the removal of this material from service went into 
effect for the MD-80/90 and DC-10/MD-11 models on June 30, 2000. The AD 
that applies to the Aerospatiale Model ATR-42-500 and Model ATR-72 
series airplanes became effective on May 27, 2003. The compliance time 
for each of these ADs is five years.
    In addition to the AD activities, the FAA initiated a rulemaking 
project to provide for overall improved flammability standards for 
thermal acoustic insulation. A notice of proposed rulemaking was issued 
and a final rule is now undergoing review at FAA. The proposed rule 
would require that thermal acoustic insulation blankets pass a new 
``radiant panel'' test developed by the FAA Technical Center. The 
radiant panel test measures a material's tendency to propagate a fire, 
addressing in-flight fire concerns. In addition, insulation installed 
in the lower half of the airplane fuselage would have to pass a new 
test method utilizing a high flow kerosene burner. This test simulates 
a post crash fire scenario and measures the ability of the insulation 
to resist penetration of a fire into the cabin, which extends the time 
for survival and evacuation in an accident.
    The FAA (through the Technical Center) is also partnering with 
industry in a number of research projects aimed at further addressing 
the inflight fire threat from fires in inaccessible areas. These 
efforts involve research regarding wire insulation, contamination of 
hidden materials, the feasibility of utilizing active fire protection 
systems in inaccessible areas, and techniques for finding and accessing 
fires in inaccessible areas in current designs. For this last example, 
FAA equipped both wide and narrow body aircraft and has initiated 
testing.
    The means of addressing fire in inaccessible areas is considered a 
combination of materials fire safety, fire detection, and fire 
suppression. The design solutions may vary; an approved installation 
for one airplane model may not be appropriate for another model. As we 
further understand the various conditions and issues, the FAA will 
modify our safety standards accordingly.
Aerospace Questions
    Question 1. Can you update the Committee on your efforts to develop 
new safety regulations for the commercial space launches operation at 
the Air Force launch ranges?
    Answer. The purpose of the Final Rule Governing Licensing and 
Safety Requirements for Launch is to develop a well-defined process for 
meeting the FAA's public safety responsibilities with respect to the 
operation of commercial space launch vehicles from both Federal and 
non-Federal launch sites. This effort was initiated in a Notice of 
Proposed Rulemaking (NPRM), published in October 2000, and followed by 
a Supplemental Notice of Proposed Rulemaking (SNPRM) in July 2002.
    The Supplemental Notice of Proposed Rulemaking addressed changes to 
the October 2000 NPRM in the areas of grandfathering, risk limit for 
each hazard, and debris thresholds for use in flight safety analyses. 
The SNPRM also addressed issues of concern to commenters, specifically: 
(1) cost impacts on licensed launches from Federal launch ranges; and 
(2) the FAA and Air Force process for relief from common launch safety 
requirements.
    Based on the commercial launch industry's response to the SNPRM, 
FAA has elected to publish a second SNPRM in September 2003. In this 
second SNPRM, FAA seeks to better articulate current practice; address 
comments to the NPRM that are not addressed in the first SNPRM; and 
close the cost gaps between the FAA and the commercial launch industry. 
These objectives can be synthesized into four fundamental areas: (1) 
capturing current practice; (2) removing ambiguities; (3) addressing 
implementation costs; and, (4) maintaining flexible approaches to space 
launch.

    Question 2. In light of the current situation in the commercial 
space industry, do you foresee any commercial development of re-useable 
launch vehicles in the near future? What regulations will be needed to 
facilitate the launching of these types of vehicles?
    Answer. A number of private or commercial companies are planning or 
in the process of developing reusable launch vehicles (RLVs). Many of 
these companies have shifted their focus toward suborbital market 
opportunities where the technical challenges and cost to develop a 
suborbital RLV are less compared to an orbital RLV. As discussed in a 
report entitled ``Suborbital Reusable Launch Vehicles and Applicable 
Markets,'' published by the U.S. Department of Commerce's Office of 
Space Commercialization, there are a number of current and emerging 
suborbital markets, which include military surveillance, commercial/
civil earth imagery, fast package delivery, high speed passenger 
transportation, media, advertising, sponsorship, and space tourism. The 
$10 million X PRIZE competition, which was created to jump start the 
space tourism industry, also serves as a catalyst for the suborbital 
commercial space transportation industry. It is our understanding that 
the X PRIZE Foundation anticipates that three U.S. teams will attempt 
launches before January 1, 2005.
    The FAA issued regulations to ensure protection of the uninvolved 
public in the event of RLV launch and reentry activities. These 
regulations, however, do not specifically address passenger and crew 
safety. The challenge facing the FAA is to balance the need for 
regulations to protect public safety and property while not 
overburdening or stifling a fledgling commercial RLV industry, which 
proposes to carry humans on board commercial RLVs. The FAA is 
identifying, researching, and evaluating issues that might have a 
bearing on future FAA requirements associated with the safety and 
transport of humans on commercial RLVs. Standards or regulations that 
are developed for commercial human space flight will influence the 
development of the commercial RLV industry in terms of vehicle design, 
operations, and risk management. It is envisioned that vehicle safety 
standards for safety critical systems, operations and maintenance (O&M) 
standards, verification standards and human safety standards (e.g., RLV 
crew qualification, training, and health requirements), as well as 
additional regulations concerning the operation of reentry sites may be 
developed in the future.

    Question 3. The tragic accident resulting in the loss of the Space 
Shuttle Columbia and its crew focuses new attention on the risks and 
danger of space activity. How does this impact the safety 
responsibilities of the FAA in this area?
    Answer. The safety responsibilities of the FAA are not changed, 
however there is an emphasis on the risks associated with reentry 
activities. The FAA is closely following the Space Shuttle Columbia 
accident investigation and is participating in the accident 
investigation process. The FAA will assess the adequacy of current 
debris models used for determining overflight risk to the public, 
including risk to aircraft that might be flying within the debris area. 
Further, the Columbia accident investigation is expected to provide 
insight into maintenance and test procedures, particularly applicable 
to reusable launch vehicles. The FAA will make use of these lessons 
learned in developing guidance and requirements for maintenance of 
reusable launch vehicles.

    Question 3a. What impact does the Space Shuttle Columbia accident 
have on the ability of commercial launch companies to obtain liability 
insurance?
    Answer. The FAA contacted a number of insurance brokers 
specializing in aviation and space insurance. It would appear that the 
tragic loss of Columbia has no direct effect on the ability of 
commercial launch operators to obtain liability insurance in 
satisfaction of FAA license requirements although, the full effects of 
the accident may not be revealed until annual insurance programs 
maintained by FAA launch licensees are renewed. However, the loss of 
Columbia contributes to the perception growing among underwriters and 
re-insurers since the events of September 11, 2001, that insuring space 
risk, including launch liability, is undesirable business. Increasing 
unwillingness of re-insurers to accept space-related risks may limit 
the availability of launch liability insurance and also increase 
insurance costs.

    Question 3b. What steps are being taken taking to capitalize on any 
lessons learned from the Space Shuttle Columbia accident investigation?
    Answer. A member of the FAA Office of Commercial Space 
Transportation staff is working with the Space Shuttle Columbia 
Accident Investigation Board. Through this effort, FAA will be able to 
capitalize on lessons learned by obtaining first hand knowledge of all 
the particular issues. One area for which the Space Shuttle Columbia 
accident will provide insight is the adequacy of current debris risk 
models. Vehicle breakup, including the characteristics (i.e., the 
number of pieces, and their sizes and shapes) is a complex and 
difficult phenomenon to model. The FAA is examining the issue of debris 
survivability for high speed reentries.

    Question 4. The Commercial Space Launch Act specifies that the 
Secretary of Transportation shall ``encourage, facilitate and promote 
commercial space launches and reentries by the private sector'' and 
facilitate private sector involvement in commercial space 
transportation activity. How are you working with the Office of Space 
Commercialization at the Department of Commerce to fulfill this 
mission?
    Answer. The FAA has worked closely with the Office of Space 
Commercialization at the Department of Commerce (DOC). Both FAA and DOC 
share data on new launch developments, encourage and facilitate the 
implementation of space policies which are favorable to commercial 
space launch sites and operators, and work on interagency groups which 
facilitate and promote the commercial space launch industry.
    Specifically, FAA worked with DOC on the recently completed 
Liability Risk-Sharing Regime for U.S. Commercial Space Transportation. 
We have worked together on the analysis of trade agreements and the 
impact on the U.S. commercial launch industry. We have discussed with 
the DOC's Office of Space Commercialization the needs of the commercial 
launch industry as described by our Commercial Space Transportation 
Advisory Committee (COMSTAC).
    A representative of the DOC's Office of Space Commercialization was 
a member of a FAA Forecast Conference Panel this past October. More 
recently, we worked with the Office of Space Commercialization on the 
Policy Coordinating Committee established by the National Security 
Council during discussions on the Space Transportation Policy.
    In addition, the FAA has participated in a seminar developed by the 
DOC's Office of Space Commercialization on improving the data systems 
used for space transportation policy issues and provided data to DOC in 
support of their publications. Finally, we have worked together in the 
development of a Memorandum of Agreement between the DOC, the FAA, and 
the Department of the Air Force on a Spacelift Range Commercial 
Requirements Process. This process is defined as a formal, repeatable 
process for collecting commercial sector range support and 
modernization requirements, communicating these requirements to the Air 
Force, and considering these requirements in the existing Air Force 
requirements process.

    Question 5. The U.S. commercial space launch industry operates 
under a risk-sharing arrangement with the Federal Government, commonly 
known as the ``indemnification provision.'' This program is scheduled 
to sunset at the end of 2004. Are there any recent circumstances that 
have affected the necessity for this program since the FAA issued its 
report last year?
    Answer. The U.S. commercial space launch industry continues to 
demonstrate a solid safety track record and there has been no event 
requiring implementation of statutory indemnification provisions. 
However, a number of insurance market-driven factors, outlined below, 
are coalescing at a time of decreased commercial launch demand and 
heightened price sensitivity, reinforcing the findings set forth in the 
FAA report, ``Liability Risk-Sharing Regime for U.S. Commercial Space 
Transportation: Study and Analysis'' (FAA Liability Study), that the 
existing risk allocation regime is adequate, proper, and effective, as 
well as necessary to maintain a near-level playing field with foreign 
competitors.
    The FAA Liability Study includes an evaluation of the effects of 
September 11, 2001, on the commercial space transportation insurance 
market. The report noted the increasing reluctance of underwriters and 
re-insurers to participate in aerospace risks after September 11, 
reflecting a re-evaluation of space risk in general. Their 
participation in space risk is critical to this market segment. 
Insurance market reactions have continued to evolve in this direction 
and difficulties in insuring space risk in general have increased due 
to recent satellite failures while in orbit, in addition to the overall 
reduction in the aviation liability insurance market following 
September 11. Although space insurance covering satellite assets is 
different from launch liability coverage, the FAA is advised that it is 
becoming increasingly difficult and costly to cover any aerospace risk, 
including launch liability.
    Because of the decline in demand for worldwide commercial launch 
services since 1999, competition between international launch providers 
is fierce and prices have dropped. Further increases in the cost to do 
business would seriously hurt U.S. competitiveness. Foreign launch 
providers receive indemnification support from their governments. U.S. 
industry has already indicated paying the expense of indemnification 
would not allow them to stay in business. This would hold true even 
under the best market conditions.
    At its October 2002 meeting, the Commercial Space Transportation 
Advisory Committee (COMSTAC) adopted a report effectively endorsing the 
FAA Liability Study's analysis of the issues and most notably its 
assessment that maintaining the current liability risk-sharing regime 
is the only option that achieves four out of the five objectives 
delineated by the FAA in the study. In forwarding its report, the 
COMSTAC Chairman stated that ``continuation of this regime is critical 
to the viability and global competitiveness of U.S. space launch 
providers, which--along with their subcontractors and suppliers--
provide assured access to space for military, civil as well as 
commercial missions.'' (Letter from Livingston L. Holder, Jr., 
Chairman, COMSTAC, to Patricia Grace Smith, February 10, 2003.)
    COMSTAC also recommended amending the Commercial Space Launch Act 
(CSLA) by eliminating the sunset provision applicable to 
indemnification authority or, alternatively, by extending the 
indemnification authority for 10 years.
    Additional developments since the issuance of the FAA Liability 
Study include the following measures to address potential catastrophic 
risks:

   Congress enacted legislation providing Government support in 
        the event of catastrophic terrorism-related claims.

   The FAA continues to provide war risk coverage for 
        commercial airlines. Section 201 of the Air Transportation 
        Safety and System Stabilization Act, limiting air carrier 
        liability to $100 million for third-party claims arising out of 
        an act of terrorism, as determined by the Secretary of 
        Transportation, has been extended and continues in effect.

   In 2002, Congress enacted the Support Anti-terrorism by 
        Fostering Effective Technologies Act of 2002, or the SAFETY 
        Act, which provides a risk management system for designated 
        anti-terrorism technologies that meet certain criteria. The 
        criteria include the existence of extraordinarily large or 
        extraordinarily unquantifiable potential third party liability 
        risk exposure to the provider of the technology. (SAFETY Act, 
        Section 862). To be eligible for the benefits of the SAFETY Act 
        risk management system, the Seller must, among other things, 
        obtain liability insurance that does not exceed the maximum 
        available on the world market at prices and terms that will not 
        unreasonably distort the sales price for the technology and 
        enter into reciprocal waivers of claims among Sellers, 
        contractors and customers, among others. The benefits of the 
        SAFETY Act include a provision limiting the Seller's liability 
        arising out of, relating to, or resulting from an act of 
        terrorism to the amount of liability insurance required under 
        the SAFETY Act. (SAFETY Act, Section 864.)

    Question 6. The global telecommunications industry and its related 
space launch component has been in a ``slump'' the last few years. How 
has this ``slump'' affected the activities of the FAA and its future 
plans?
    Answer. The commercial launch market does not necessarily impact 
FAA activity. In fact, new private sector efforts as well as Federal 
and State funded space transportation programs have not been deterred 
by changes in the telecommunications marketplace.
    FAA activities include launch and reentry licenses, launch site and 
reentry site operator licenses, regulatory development, and policy 
development. Currently there are 13 active launch licenses. A number of 
organizations are seeking new launch and reentry licenses and FAA works 
with these companies in a pre-application process that includes reviews 
of safety, payloads, policy and environmental impacts. Furthermore, 
expendable launch vehicle (ELV) and reusable launch vehicle (RLV) 
companies continue development efforts with one brand new ELV expected 
to launch in 2003.
    In addition to four active launch site licenses held by state 
entities in Alaska, California, Florida, and Virginia, ten additional 
states are proposing launch sites for future commercial space 
transportation activities (Alabama, Montana, Nevada, New Mexico, 
Oklahoma, South Dakota, Texas, Utah, Washington, and Wisconsin).
    As industry advances new space transportation capabilities, the 
regulatory framework must expand and adapt to create the best possible 
framework to grow the industry while maintaining safety standards. FAA 
has issued advisory circulars and other guidance documents to aid the 
industry in understanding regulations and requirements for new 
expendable and reusable launch vehicles. When developing regulations, 
FAA also prepares economic impact analyses as part of the Paperwork 
Reduction Act. FAA has been contacted by congressional offices urging 
increasing levels of support for newly emerging companies in space 
transportation.
    To stay in touch with the needs and concerns of the industry, FAA 
works with its Commercial Space Transportation Advisory Committee 
(COMSTAC), a group comprised of representatives of industry and related 
interests. In addition, FAA participates in future space launch bases 
and range technology studies and works on the development of 
requirements and regulations for RLV Operations and Maintenance (O&M). 
Several annual publications each year assist industry in assessments of 
the market and help promote their activities. FAA also works closely 
with the White House on the review of the National Space Transportation 
Policy and participates in interagency discussions on policy and trade 
issues.

    Question 7. Before the Space Shuttle Columbia accident, there was a 
lot of discussion about commercial space tourism being a field with 
economic potential. Based upon interface with the commercial industry, 
what fields do you believe have the greatest potential for economic 
growth?
    Answer. There are a number of areas that have been enabled by 
commercial space launch activities and space tourism is often cited as 
a future growth area. The continued growth of satellite applications in 
the areas of remote sensing, communications (Direct to Home or Direct 
Access Radio) and navigation will also grow as new applications are 
developed.
    Public Space Travel continues to be the most promising market for 
new growth in the commercial space transportation industry. Interest in 
space tourism has not waned since Shuttle Columbia. Proponents believe 
that the market is real, even at very high prices, and only awaits the 
proper launch vehicle.
    The X PRIZE competition is a $10 million prize competition that was 
created to jump start the space tourism industry. If one of the 
competitors is successful and continues to operate as a commercial 
launch activity carrying passengers to the edge of space, there are 
business plans which will marry the launch with commercial astronaut 
training and marketing companies, poised to advertise the availability 
of this type of adventure travel.
    Other new applications that could open up new markets include 
expansion of broadband capabilities such as delivery of the Internet, 
digital motion pictures or other information requiring high bandwidth. 
Advertising and commercial product sponsorships could show some limited 
opportunities. There could be new markets for in-space transportation 
services such as fuel, power, or other supplies for the International 
Space Station or extending a satellite's lifespan.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. Ernest F. Hollings to 
                            Marion C. Blakey

    Question 1. How has the FAA responded to the Canadian 
Transportation Safety Board's findings that indicates that the FAA'S 
oversight of its third party certification program (Designated 
Alteration Station) failed to identify and correct anomalies that 
existed in the design and integration of a ``non-essential'' system on 
the MD-11 involved in the September 2, 1998 tragedy of Swissair Flight 
111 which departed from New York, on route to Geneva, Switzerland, with 
215 passengers and 14 crew members on board?
    Answer. The FAA has taken steps to ensure that its certification 
personnel are aware of the potential hazards introduced by non-
essential systems, especially those that might affect power load-
shedding procedures during an emergency. In September 2000, the FAA 
issued policy requiring that flight crews have a means to manually 
remove power from such in-flight entertainment systems. Additionally, 
the FAA is considering new regulations that require circuit breakers 
not be used as the primary means to remove or reset system power.
    The FAA has incorporated guidance in its policy addressing 
Designated Alteration Station (DAS) programs that requires:

        --a DAS to consider aircraft manufacturer design philosophies 
        during the supplemental type certification (STC) process;

        --a DAS to determine that they have appropriate knowledge and 
        experience prior to performing the STC;

        --FAA to assess the DAS's knowledge and experience relative to 
        these issues prior to delegating the program; and

        --in-house DAS training to highlight the importance of these 
        considerations in the STC process.

    Question 2. How does the FAA verify that ``non-essential'' system 
electrical requirements are not on the same electrical cabin buses as 
``essential'' flight control systems?
    Answer. The current transport category airworthiness requirements 
do not prohibit ``non-essential'' electrical system loads to be 
connected to an ``essential loads'' electrical bus. However, the 
regulations require that ``non-essential'' loads not interfere with 
operation of essential systems during normal operations and failure 
conditions.
    The FAA has published policy regarding the connection of ``non-
essential'' cabin equipment to the same electrical buses as 
``essential'' systems. These policies are available to the public. 
While not legally binding, the policies are used by Aircraft 
Certification Offices and designees as part of the normal certification 
process, when reviewing proposed electrical system designs, to ensure 
compliance with applicable airworthiness regulations.
    In addition, FAA has drafted nearly two dozen new and revised 
aircraft certification regulations that specifically address aircraft 
wiring issues. Aviation industry wiring experts and foreign aircraft 
certification authorities have participated in this process. Some of 
the proposed requirements are power switches for non-essential 
equipment, improved wire separation criteria, and a wire system safety 
analysis.

    Question 3. Currently, the FAA requires cockpit voice recorders to 
have a 30-minute recording duration for transport category aircraft. 
However, the international joint aviation requirements require that 
airline transport category aircraft be equipped with two-hour CVR 
recording capability. Are there any plans to require that U.S. planes 
are equipped with two-hour CVR capability?
    Answer. The FAA is finalizing a notice of proposed rulemaking to 
address National Transportation Safety Board recommendation A-99-17 
regarding the mandatory equipage of 2-hour cockpit voice recorders. 
Currently, the proposed language is in executive-level coordination.

    Question 4. What aircraft certification standards currently exist 
regarding material flammability that are pertinent to the Swissair 
Flight 111 case? Are there any changes planned as a result of this 
crash?
    Answer. The pertinent regulation that covers the certification 
standards for passenger cabin and cargo compartment flammability is 14 
CFR 25.853, Compartment Interiors. This regulation describes the 
specific areas and items within the compartments occupied by crew or 
passengers that must meet FAA flammability tests articulated in 
Appendix F to Part 25.
    As a direct result of the crash of Swissair Flight 111, the 
metalized polyethyleneterephthalate (MPET or metalized Mylar) cover 
material used on the thermal acoustic insulation blankets was ordered 
removed from the fleet. Only the MD-8O/90, MD-11 and ATR-42/72 models 
were found to use the MPET insulation. The Airworthiness Directives 
(AD) ordering the removal of this material from service went into 
effect for the MID-80/90 and DC-10/MD-11 models on June 30, 2000. The 
AD that applies to the Aerospatiale Model ATR-42-500 and Model ATR-72 
series airplanes became effective on May 27, 2003. The compliance time 
for each of these ADs is five years.
    In addition to the AD activities, the FAA initiated a rulemaking 
project to provide for overall improved flammability standards for 
thermal acoustic insulation. A notice of proposed rulemaking was issued 
and a final rule is now undergoing review at FAA. The proposed rule 
would require that thermal acoustic insulation blankets pass a new 
``radiant panel'' test developed by the FAA Technical Center. The 
radiant panel test measures a material's tendency to propagate a fire, 
addressing in-flight fire concerns. In addition, insulation installed 
in the lower half of the airplane fuselage would have to pass a new 
test method utilizing a high flow kerosene burner. This test simulates 
a post crash fire scenario and measures the ability of the insulation 
to resist penetration of a fire into the cabin, which extends the time 
for survival and evacuation in an accident.
    The FAA (through the Technical Center) is also partnering with 
industry in a number of research projects aimed at further addressing 
the inflight fire threat from fires in inaccessible areas. These 
efforts involve research regarding wire insulation, contamination of 
hidden materials, the feasibility of utilizing active fire protection 
systems in inaccessible areas, and techniques for finding and accessing 
fires in inaccessible areas in current designs. For this last example, 
FAA equipped both wide and narrow body aircraft and has initiated 
testing.
    The means of addressing fire in inaccessible areas is considered a 
combination of materials fire safety, fire detection, and fire 
suppression. The design solutions may vary; an approved installation 
for one airplane model may not be appropriate for another model. As we 
further understand the various conditions and issues, the FAA will 
modify our safety standards accordingly.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                            Marion C. Blakey

    Question 1. In the President's recent budget submission, changes 
were proposed to the Essential Air Service Program. This is an 
important program for several communities in my State. Could you please 
explain the proposed changes and the possible effect on the communities 
that currently receive service?
    Answer. We are proposing a fundamental change in the way that the 
Government delivers transportation services to rural America. For too 
long, many communities--there are a few exceptions--have taken the air 
service for granted as an entitlement and done little or nothing to 
help make the service successful. Requiring a modest contribution 
should energize civic officials and business leaders at the local and 
State levels to encourage use of the service. Communities will also 
have many more service options available to them. Rather than the two 
or three round trips a day to one hub that EAS has traditionally 
provided, we would work with the communities and state departments of 
transportation to procure charter service, single-engine, single-pilot 
service, regionalized service, or ground transportation in cases where 
that seemed to be more responsive to their needs. Moreover, as 
stakeholders in their service, the communities will become key 
architects in designing their specific transportation package. For the 
most isolated communities, we would continue to subsidize air service 
to the extent of 90 percent of the total subsidy required. The 
remaining communities would have to contribute 25 percent of the total 
subsidy required.
    In determining a community's standing in the program, we would 
incorporate the distance from small hub airports in addition to the 
distance to medium and large hubs. Some EAS communities are very close 
to small hubs but maintain their standing in the program because the 
nearby airport does not meet the medium-hub threshold.

    Question 2. I am concerned that some of the communities that would 
be required to pay 10 to 25 percent of the federal subsidy level would 
be unable to fund the match requirement and may lose service. In 
Hawaii, we have a very small community of Hansen's disease patients 
living in a remote area with no surface transportation links. Kalaupapa 
is currently served by EAS and under your current proposal would be 
required to provide $51,000 to continue service. Should Kalaupapa not 
be able to fund the matching requirement, it could have devastating 
effects on the members of the community requiring medical attention who 
would not have access to our State's medical providers without this air 
service. Would communities that cannot raise the necessary funds become 
isolated from our national air transportation system, regardless of the 
needs of that community?
    Answer. Communities that are not able to raise the necessary funds 
would not automatically be cut off from the national air 
transportation. We would take into account geographic isolation, with 
particular deference to communities that have no access to the national 
transportation system other than by air, such as islands or, in this 
case, Kalaupapa. We would certainly be willing to work with you on any 
needs unique to Hawaii.
    In the broader context of your question, we would also like to 
emphasize that the funds do not need to come from the community 
exclusively, or even at all, but can come from a variety of sources, 
both public and private. In fact, we encourage statewide participation 
by a variety of state agencies, including, of course, state departments 
of transportation. Communities could also look to their chambers of 
commerce for additional support.

    Question 3. The Airport Improvement Program was created to maintain 
and develop airport facilities. Prior to September 11, security 
projects accounted for an average of 2 percent of the total AIP grant 
program. Although aviation security was transferred to the new 
Transportation Security Administration, in the last Fiscal Year more 
than 16 percent of the AIP grants were used for security projects. 
Despite FAA's projected growth in the national air transportation 
system, the Administration has proposed level funding for the AIP 
program. Do you plan to submit a proposal to protect the AIP program 
from further use for security projects to ensure that the needed 
capacity building projects are completed?
    Answer. AIP has always funded security projects at airports, 
although before FY 2002, security projects on average made up a low 
percentage of AIP expenditures. In FY 2002, in response to the 
unprecedented new security requirements imposed on airports after 
September 11, AIP spending on security rose to unprecedented levels 
representing almost 17 percent of AIP. The FAA anticipates comparable 
levels of AIP funding for security in FY 2003, with spending being 
driven by the cost of terminal modification and reconfiguration to 
accommodate in-line installation of explosive detection systems for 
checked-baggage. The Aviation and Transportation Security Act made this 
work AIP eligible and the transfer of aviation security 
responsibilities to TSA did not otherwise narrow AIP eligibility for 
security funding.
    The FAA does not at this time anticipate continuation of these 
unprecedented levels of AIP funding for security projects beyond FY 
2003, however, our reauthorization proposal does not include any 
provisions to limit the availability of AIP funds for security.

    Question 4. As you know, more than $560 million in AIP was used for 
security-related expenses in Fiscal Year 2002, up from only $57 million 
the previous year. Last week, TSA Under Secretary James Loy testified 
that the TSA would like to have ``one more bite at the apple'' in 
Fiscal Year 2003 to use AIP for high priority security projects.

   What effect has the use of the $560 million in AIP in FY02 
        had on other safety- and capacity-related airport improvement 
        projects?

   What is your view on the use of AIP funds for even more 
        security costs in FY03?

   What affect would the use of AIP at FY02 levels have on 
        other projects in FY03?

   Long-term, what is your view on the use of AIP funds for 
        security-related projects?

    Answer. Despite record levels of AIP expenditures in FY 2002 to 
help airports meet new security requirements imposed in the wake of the 
terrorist attacks of September 11, the FAA was able to fund all safety 
projects, including runway safety areas and runway safety action team 
recommendations; letter of intent commitments; noise mitigation and 
reduction projects, ongoing phased projects; and congressional 
earmarks. The LOIs and phased projects represent commitment of 
significant AIP resources to capacity projects. The FAA also provided 
substantial AIP funding for rehabilitation projects, though there was a 
reduction in reconstruction and standards projects.
    Working collaboratively with TSA and the Department of 
Transportation, the FAA has committed to make a comparable level of AIP 
funding available for security projects in FY 2003--with a significant 
share going toward terminal modification and reconfiguration costs 
associated with in-line EDS deployment. These costs were made eligible 
for AIP funding for the first time in the Aviation and Transportation 
Security Act. We are confident that the system can sustain this level 
of AIP support for security for one more year without compromising 
other national objectives in building and sustaining this nation's 
system of airports.
    The FAA does not anticipate that the unprecedented level of 
security needs will be sustained on a continuous basis, once deployment 
of explosive detection systems for check baggage is fully implemented. 
Therefore, we do not anticipate that this tension will be sustained on 
a long-term basis. In the mean time, the FAA will continue to work 
closely with the Secretary of Transportation, the TSA and this 
committee to assure that the appropriate balance is struck between 
funding for security and other national priorities.

    Question 5. The Administration in its FY 2004 budget proposes to 
fund AIP at $3.4 billion for the foreseeable future. Airports have 
stated that capital needs top $16 billion annually for the foreseeable 
future. Can we meet ongoing safety, security, capacity and noise-
abatement needs into the future with AIP funded at only $3.4 billion?
    Answer. The Administration's proposal would continue the dramatic 
increase in AIP initiated by the passage of AIR-21. A $3.4 billion AIP 
represents a 70 percent increase in AIP from pre-AIR-21 levels. We 
recommend shifting a greater percentage of those funds to those 
airports with the greatest financial need and highest dependence on AIP 
funding for achieving capital requirements. We have also proposed that 
a larger percentage of AIP be made available on a discretionary basis 
to enable the FAA to direct these funds to safety, security and 
capacity projects of national significance. We have also proposed an 
increase in the noise set aside. We believe that by retaining the 
robust AIR-21 level of AIP, in combination with these formula changes, 
we can best meet airport capital needs before us.

    Question 6. In its budget request, the Administration proposes a 
major ``spend down'' of the Airport and Airways Trust Fund over the 
next several years. How would the ``spend down'' of the Trust Fund 
affect capital programs like AIP?
    Answer. We remain committed to using the AATF only to fund the 
Department's aviation programs, but in a change from AIR-21, the 
Administration is proposing to increase our use of balances that have 
built up in the Trust Fund.
    The Administration's spend down proposal does not impact capital 
programs. These programs are maintained at comparable levels to those 
provided under AIR-21.
    Under our budget and reauthorization proposals, we are projecting 
an uncommitted balance of just over $1.1 billion at the end of FY 2007. 
This balance would be down from a $4.8 billion uncommitted balance at 
the end of FY 2002.

                     FY 2004 Funding ($ in millions)
------------------------------------------------------------------------
     FAA Account        Under AIR-21 formula      Under FY04 Pres. Bud.
------------------------------------------------------------------------
Facilities &                            2,916                     2,916
 Equipment
Grants-in-Aid for                       3,400                     3,400
 Airports
Research,                                 100                       100
 Engineering &
 Development
Operations (Trust                       4,511                     6,000
 Fund)
Operations (General                     3,080                     1,591
 Fund)
------------------------------------------------------------------------
    Total                              14,007                    14,007
------------------------------------------------------------------------


    Question 7. The FAA has made a concerted effort in recent years to 
streamline the review and approval process for key capacity-related 
projects. What is the status of those efforts?
    Answer. FAA issued a Report to Congress in May 2001 reporting on 
Federal environmental requirements related to the planning and approval 
of airport improvement projects together with recommendations for 
streamlining the environmental review process associated with those 
types of projects. Six initiatives for streamlining were identified and 
implemented, as outlined below.

        1. FAA established EIS Teams for preparing EISs for major 
        runway projects at large hub primary airports. Since the Report 
        to Congress in 2001, FAA Teams have been working on the EISs 
        for eight major runway projects (Atlanta, Boston, Chicago-
        O'Hare, Chicago South Suburban Airport (SSA), Cincinnati, Los 
        Angeles, Philadelphia, and San Francisco). EISs have been 
        completed for four of the projects (Atlanta, Boston, SSA-Tier 
        I, and Cincinnati) with the other four in various stages of EIS 
        preparation.

        2. FAA has reallocated staff to provide for five more 
        environmental specialist positions in the Office of Airports. 
        With the passage of the FY 2003 Department of Transportation 
        and related Agencies Appropriations Act, funding has been 
        provided for hiring 18 more Airports environmental specialists 
        and 13 environmental attorneys. These added personnel will 
        specifically conduct and expedite the environmental analysis 
        and review of airport and aviation development so as maximize 
        the capacity benefits to the National Aviation System. FAA is 
        underway with plans to hire qualified personnel to fill these 
        positions at various locations around the country.

        3. FAA continues to maximize the use of consultant resources to 
        perform more EIS tasks that can be delegated by the FAA.

        4. FAA is working with the Council on Environmental Quality 
        (CEQ) to expand FAA list of categorical exclusions will be 
        published in revisions to FAA environmental orders. Initiatives 
        are being explored to provide for shorten and streamlined EISs, 
        as well as Environmental Assessments, that will also involve 
        CEQ and EPA.

        5. FAA continues to engage other Federal agencies at the 
        beginning and during preparation of EISs about their 
        environmental reviews and permit requirements to avoid 
        unnecessary delays. Also, the FAA, and the National Association 
        of State Aviation Officials, has undertaken a joint review of 
        Federal and State environmental processes and coordination. As 
        a result we have determined opportunities for improving ways in 
        which Federal and individual State requirements can be more 
        effectively and efficiently combined and coordinated. FAA 
        reviews and updates the status of efforts on the latter 
        initiative twice a year.

        6. FAA has developed, published (on FAA's web site) and updates 
        (at least twice a year) a compendium of best practices for EIS 
        preparation and management. The compendium of best practices 
        addresses practices that are the responsibility of the airport 
        proprietor, the EIS consultant, as well as those of the FAA.

    Question 7a. How have they affected the time it takes to review key 
projects?
    Answer. The 2001 Report to Congress noted the average time for 
completion of an EIS (from start of the EIS until EIS approval) was 3 
years. The average time to issue an agency Record of Decision (ROD) was 
3 months. Of the four runway EIS completed since issuance of the 2001 
Report to Congress, and implementation of FAA streamlining initiatives, 
the Atlanta EIS took 2 years and 5 months to complete. The Tier I EIS 
for the SSA took 1 year and 10 months and the Cincinnati EIS took 3 
years and 2 months to complete. For the Atlanta EIS, that is 7 months 
less than the 3-year average; for the SSA EIS, 12 months less than the 
average; and for the Cincinnati EIS, just 2 months more than the 
average. RODs for Atlanta, SSA, and Cincinnati were prepared and issued 
in 1\1/2\, 2, and 3 months respectively. The Boston project was unique 
and controversial and, therefore, the EIS process was long (almost 7 
years). Adding to the process was an 18-month delay between 1996 and 
1998 because of a change in Massport leadership and priorities, and 
extraordinary steps taken to engage community groups and the public in 
the process. The Boston EIS was not an average new runway EIS project 
in any sense of the word. In the ongoing EIS projects, FAA streamlining 
initiatives are being utilized to ensure that environmental process 
times are minimized to the maximum extent possible, and hiring more 
environmental staff will greatly aid the effort.

    Question 7b. Do you anticipate further administrative improvements 
in this area?
    Answer. FAA hopes that further agency, as well as congressional 
actions, will lead to administrative improvements in streamlining the 
environmental process for major runway projects around the country. 
Besides the initiatives proposed as part of the Administration's 
proposal for Aviation Reauthorization Legislation, FAA is implementing 
the environmental streamlining provisions of Presidential Executive 
Order (E.O.) 13274, Environmental Stewardship and Transportation 
Infrastructure Project Review. Two airport EIS projects (Philadelphia 
and Los Angeles) have recently been designated as priority projects for 
oversight under the E.O.

    Question 7c. Do you support efforts in Congress to make further 
improvements to the process?
    Answer. Yes. The Administration's bill proposes a number of 
streamlining provisions including--

   designation of aviation congestion projects and aviation 
        safety projects for high priority coordinated, concurrent 
        reviews;

   establishment of interagency Environmental Impact Statement 
        teams;

   deference to the Secretary on project purpose and need;

   deference to the FAA on reasonable alternatives, aviation 
        factors, and aviation noise and emissions analyses;

   funding of airport expansion noise mitigation from the noise 
        set-aside without an additional Part 150 process requirement;

   elimination of the duplicative Governor's air and water 
        quality certification; and

   judicial review.

    Question 8. We are told that the Administration will soon unveil 
its FAA reauthorization proposal. Can you give us a preview of some of 
the key elements? Will the Administration support the continuation of 
guaranteed funding for FAA capital programs?
    Answer. On March 25, 2003, the Administration transmitted its 
reauthorization proposal, Flight-100, to Congress.
    Flight-100 builds on the foundation of AIR-21, by continuing our 
investment in safety, air traffic control modernization and operations, 
airport capacity improvements, and environmental stewardship. The key 
provisions of Flight-100 include an emphasis on smaller airports and 
projects of national significance. Therefore, the Administration 
proposes a restructuring of the formulas and set-asides to allow more 
funds to be targeted to those airports and projects with the greatest 
dependence on Federal assistance. These airports are essential to the 
vitality of the NAS and have limited funding options other than Federal 
assistance. We also recommend simplifying the grant formulas by 
eliminating unnecessary or outdated set-asides.
    I would also like to highlight our environmental concerns, a 
cornerstone of Flight-100. While FAA's primary mission is to ensure a 
safe and efficient NAS, we also take our environmental responsibilities 
quite seriously. The environmental initiatives in Flight-100 will 
contribute to continued success of our investment in safety and 
capacity projects by providing for prompt and more effective 
environmental review of significant projects while continuing to 
exercise strong environmental stewardship.
    The Administration also proposes new initiatives to mitigate the 
impacts of aviation emissions and noise. For example, we propose to 
establish voluntary programs to reduce aviation emissions by converting 
airport infrastructure, airport vehicles, and airport-owned ground-
support equipment to new low emission technologies. Our noise 
initiatives include using some of the AIP noise set-aside for research 
aimed at reducing community exposure to aircraft noise or emissions. We 
also hope to increase prospective homebuyers' awareness of areas near 
airports that are exposed to aircraft noise by requiring Federal 
lenders to inform prospective homebuyers of properties within airport 
noise contours.
    Finally, Flight-100 sets forth certain structural reforms that 
could assist agency efforts to transform air traffic control and its 
supporting functions into an effective, performance-based Air Traffic 
Organization. The structural reform provisions in our reauthorization 
proposal would reinforce this goal by clarifying and enhancing 
management reforms that Congress has already put in place for the FAA.
    Although the proposal does not extend the AIR-21 provision of 
guaranteed funding by the Airport and Airway Trust Fund, the 
President's budget does propose to spend not only interest and receipts 
accrued by the trust fund but also to increase our use of balances that 
have built up in the fund.

    Question 9. While service to smaller communities remains a high 
priority, the Administration has proposed cuts to the Essential Air 
Service Program and has not requested funding for the Small Community 
Air Service Development Program. What is the Administration doing to 
promote air service to smaller communities?
    Answer. The key issue here is responding effectively and 
efficiently to small communities. It is important that changes be made 
to the Essential Air Service program, regardless of the proposed or 
ultimate funding levels, to ensure that we provide the communities the 
maximum flexibility possible to address their air service issues. A 
``one size fits all'' approach has not proven to be very successful. 
Providing communities more direct involvement and increased flexibility 
in meeting their individual needs will better ensure that the Federal 
assistance available will provide the communities with service that 
will be used.
    It was not possible to provide Fiscal Year 2004 funding for the 
Small Community Air Service Development Pilot Program as the program is 
currently authorized only through Fiscal Year 2003. However, the 
Administration's Flight-100 proposal includes a provision for small 
hubs and smaller airports to seek Federal assistance to improve service 
at their communities. It differs from the current Pilot Program in that 
it requires a contribution of 25 percent. It also eliminates the 
limitations on the number of communities that can participate. The 
broad flexibility and the ``grant'' structure have been retained.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. Ron Wyden to 
                            Marion C. Blakey

    Question 1. Please discuss the status of FAA programs to install 
ASR-11 or other radar systems in areas that currently have no radar 
coverage. How many radar systems does FAA expect to be able to deploy 
over the next several years? What criteria are used to set priorities 
for new radar installation?
    Answer. The FAA has qualified 12-airport surveillance radar at 
locations that currently have no radar coverage. Installation 
activities have begun at four locations and installations are scheduled 
to begin at four more within the next two fiscal years. The FAA expects 
to deploy/commission 112 ASR-11 systems through 2010.
    The FAA considers actual and forecasted number of itinerant 
operations, aircraft types, Instrument-Flight Rule (IFR) operations, 
expected delay savings, expected coverage, coverage provided by other 
radar systems, existing navigation systems, service to satellite 
airports, control facilities, and feeds to large terminal radar 
approach control facilities in its criteria to set priorities for new 
radar installations. The FAA has met with the airport operators/
authorities for some airports that may not qualify for new radar, to 
consider alternatives to improve service.

    Question 2. As you know, Congress has provided funding in each of 
the last three years for the installation of Transponder Landing 
Systems (TLS) at a number of small airports, including La Grande/Union 
County Airport in Oregon. These airports stand to benefit significantly 
both economically and from a safety perspective once these navigation 
aids are put in place. How is the TLS program proceeding? What kind of 
progress is being made toward actually commissioning these systems at 
the specific airports the congressional appropriators have named?
    Answer. In December 2001, FAA type accepted Advanced Navigation & 
Positioning Corporation's (ANPC) TLS, as a special (not for public use) 
Category I precision approach with siting and operational limitations. 
The limitations were necessary in order to address risks associated 
with the system's unique technical characteristics.
    The completion of the TLS evaluation has taken longer than 
anticipated because of a safety issue with the system that was 
identified in May 2002. During the execution of a TLS approach by an 
FAA flight inspection pilot, the TLS provided guidance based upon the 
position of a nearby helicopter. The misleading guidance information 
provided by the TLS was a safety hazard, because it could potentially 
result in controlled flight into terrain. Therefore, on May 30, 2002, 
the FAA suspended the Type Acceptance for TLS.
    ANPC and FAA met in June 2002 to conduct problem analysis and to 
define the strategy for fixing and testing the TLS. In the process of 
the problem analysis, other potential safety issues were identified. 
The issues and their proposed resolutions have been reviewed and a plan 
to test the resolutions has been developed. Testing recommenced in late 
April 2003. Once testing is complete, a decision on lifting the 
suspension on the TLS Type Acceptance will be made.
    Given the possibility that the results of the reevaluation may 
require substantial technical changes, additional installations of TLS 
will be delayed until after this process is complete.

    Question 2a. Is there anything FAA can do to streamline the site 
evaluation process, such as conducting the various layers of analysis 
in parallel rather than sequentially?
    Answer. The site evaluation process includes an initial site survey 
and a geographic survey. Initial site surveys are conducted to ensure 
that the FAA understands the needs of the site, and that the airport 
understands the requirements of a precision approach. Following the 
initial site survey, FAA can advise an airport whether it would be a 
suitable location for ILS (public approach) or TLS (special use 
approach, not for public use). The geographic survey is then performed 
so that an approach procedure can be developed for the desired landing 
system.
    FAA has found that concurrent TLS initial site surveys and 
geographic surveys would not be prudent because, during the conduct of 
the initial site surveys, several airports chose to decline any further 
consideration of a potential TLS at their facility.
    To accelerate the site evaluation process the FAA's contract with 
ANPC includes the geographic survey, which is normally performed by 
National Geodetic Survey (NGS). Because ANPC can prioritize the survey 
for the installation of its own product, TLS, this approach has 
significantly reduced the time required in the site evaluation process.

    Question 2b. Is the FAA shouldering costs related to Type 
Certification to the same extent as it does for other navigation aids?
    Answer. ANPC submitted the TLS for a regulatory approval as an 
instrument landing system but it is not an FAA required system. The FAA 
has never paid development, testing, installation or other costs to any 
other manufacturer for a navigational aid submitted for regulatory 
approval. The development of the TLS is the responsibility of ANPC, as 
it would be for the developer of any system not required by FAA. Issues 
related to type acceptance determination and associated costs are also 
the responsibility of ANPC. FAA was, however, directed by Congress to 
procure the systems, so we established a contract with ANPC to acquire 
TLS for the test program.

    Question 3. The FAA has determined that, at least initially, TLS 
use will be limited to commercial airline and charter air service 
operators. General aviation operators will be excluded, even though 
some general aviation pilots may well have training and equipment that 
enables them to operate on a par with commercial airline and charter 
pilots, and even though general aviation represents the majority of 
potential users at many of the small airports where TLS is to be 
installed. Nearly a year ago, then-Administrator Garvey explained in a 
letter to me that as the agency gains experience with TLS operation, 
``it may be possible to allow for a larger pilot population to use TLS 
landing capabilities.'' What progress has the FAA made on this front? 
When will it consider expanding TLS use to some classes of general 
aviation operators?
    Answer. The FAA type accepted the TLS as a Special Use (not for 
public use) system. Restrictions to the type acceptance were necessary, 
because technical limitations that are inherent to the TLS design 
result in operational risks, such as the potential for improper 
guidance, the potential for signal loss that would result in missed 
approaches and the potential for error due to the introduction of a 
human-in-the-loop.
    FAA's approach to mitigating the operational risks included 
limiting the use of TLS to Part 121 and Part 135 operators, because 
they can be held to TLS-specific training and operations standards that 
we cannot legally impose on Part 91 operators. Additional restrictions 
to mitigate risks include requiring each aircraft using TLS to have a 
pilot and a co-pilot, requiring the use of two radios, requiring a 
cross-check of TLS guidance with an alternate source of guidance, and 
establishing criteria for siting a TLS.
    The FAA intends to conduct a two-year operational evaluation after 
the first commissioning to validate the siting and operational 
limitations and to determine what adjustments would be appropriate. 
Prior to the suspension of the TLS Type Acceptance, general aviation 
applications were to be assessed on a test-case basis during an 
evaluation period. However, as a result of the system safety assessment 
and resolutions, additional procedural mitigations have been introduced 
that make it unfeasible to consider general aviation operators at this 
time.

    Question 4. There appears to be some confusion amongst aviation 
interests in my State about the authority and role of Designated 
Engineering Representatives (DERs) in approving supporting 
certification data. The regulations seem to say that DERs have approval 
authority, but I am told that FAA personnel at Aircraft Certification 
Offices sometimes re-analyze the data from scratch nonetheless, 
resulting in significant delays. What is FAA policy on this matter?
    Answer. DERs assist the FAA by examining data and finding 
compliance on behalf of the FAA. The FAA determines when and how DERs 
will be used and how much DER activity will be reviewed as part of DER 
oversight and specific project management. The FAA retains the 
authority to make compliance findings on the safety-critical, complex, 
controversial and new technological applications and does not delegate 
those aspects of design approvals. The bulk of the work completed by 
designees is routine and the FAA has a high degree of confidence in 
their technical ability to make the correct finding.
    The amount of delegation to DERs and the amount of review of DER-
approved data depends on several factors. A project that deals with new 
technology or a high level of complexity may dictate more FAA 
involvement in the form of direct FAA finding or review of findings 
delegated to a DER. A DER who is less experienced or unfamiliar to the 
FAA project office would also warrant less delegation and more review. 
There is no minimum or maximum quantity of data review specified in FAA 
policy, but DER performance evaluation depends on some review of DER 
data submittals.
    DER approved data is sampled and reviewed by the FAA in order to 
identify problem areas and ensure the DER work is satisfactory. Data is 
not re-analyzed from scratch, but the reviewed data must clearly 
substantiate the finding that the DER made on the FAA's behalf. If the 
reviewed data is poorly documented or substantiated, then additional 
data will likely be required. Re-submittal of satisfactory data may 
result in project delays but such delays are rare and are usually 
avoided by up-front technical exchanges between the FAA and the 
applicant and DER.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                            Marion C. Blakey

    Question 1. The Aerospace Commission states that the transformation 
of the U.S. air transportation system is a national priority. 
Specifically, the Commission has called for ``rapid deployment of a 
new, highly automated Air Traffic Management system'' that will better 
accommodate the increasing number and variety of aircraft in the 
system.
    I am very interested in seeing this recommendation implemented to 
ensure the economic security of our country. Can you tell me what 
resources and technologies your agency is investing in this project?
    Answer. The Federal Aviation Administration (FAA) is firmly 
committed to deploying a new, highly automated air traffic management 
system as called for in the Commission report. The FAA Strategic Plan--
the blueprint for the FAA's activities for the next five years and 
beyond--emphasizes that the continued development of a modern and 
efficient air traffic system is absolutely essential. Two of the 
principal components of the FAA's strategic plan are the continued safe 
operations of a growing and diverse air traffic system and the 
continued growth in system capacity. These objectives, which are 
critical to the future of the National Airspace System, can only be 
obtained by continuing to develop a modern air traffic system.
    Much of the emphasis of our work in more aggressively reaching 
these goals is in leveraging technologies currently in development and 
moving faster on those that are ready for deployment. By this approach 
we feel we can more rapidly achieve the kind of air traffic management 
system envisioned by the commission.
    Another facet of our work is more long term and involves 
coordinating the aeronautical and automation research efforts of 
several different agencies in government. As stated in the report, it 
is vitally important that the FAA, the National Aeronautics and Space 
Administration, the Department of Defense, the Department of Homeland 
Security, the Office of Science and Technology Policy, and the 
Department of Commerce develop more effective mechanisms for 
collaborative research. This is critical for developing and deploying 
the cutting edge technologies that will support the future development 
of our air traffic system. At the moment, we are working closely with 
each agency to establish agreements and structures to see that this 
happens.

    Question 2. The Aerospace Commission emphasized the importance of 
Federal investment in research and development to maintaining our 
nation's strength in the commercial aviation industry. I know that the 
FAA plays an important role in research on a number of issues 
pertaining to aircraft infrastructure, including cooperative research 
efforts with the aviation industry. As the aircraft industry has begun 
to work increasingly with advanced materials to design faster and more 
efficient planes, I know that there is increasing excitement in the 
industry in applying developments in advanced materials.
    I am very interested in the burgeoning field. Can I assume that you 
would be interested in working with industry further to develop 
techniques to maintain and ensure durability of these materials in the 
future, along the lines of the Center of Excellence programs currently 
in place for such technologies as airport technology and computational 
modeling?
    Answer. We are always interested in working with industry to 
develop new technology. Five years ago the FAA established a Center of 
Excellence in Airworthiness Assurance (AACE). The Center of Excellence 
currently has 28 university members.
    One of the Center's principal research areas is in the durability 
and damage tolerance of advanced materials. One example of how the 
Center's university research organizations are working with industry is 
in the maintenance and repair of advanced material sandwich structures. 
These are used in nacelles and control surfaces on transport aircraft, 
as well as fuselages on commuter and general aviation aircraft. Boeing 
is a full partner in this research initiative, supplying their manpower 
and fabrication expertise.

    Question 3. In the Administration's proposed reauthorization 
language you emphasize projects of national significance. In the case 
of many of those projects, such as the third runway at SeaTac Airport, 
the cost of the project has increased substantially due to federal and 
state requirements for environmental mitigation. Will there be 
recognition of these increased costs in your funding allocations for 
these projects of national significance?
    Answer. We recommended, in our proposal, to establish a fund for 
nationally significant projects with a significant funding level. We 
made this recommendation because the existing formulas do not produce a 
high enough level of discretionary funding to provide adequate Federal 
support for large projects such as the new runway at SeaTac airport. We 
would anticipate using the new fund to provide more assistance where 
the cost of the project has increased significantly or to provide a 
higher level of funding for projects from the outset.

    Question 4. The Administration's proposal converts the noise set-
aside portion of the AIP funds to nine percent of the total AIP 
program. Will that be enough to continue to fund the noise mitigation 
programs at airports such as SeaTac, where the airport and the FAA have 
committed to a significant program for residential and school noise 
mitigation?
    Answer. The Administration proposed the conversion of the noise 
set-aside to nine percent of the total AIP program in order to ensure 
that the funding is both adequate as well as stable. Under the existing 
formula, the noise set-aside is subject to the overall AIP level and 
also rising entitlement funding. Under existing law, the noise set-
aside can show a downward trend as passenger traffic increases, which 
increases the entitlement based upon boarding passengers. Under the 
Administration proposal, the noise set-aside would only be affected by 
the overall AIP funding level.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Frank Lautenberg to 
                            Marion C. Blakey

    Question 1. Do you think it is a good idea to move toward a private 
takeover of air traffic control? Do you think the public would support 
this move?
    Answer. I strongly support the Secretary's decision that the air 
traffic control functions performed at FAA's en route and larger 
terminal facilities (i.e., facilities larger than those currently in 
the contract tower program) are a core capability of the Federal 
Aviation Administration (FAA). However, prohibiting the conversion of 
any government-provided air traffic control functions to the private 
sector is unnecessary and would hinder the efficient management of the 
FAA's air traffic control and related responsibilities by preventing 
the FAA from making strategic decisions on how best to perform its 
mission. Certain FAA responsibilities are best fulfilled by contract, 
or using a combination of government and private services--as is the 
case today. Congress gave the FAA unique procurement authority for 
exactly this reason. For example, the FAA's air traffic control systems 
are increasingly composed of commercial components and software that 
build upon privately developed computer programs. In many instances, 
the developers of these components and software are unwilling to sell 
to the FAA the data rights necessary for FAA to maintain these items, 
or will only sell the rights at an exorbitant price.

    Question 2. I understand that the Federal Aviation Administration 
(FAA), by direction of the Office of Management and Budget (OMB) is 
conducting a study for contracting out flight service station 
controllers. To date, how much has been spend on this study? How much 
is this study expected to cost? Which FAA budget is funding this study: 
Operations or Facilities and Equipment (F&E)?
    Answer. The FAA is in the planning phase of the competitive 
sourcing review of Automated Flight Service Stations (AFSS) located in 
the continental United States, Puerto Rico, and Hawaii. To date, $1.6 
million from our Facilities and Equipment (F&E) account and $1.2 
million from our Operations account has been spent on the study. 
Activities related to NAS modernization are being paid out of F&E while 
all other activities are being paid out of Operations.
    We plan to fund the study at approximately $4,000,000 in FY 2003 
and it is anticipated that the cost of running the study in FY 2004 
will be approximately $6 million.

    Question 3. With regard to the FAA's NAS Implementation Support 
Contract (NISC), the Department of Transportation Office of Inspector 
General (IG), in its report #AV-2003-002, found that 22 percent of 
contract personnel reviewed did not meet contract requirements for 
education and experience. I understand that the IG has recommended that 
the FAA perform a complete review of all contract employees to ensure 
that they are qualified. Has the FAA completed this review? What type 
of reviews does the FAA now perform on its contract employees agency-
wide to ensure that all contract employees are qualified? Generally, 
what is the FAA doing to ensure adequate contractor oversight?
    Answer. The NISC-II program office completed a review of all 
contract personnel who were charging labor hours on NISC-II task 
orders. This review did not reveal any additional contractor employees 
who were not qualified for the labor category to which they were 
assigned or did not otherwise have a sufficiently documented waiver.
    Currently, FAA requires contractors to provide evidence that their 
employees meet the qualifications for the labor categories that FAA has 
established under the contract. Most requests for proposals (RFPs) 
include provisions that contain the qualifications required for 
contract positions (e.g., education, certifications, years of 
experience). In some instances, the RFPs and resulting contracts also 
contain provisions that require persons in key positions to provide FAA 
with their resume as well as a commitment that they will work on the 
particular project for a sufficient amount of time to ensure its 
continuity and success.
    The level of our surveillance of contractors varies in accordance 
with the nature of the work, the type of contract and the period of 
performance. In general, FAA conducts periodic audits to make sure that 
contractors are charging us only for work conducted by appropriately 
qualified people. Cost-Reimbursable contracts, like the NISC-II, have 
stringent reporting requirements, because costs are not fixed. 
Additionally, the NISC II contract type, cost plus award fee, motivates 
and rewards the contractor for cost control. Other large contracts that 
provide incentives to the contractor also require similar stringent 
milestones and reporting and evaluation requirements.

    Question 4. Could airport authorities benefit from using Airport 
Improvement Program (AIP) funds to purchase airport development rights? 
What are the advantages and disadvantages of such a policy?
    Answer. We believe that the purchase of airport development rights 
would be one method of ensuring that a privately owned airport remains 
an airport in perpetuity. As we understand the proposal, the State 
government would purchase these rights from the private owner in lieu 
of the purchase of the airport in fee simple. Thus, the main advantage 
is that costs should be much less. If AIP funds are used, the proposal 
should restrict the ability of the State to resell these development 
rights. It should also provide that the Secretary can permit a State to 
sell the development rights if the airport is no longer needed or if it 
is in the public interest.

    Question 5. What was the justification for a 27.6 percent budget 
estimate increase in spending on contract maintenance from fiscal years 
2002 to 2003? What is the estimate for Fiscal Year 2004? If this 
estimate varies from the Fiscal Year 2003 enacted appropriation level, 
please explain why.
    Answer. The estimate for FY 2004 is $73,581,615, which represents a 
30 percent increase over the FY 2003 enacted appropriation level. The 
increase in contract maintenance is due to the commissioning of newly 
acquired National Airspace System (NAS) systems hardware.
    FAA considers a number of factors when deciding to use contract 
maintenance and/or in-house staffing. Some of these factors are the 
expected life of the system, the level of integration with other NAS 
systems, and the degree of commercial off-the-shelf (COTS) hardware and 
software in the system. Sometimes contract maintenance is used only as 
an interim measure to allow time for FAA technicians to be trained and 
spare parts to be stocked at the FAA Logistics Center for in-house 
maintenance. However, when the characteristics of particular systems 
dictate, contract maintenance will be utilized for the full life of the 
system. In some cases, a combination of contract maintenance 
(contractor supplies and repairs of lowest repairable units) and in-
house staff will do all maintenance tasks.
    An example of FAA choosing to have the contractor maintenance for 
the life of the equipment is contained within the FY 2004 request. We 
are requesting $9,298,000 for Facility Security Risk Management. This 
is for contract maintenance of electronic facility security equipment 
such as closed circuit television, access control devices and intrusion 
detection systems. Equipment such as this is not integrated with other 
NAS systems, has a short life span and is commercial-off-the-shelf 
(COTS), thereby use of contract maintenance is more cost effective.
    The HOST Oceanic Computer System Replacement (HOCSR) program is 
requesting an additional $3,630,000 for contract maintenance. This 
system uses a combination of contract and in-house staff performing 
maintenance. In-house maintainers are responsible for system 
certification and contractors are used for COTS repair.
    Contract maintenance costs are expected to continue to grow as new 
systems and functionality are added to the NAS.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. John McCain to 
                          Read C. Van De Water

    Question 1. This committee is very concerned about competitive 
access issues in the airline industry. One tool we have tried to use to 
address this concern is the competition plans we require of certain 
large airports.

   Do you believe these plans are useful?
   Do you believe they could be improved?
   The Administration bill did not include any recommendations 
        in this area. Apparently proposed changes to the competition 
        plans' requirement are still being considered within the 
        Administration. When can we expect such changes to be 
        transmitted to Congress?

    Answer. All air carriers should be treated fairly. For this to 
occur, airport policies and business practices must be transparent--
e.g., all air carriers, not just the dominant carrier, should receive 
timely notice when gates and other facilities become available at an 
airport. When transparency exists, all air carriers, large and small 
alike, are able to compete on fair and equal terms. The competition 
plan requirement is an essential tool for ensuring that airport 
policies and practices do not unfairly disadvantage any air carriers
    We are confident that the competition plan requirement is reducing 
entry barriers at concentrated airports. We base this conclusion on the 
actions airport officials have taken to reduce entry barriers at their 
airports and the discussions we have had with airline managers who are 
attempting to gain access to or expand service at concentrated 
airports. The attached paper provides a partial list of the competitive 
policies certain airports have adopted since the competition plan 
requirement has been in effect. But despite our successes, some 
airports still retain business practices that make it difficult for 
smaller air carriers to gain access to the full range of airport 
facilities or to expand service on terms equivalent to those enjoyed by 
incumbent carriers.
    The FAA and OST staff devote a considerable amount of time to 
reviewing airport competition plans and offering suggestions as to what 
actions airport officials could take to reduce entry barriers at their 
airports. The competition plan process is targeted to address cited 
complaints and similar practices that may impede or prevent competitive 
entry. The practices that must be described are those considered to be 
essential for ensuring robust airline competition and were chosen to 
avoid undue burdens on airports; indeed, to reduce the regulatory 
burden, airports are now required to submit competition plans every 18 
months, as opposed to every 12 months.
    The Department has submitted to Congress a proposal for enhancing 
the competition plan requirement. This proposal is intended to be added 
to the Administration's proposed Flight-100 bill.

Attachment

  AIRPORT COMPETITION PLANS--Highlights of Reported Actions to Reduce 
            Barriers to Entry and Enhance Competitive Access

I. AVAILABILITY OF GATES AND RELATED FACILITIES
Major Elements of Competition Plan
   Number of gates available at the airport by lease 
        arrangement.

   Samples of gate use monitoring charts.

   Description of the process for accommodating new service and 
        for service by a new entrant.

   Description of any instances in which the PFC competitive 
        assurance #7 operated to convert previously exclusive-use gates 
        to preferential-use gates or has it caused such gates to become 
        available to others.

   Policy regarding ``recapturing'' gates that are not being 
        fully used.

   Resolution of any access complaints during the 12 months 
        preceding the filing.

   Use/lose or use/share policies for gates and other 
        facilities.

   Plans to make gates and related facilities available to new 
        entrants or to air carriers that want to expand service at the 
        airport.

   Availability of an airport competitive access liaison for 
        requesting carriers, including new entrants.

   The resolution of any complaints of denial of reasonable 
        access by a new entrant or an air carrier seeking to expand 
        service in the 12 months preceding the filing of the plan.

Significant Airport Responses
   Asserting control over underutilized gates.
   Designating Competition Access committees.
   Adopting more entry-friendly leasing terms.
   Removing specific access protections for signatory carriers.
   Providing new entrants with informational packages regarding 
        airport access.
   Monitoring gate use.
   Streamlining forced accommodation process.

Highlights of Recent Actions Reported by Individual Airports:
Anchorage--Converted from exclusive to preferential leases upon 
            expiration of exclusive leases; created Competitive Access 
            Team; uses web site to publish gate utilization 
            information.
Atlanta--Provides handbook with airport information to requesting 
            carriers and is invoking recapture authority for unused 
            facilities.
BWI--Developed Airline Accommodations Committee consisting of air 
            service development, operations, planning and commercial 
            management offices.
Burbank--Designates official as new entrant liaison and provides 
            guidance package.
Cincinnati--Using Competition Plan Coordinator to develop procedures 
            and time lines to respond in a timely manner to requests 
            for accommodation.
Cleveland--Competition Task Force established to ensure implementation 
            of competition plan and pursue expansion and growth 
            options; will develop new entrant handbook; assigns 
            Administrative Officer to each airline to monitor sublease 
            activity, assess operational needs to ensure efficiency of 
            use.
Detroit--Adopted a policy to override strict ``exhaustion of efforts'' 
            clause in its lease provision by assisting a requesting 
            carrier to ease any burden and reduce unnecessary delays 
            associated with acquiring gates and related facilities when 
            the airport is unable to provide those facilities.
Houston Hobby/Intercontinental--Renegotiated long-term, exclusive use 
            leases to shorter term, preferential, minimum-use leases 
            (at some terminals) with commitment on part of airport to 
            facilitate inter-carrier accommodations upon request of 
            interested airline; developed Welcome Letter package to 
            include gate usage information and a general Dispute 
            Resolution Policy Statement, as well as other pertinent 
            information.
Milwaukee--Removed potential obstacle for accommodation that enabled a 
            signatory carrier to refuse to accommodate a ``direct 
            competitor.''
Minneapolis--Undertook Competitive Marketing initiatives with low-fare 
            carriers and created short-term gates with preferences for 
            new entrant carriers; created new entrant package with 
            plans to publish information package on web site.
Nashville--Streamlining exhaustion of efforts requirement by using web 
            site to encourage new entrants to contact airport directly, 
            assists carrier with voluntary accommodation and 
            negotiations, under a timeline; intends to recapture vacant 
            leased gates upon request of another carrier.
Newark--Initiated review of Master Airline leases, identified 
            provisions enabling airport to regain more control over the 
            use of gates; moved to recapture gates or to force 
            accommodation on gates, based on utilization study; 
            streamlined forced accommodation clause by removing an 
            exhaustion of efforts; appointed New Entry Manager and 
            developed New Entrant Airline Rights package.
Oakland--Installing common use ticketing equipment at ticket counters 
            and gates so that all airlines operating there will use 
            identical gate check-in and gate CUTE equipment, thereby 
            providing maximum flexibility in assigning gates, even on a 
            per flight basis, thereby increasing the opportunities for 
            competition; provides Airline Entry Package and airport 
            facilitates negotiations between requesting carriers and 
            incumbents.
Providence--Facilitates gate sharing requests and will not enforce 
            lease clause requiring requesting airline to contact all 
            signatories.
Sacramento--Is formalizing gate availability information by preparing 
            an Airline Information Package containing information on 
            available gates, terms of access, and procedures for 
            securing facilities for new service, to be made available 
            on the airport's web page and upon request.
Salt Lake City--Start Up Package provided to requesting carriers 
            includes a gate utilization report summary, a statement 
            about the airport's dispute resolution practices, as well 
            as other necessary information about operating at the 
            airport.
San Antonio--Negotiated expiring lease to provide for preferential-use; 
            Aviation Department assists requesting airlines in gaining 
            access.
San Francisco--Invoked forced accommodation clause to ensure that 
            temporary gate needs of new entrant airlines were met.
San Jose--Established a Tenant Liaison Committee to respond to requests 
            for access within a reasonable time, gather appropriate 
            information, meet with relevant airport personnel, provide 
            gate utilization information to requesting airline, and act 
            as an intermediary between prospective airline and 
            incumbent airline to expedite accommodation; assigned 
            Property Management personnel as first point of contact.
San Juan--Developing policy on gate use and monitoring requirements to 
            be applied to all gates, drafting sublease guidelines and 
            requirements, developing complaints and disputes resolution 
            policy and developing a master lease incorporating the 
            referenced policies and procedures.

II. ARRANGE FOR LEASING AND SUBLEASING

Major Elements of Competition Plan
   Whether a subleasing or handling arrangement with incumbent 
        carrier is necessary.

   How the airports assists requesting airlines to obtain a 
        sublease or handling arrangement.

   Airport oversight policies for sublease fees.

   Process by which availability of facilities for sublease or 
        sharing is communicated to other interested carrier.

   Airport policies regarding sublease fees.

   How complaints by sub-tenants about excessive sublease fees 
        are resolved.

   How independent contractors who want to provide such service 
        as ground handling are accommodated.

   Formal dispute resolution procedure.

Significant Airport Responses
   Beginning to develop dispute resolution process.

   Asserting more control and oversight over sublease fees, 
        terms, and conditions.

   Imposing sublease caps on administrative fees.

   Reviewing and/or pre-approving subleases.

   Notifying carriers of gates available for subleases.

Highlights of Recent Actions Reported by Individual Airports:
Albuquerque--Adopting dispute resolution procedures.
Anchorage--Requires airport approval and caps administrative fees; 
            adopting dispute resolution procedures.
Atlanta--Adopting dispute resolution procedures.
Austin--Requires airport approval and caps administrative overhead 
            fees.
BWI--Caps fees and requires airport approval.
Chicago O'Hare--Adopting dispute resolution procedures.
Chicago Midway--Gate committee is developing dispute resolution 
            procedures for use on domestic gates.
Cleveland--Pre-approves subleases, caps fees; common-use gate protocol 
            manages gate occupancy times and fines user for failure to 
            comply; adopting dispute resolution procedures.
Dallas Love Field--Adopted a policy to cap sublease administrative 
            fees.
Dallas-Fort Worth--Adopting dispute resolution procedures.
Denver--Adopting dispute resolution procedures.
Detroit--Caps sublease fees for forced accommodation arrangements; 
            requires airport approval for subleases with new entrants; 
            gate utilization policy assures that subtenant will not be 
            disadvantaged by a schedule change of the tenant.
Houston Hobby/Intercontinental--Will initiate the development of a 
            formal dispute resolution process.
Kahului--Requires pre-approval of a sublease and discourages excessive 
            sublease rents.
Memphis--Adopting dispute resolution procedures.
Newark--Is developing more formalized procedures for hearing complaints 
            in addition to considering complaints at station manager or 
            airlines affairs meetings.
Oakland--Requires airport manager's pre-approval for sublease or 
            assignment; restricts amount of assigned space that may be 
            assigned or sublet to another airline; caps fees.
Ontario--Is developing a Gate Use Committee to resolve disputes, set 
            timeline for appeals
Palm Beach--Pre-approval required for subleases; airport has authority 
            to recapture subleased facilities when they represent over 
            50 percent of the tenant's leasehold; caps administrative 
            fees; adopting dispute resolution procedures.
Reno--Adopting dispute resolution procedures.
San Antonio--Adopting dispute resolution procedures.
Saint Louis--Airport consent required for subleases; ground-handling 
            fees are subject to airport oversight; preferential-use 
            sublease terms and fees subject to airport oversight; will 
            address sublease markups in new airline use agreement.
San Jose--Developed an Airline Access Complaint form and established 
            procedures for resolving complaints within a reasonable 
            time. Also oversees sublease fees per revised lease and 
            applies, as a matter of policy, sublease fee caps on 
            subleases executed under older master lease.
San Francisco--Adopting dispute resolution procedures.
Washington Dulles--Requires prior approval of subleases and handling 
            agreements; caps sublease fees.

III. PATTERNS OF AIR SERVICE

Major Elements of Competition Plan
   Markets serviced.
   Small communities served.
   Markets served by low-fare carrier.
   New markets added or dropped in past year
Significant Airport Responses
   Using market analysis to add competitive services.
   Using marketing tools to attract low-fare services.

Highlights of Recent Actions Reported by Individual Airports:
Albuquerque--Instituted New Entrant Promotional Program as an incentive 
            to promote competition.
Charlotte--Performed a Competitive Air Service Assessment indicating 
            possibilities for adding low fare carrier service on 
            certain routes; implemented marketing plan to attract 
            additional service.
Palm Beach--Eliminated surcharge on use of common-use gates for a 
            seasonal or temporary basis; is conducting an ``air service 
            enhancement campaign'' to increase the air service 
            opportunities available at its airport and to enhance the 
            revenue-generating opportunities for airlines.
Pittsburgh--Provides Airline Information Package; adopted Air Service 
            Marketing Incentive Program to encourage new and 
            competitive air service for existing and new carriers.
Reno--New Airline Incentive Policy implemented; Business Development 
            and Property Administration Division coordinates the 
            accommodation of services and facilities for new entrants, 
            including assisting in negotiations with incumbent 
            signatory airlines and participation in incentive programs.

IV. GATE ASSIGNMENT POLICY

Major Elements of Competition Plan
   Method of informing carriers of gate assignment policy.
   Methods for announcing to carriers when gates become 
        available.
   Policies on assigning RON positions.
Significant Airport Responses
   Adopting gate assignment protocols with consideration for 
        new entrants.
   Changing signatory policies to lessen burdens on new 
        entrants.
   Notifying all carriers of gate availability.

Highlights of Recent Actions Reported by Individual Airports:
Anchorage--Posts gate utilization information and availability on web 
            site; is required to post public notice prior to leasing 
            space.
Atlanta--Will add link to web site for tenant information; will post 
            information on underused gates after gate use surveys.
BWI--Will revise policy to offer signatory status to any airline 
            willing and qualified to assume substantially similar 
            obligations as those required of a signatory carrier when, 
            due to the physical space limitations at the airport, that 
            airline is otherwise precluded form leasing a full 
            complement of space. Also, will post gate/hold room 
            availability information on its web page and will advertise 
            announcements of gates.
Charlotte--Non-signatory/new entrant landing fee is the same as a 
            signatory landing fee.
Chicago O'Hare--Notified all carriers by facsimile of availability of 
            common-use gate.
Houston Intercontinental--Reassigned underused leased space to an 
            incumbent air carrier for its expansion.
Miami--Prohibits carriers from controlling gate assignments and from 
            transferring or assigning ticket counter positions; 
            requires sharing of contiguous and underutilized ticket 
            counters.
Nashville--Will post information on gate availability on its web site.
Newark--Notified interested subtenant carriers of potential gate 
            availability during Master Lease Utilization review 
            process; adopted common use procedures (for use to resolve 
            competing interests in a gate) with a priority to new 
            entrants offering competitive services.
Oakland--Provides written notification to airlines as gates become 
            available and includes estimate date of availability; 
            requesting airlines must provide current and planned 
            schedule information.
Philadelphia--Intends to assign new gates on basis of accommodating 
            competitive airline service, considering, among other 
            factors, whether airline is a ``low fare'' airline, nonstop 
            markets, size of aircraft, frequency of operations, etc.
Pittsburgh--For PFC-financed gates, airport will give priority to new, 
            competitive airline service; signatory fee status not 
            dependent on minimum leasehold.
Phoenix--Is studying the development of contractual and/or regulatory 
            tools to allow airport to better coordinate gate-sharing 
            opportunities; provides gate use and schedule information 
            to prospective entrant carriers; provides New Entrant 
            Information package, containing gate utilization 
            information, to prospective entrant to enable it to make 
            informed decision on which incumbent air carriers to 
            contact for shared gate agreements.
Sacramento--Replaced County ordinance gate assignment process with a 
            lease agreement providing for short-term, preferential-use 
            leases subject to airport reassignment; is developing 
            Airline Information Package to be provided on airport's web 
            page.
Saint Louis--Signatory status is available to subtenants; gate 
            assignment procedures will be published on web site; 
            simultaneously advises all carriers of gate availability; 
            will use its web site to publish relevant information for 
            serving airport; is developing and placing timelines for 
            access; City agent is contact point for City gates as well 
            as facilitating sublease accommodation.

V. GATE USE REQUIREMENT

Major Elements of Competition Plan
   Gate use monitoring policy.
   RON monitoring policy.
   Requirement for signatory status.
   Minimum requirements for a lease.
   Accommodation priorities.
   Common-use gate usage policies.
   Methods for calculating rental rates for common-use gates.

Significant Airport Responses
   Developing per-gate use monitoring policies.
   Making gate usage information available.
   Adopting similar minimum utilization requirements for 
        incumbent and new entrant carriers.

Highlights of Recent Actions Reported by Individual Airports:
Anchorage--Uses its newly installed Multi-User Flight Information 
            Display System (MUFIDS) to identify space to fill specific 
            requests as they arise and to determine which gate are 
            subject to recapture; information is made available upon 
            request and on web site; RON positions are monitored 
            through ground handler.
Chicago Midway--Monitors gates on a per-gate basis to track airline 
            compliance with preferential lease utilization 
            requirements, implement shared-use provisions, develop gate 
            use procedures, and analyze construction phasing, and 
            develop utilization criteria. Also used to schedule airport 
            services such as parking, custodial services, concessions 
            and security.
Dallas-Fort Worth--Instituted formal Gate Monitoring and Reporting 
            Procedures, under auspices of a Gate Monitoring Task Force, 
            in support of PFC competitive access assurance, using FIDS-
            produced monthly gate activity reports and flight activity 
            reports, for summary daily gate utilization activity by 
            gate and terminal.
Denver--Will negotiate a narrower ``preferential'' gate availability 
            window with its hubbing carrier and will review the use/
            lose provisions to ensure they are procompetitive; drafted 
            5 Year Strategic Business Plan.
Detroit--Formulated a policy for (1) a gate allocation package that 
            will chart scheduled daily and weekly departures per 
            carrier and (2) an on-going gate monitoring program to 
            determine whether minimum utilization is met.
Miami--Has an active gate-monitoring program to control gate 
            assignments on a daily basis.
Minneapolis--Generates bimonthly gate plot based on scheduled gate 
            usage, modified to reflect actual usage.
Oakland--Monitors gate usage and analyzes and maps flight schedules on 
            a weekly basis to determine availability of space and 
            minimum gate usage, for purposes of determining whether to 
            exercise the 30 day revocation process for a preferential-
            use gate permit.
Palm Beach--Monitors common-use gate utilization and uses airline 
            provided monthly reports and airport daily monitoring to 
            oversee preferential-use gate usage to determine whether a 
            reallocation of gates should be undertaken to better 
            balance user needs with terminal capacity, and for 
            marketing purposes, that is, identifying high demand or un-
            served demand markets.
Pittsburgh--Uses new software to monitor gate usage on all gates and to 
            identify opportunities to accommodate new entrants and 
            maximize facility utilization.
Phoenix--Performs periodic studies of flight schedules to monitor gate 
            utilization; will use the studies to communicate gate 
            availability to prospective entrant carriers and will 
            incorporate it in new entrant airline packet; will also use 
            studies to better manage and adjust operating schedules for 
            terminal food beverage and retail concessions; will perform 
            formal gate utilization analysis for each carrier when 
            vacancy rates subside.
Providence--Monitors gate use relying on airline schedule information; 
            uses this information to assist a new entrant in 
            identifying a potential signatory carrier to accommodate 
            it.
Saint Louis--Monitors average daily gate utilization through scheduled 
            daily flight information supplied by airlines; requires 
            monthly gate utilization report in each short term 
            preferential use permit and for new master preferential 
            lease to replace that expiring at year end 2005.

VI. FINANCIAL CONSTRAINTS

Major Elements of Competition Plan
   Major source of revenue for terminal projects.
   Use of PFCs for gates and related terminals.
   Availability of discretionary income for capital improvement 
        projects.

Significant Airport Responses
   Using discretionary income for gate projects.

Highlights of Recent Actions Reported by Individual Airports:
Anchorage--New Airline Operating Agreement permits airport to rate-base 
            capital projects required to accommodate a new entrant or 
            expanding airline, under certain conditions.
Chicago O'Hare--Purchased exclusive-use gate with discretionary funds 
            and converted it to common use.

VII. AIRPORT CONTROLS OVER AIRSIDE AND GROUNDSIDE CAPACITY

Major Elements of Competition Plan
   Majority-in-interest (MII) clauses covering projects.
   Projects delayed because MII clauses revoked.
   Plans to modify existing MII agreements.

Significant Airport Responses
   Exempting capital projects necessary for competition from 
        MII votes.

Highlights of Recent Actions Reported by Individual Airports:
Nashville--May consider, as not enforceable, an MII vote against a 
            development project for the purposes of excluding 
            competition, when the development project is necessary for 
            the airport to meet its obligation to provide access on 
            reasonable terms as required by the AIP assurances.
Providence--Interprets MII clause that excludes from MII concurrence 
            projects to comply with Federal requirements as permitting 
            airport to construct terminal facilities to enhance 
            competition without MII approval.

VIII. AIRPORT INTENTIONS TO BUILD OR ACQUIRE GATES TO BE USED AS COMMON 
        FACILITIES

Major Elements of Competition Plan
   Common-use gates available.
   Common-use gates scheduled to be built.
   International gates available for domestic use.
   Fee differences between international gate use for domestic 
        service and domestic gates.
   Carrier reliance on common-use gates.

Significant Airport Responses
   Utilizing discretionary income to acquire common-use gates.
   Adopting common-use gate fees comparable to fees charged for 
        leaseholds.

Highlights of Recent Actions Reported by Individual Airports:
Anchorage--Converted from exclusive to short-term preferential (subject 
            to recapture) and common-use gates.
Atlanta--Recaptured a temporary exclusive-use gate for preferential 
            use, and converted one underused preferential-use gate to a 
            common-use gate.
BWI--Installing common use terminal equipment (CUTE) in all common-use 
            gates to enhanced the ability of airlines to share gates 
            and hold rooms thereby increasing airport capacity.
Chicago O'Hare--Converted exclusive-use gate to common use.
Cleveland--Adopted protocol for common use gate with priorities given 
            for (a) use by existing carrier that does not lease a gate, 
            (b) a new entrant, and (c) an carrier seeking to expand; 
            would apply this protocol, as needed to exclusive-use 
            gates. Three gates converted to common use; common use gate 
            legislation passed by City; gate program management 
            contract developed; protocol adopted.
Houston Hobby/Intercontinental--Use CUTE system at all ticket counters; 
            IAH has constructed common-use/preferential-use gates; HOU 
            has common-use gates and is developing a standard fee for 
            any common gate use to charge separately for gate use, 
            ticket counter, and common facility use to eliminate 
            confusion in combined ``per turn'' rates).
Nashville--Has several common-use gates available for requesting 
            carriers; airport will negotiate vacant gate recapture, 
            upon request.
San Jose--Is developing a common use philosophy for the design of new 
            and renovated passenger terminal facilities, including the 
            use of plasma signs, generically sized gates to facilitate 
            sharing, an integrated data system similar to CUTE II to be 
            installed at ticket counters and gate podiums, and a shared 
            baggage screening system.

IX. AIRFARE LEVELS AS COMPARED TO OTHER LARGE AIRPORTS

Major Elements of Competition Plan
   Carrier local passenger, average fare, market share and 
        average passenger trip-length data.
   Data above compared to other airports.

Significant Airport Responses
   Using fare data to illustrate competitive strength.
   Using market share data to attract new service.

Highlights of Recent Actions Reported by Individual Airports:
Chicago O'Hare--Using fare data, actively tracks O'Hare's competitive 
            position relative to other O'Hare markets.
Palm Beach--Using market share data to highlight market opportunities 
            for new and incumbent carriers.
30 Airports--Published Competition Plan, including market-share data, 
            on web page.

Small Community Air Service Development Pilot Program
    Question 2. Your testimony is generally complimentary of the small 
community pilot program. The Department's budget, however, does not 
request any funding for Fiscal Year 2004--why not?
    Answer. The Pilot Program was authorized for the three-year period 
covering fiscal years 2001, 2002, and 2003. This fiscal year is the 
last year the program has been authorized and the Administration was 
not, therefore, in a position to seek funding for the program for 
fiscal year 2004. However, the Administration's proposal in its 
Reauthorization Bill, Flight-l00, includes a provision for small hubs 
and non-hubs to seek Federal assistance to improve service at their 
communities. It differs from the current program in that it requires a 
contribution of 25 percent. It also eliminates the restrictions on the 
number of communities that can participate and the state limitations. 
The broad flexibility and the ``grant'' structure have been retained.
Essential Air Service Program
    Question 3. Why don't more passengers use EAS-subsidized service?
    Answer. As mentioned above, a ``one size fits all'' approach has 
not proven to be very successful. Providing communities more direct 
involvement and increased flexibility in meeting their individual needs 
will better ensure that the service is more tailored to communities' 
individual needs and, thus, that the maximum number of passengers will 
use the service.
Essential Air Service Program
    Question 4. The Administration's proposed budget for FY 2004 caps 
EAS spending at $50 million and modifies the program to include, among 
other requirements, local matching funds. What is the anticipated 
impact of these program changes on air service to small communities?
    Answer. We are proposing a fundamental change in the way that the 
Government delivers transportation services to rural America. For too 
long, many communities--there are a few exceptions--have taken 
Essential Air Service for granted as an entitlement and done little or 
nothing to help make the service successful. Requiring a modest 
contribution should energize civic officials and business leaders at 
the local and State levels to encourage use of the service. Communities 
will also have many more service options available to them. Rather than 
the two or three round trips per day to one hub that EAS has 
traditionally provided, we will work with the communities and State 
Departments of Transportation to procure an appropriate level of 
service that is responsive to their needs, whether it is charter 
service, single-engine/single-pilot service, regionalized service, or 
ground transportation. As stakeholders in their service, the 
communities will become key architects in designing their specific 
transportation package.
    Under the Administration's Flight-100 reauthorization proposal, for 
the most isolated communities, we will continue to subsidize air 
service to the extent of 90 percent of the total subsidy required. For 
the least isolated communities (those within 100 miles of a large or 
medium hub or 75 miles of a small hub or 50 miles of a non-hub with jet 
service), we will be willing to pay for one-half of the cost of surface 
transportation. The remaining communities would have to contribute 25 
percent of the total subsidy required.

    Question 4a. How many communities and passengers are estimated to 
continue receiving EAS funding under the Administration's FY 2004 
budget proposal? How many communities and passengers will likely lose 
subsidized service?
    Answer. We expect that approximately 70-80 communities, generating 
in excess of half a million passengers a year, will retain service, 
while 50-60 communities, generating 350,000-400,000 passengers a year, 
may lose air service.

    Question 4b. Will Alaskan and Hawaiian communities, which face 
significant geographic challenges from communities in the Lower 48, be 
subject to the same program changes?
    Answer. Communities that are not able to raise the necessary funds 
would not automatically be cut off from the national air transportation 
system. We would take into account geographic isolation, with 
particular deference to communities that have no access to the national 
transportation system other than by air, such as islands. In addition 
the funds do not need to come from the community exclusively, or even 
at all, but can come from a variety of sources, both public and 
private. In fact, we encourage statewide participation by a variety of 
state agencies, including, of course, State departments of 
transportation. Communities could also look to their chambers of 
commerce for additional support.

    Question 4c. How will these changes affect the regional carriers 
that currently rely on EAS subsidies?
    Answer. To the extent that not all currently subsidized EAS 
communities will participate in the program, some carriers will lose 
some routes. However, we do not expect that any carriers will be 
materially hurt. In fact, those communities that remain in the program 
should be more aggressive in taking a leadership role in ensuring that 
the air service is successful.
Essential Air Service Program
    Question 5. What is the Department's estimate of how much the EAS 
program will cost in Fiscal Year 2004 if Congress does not make the 
programmatic changes you have proposed?
    Answer. The Department has found itself in the past caught among 
conflicting statutes: (1) communities' entitlements to receive at least 
a minimum level of air service; (2) carriers' rights not to be forced 
by the Government to serve communities at a loss; and (3) the 
Department's being subject to the Anti-deficiency Act.
    As you know, the EAS subsidy makes up the gap between expenses and 
revenues, and the attacks of 9/11 caused expenses to increase and 
revenues to decrease, thus significantly increasing required subsidy 
levels. More recently, the Iraq war and SARS have depressed airline 
revenues even further. Thus, it is still very unclear how many 
additional non-subsidized EAS communities will require subsidy in FY 
2004 as a result of the sole remaining carrier's filing a notice to 
suspend the last service there. Since 9/11, we have received 50 
suspension notices--27 of them triggering new subsidy. At that rate of 
newly subsidized communities, it appears that $113 million will not be 
sufficient to maintain status-quo service levels.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. John McCain to 
                          Gerald L. Dillingham

    Question 1. Your testimony notes that it still takes 10 to 14 years 
to complete a major runway project. Our bill tries to address this 
problem by giving the Secretary tools to accelerate capacity critical 
projects. How successful do you think our approach will be? What can be 
done legislatively and administratively to reduce the time required to 
complete runways?
    Answer. We believe the measures proposed in the Aviation Investment 
and Revitalization Vision Act (S-824) to expedite the environmental 
review process address many of the challenges identified in our January 
2003 report and should make a difference in the amount of time it takes 
to build a major runway project. \1\ Completing the environmental 
review process, specifically complying with extensive and duplicative 
Federal and State requirements and obtaining the necessary permits was 
cited as one of the most significant challenges by the airports we 
surveyed. However, it is also important to point out that our work 
shows that airports also experienced challenges in other phases of the 
runway process including reaching agreement the purpose and need during 
the planning phase and on how to mitigate the impact of noise and other 
quality of life issues.
---------------------------------------------------------------------------
    \1\ U.S. General Accounting Office, Aviation Infrastructure: 
Challenges Related to Building Runways and Actions To Address Them GAO-
03-164 (Washington, DC)
---------------------------------------------------------------------------
    Regarding whether additional legislative or administrative actions 
are needed, the Federal Government and airport authorities have 
undertaken a number of actions to reduce the time required to complete 
runways. For example, Executive Order 13274, entitled Environmental 
Stewardship and Transportation Infrastructure Project Reviews, is 
designed to streamline the environmental review of transportation 
infrastructure projects by requiring federal agencies that conduct 
environmental reviews to develop procedures that will allow the reviews 
to be completed in a timely and responsible manner. Thus, we believe 
that Congress should allow airports to use the existing tools and 
evaluate the effectiveness of these efforts before making any 
additional legislative or administrative changes to the process for 
building runways.

    Question 2. Do you believe that appointing a Chief Operating Office 
(COO) will improve the management of the air traffic control system at 
the FAA?
    Answer. The appointment of a chief operating officer to manage the 
day-to-day operations of the air traffic control system will be a 
positive step for FAA and the aviation industry and should, over time, 
lead to improvements in the overall management and delivery of air 
traffic control services. The Air Traffic Services Subcommittee, which 
is responsible for overseeing the Administration and management of the 
air traffic control system, called the chief operating officer the 
``lynchpin'' of the new performance-based organization. We agree.
    As envisioned, the chief operating officer will be held accountable 
for transforming FAA's culture to one that is more results oriented and 
customer focused. Lack of accountability has been a contributing factor 
in the on-going problems that FAA has encountered in modernizing the 
air traffic control system. While the cultural transformation is 
expected to take several years, the flexibilities that Congress granted 
FAA in the areas of personnel and procurement should help facilitate 
the chief operating officer's efforts to hold employees accountability 
for results.

    Question 3. If substantial amounts of AIP funds continue to be used 
for security, what will be the impact on safety and capacity projects? 
Where will that put us five years from now when demand of air travel 
has returned?
    Answer. Continuing to use significant amounts of AIP funds for 
security projects could have a profound impact on future airport 
development including safety and capacity projects. As we reported in 
our October 2002 report, using a half billion in AIP grant funds for 
new airport security requirements has had some affect on other airport 
development projects. \2\ FAA had to decrease the amount of AIP grant 
funds for capacity, environment, reconstruction, safety, and standards, 
with the largest reductions occurring in standards and reconstruction. 
For example, there was almost a $156 million decrease in standards 
projects and a $148 million decrease in reconstruction projects. In 
addition, FAA also deferred three letter-of-intent payments until 
Fiscal Year 2003 to the following three airports:
---------------------------------------------------------------------------
    \2\ U.S. General Accounting Office, Airport Finance: Using Airport 
Grant Funds for Security Projects Has Affected Some Development 
Projects, GAO-03-27 (Washington, DC)

        Hartsfield International Airport in Atlanta, GA, which is the 
        busiest airport in the country with almost 40 million 
        enplanements per year and was one of the most delayed airports 
---------------------------------------------------------------------------
        in 2000 and 2001, had $10 million for a runway deferred;

        Cincinnati/Northern Kentucky Airport in Covington, KY had $10 
        million for a new runway deferred; and

        Indianapolis Airport in Indianapolis, IN, had $7.5 million for 
        a new apron and taxiway deferred.

    Moreover, if we do not ensure that AIP grants are available to fund 
capacity enhancing projects, such as runways, which take 10-14 years to 
build, the National Airspace System may not be able to handle air 
traffic when it returns.

    Question 4. The GAO has done a lot of work on management issues at 
the FAA. What recommendations do you have in terms of legislative 
proposals that we should consider to improve FAA management?
    Answer. Before the Congress initiates new legislative remedies, we 
believe that FAA should complete the implementation of statutory 
authorities that the Congress has already provided, fully address 
recommendations that we and the Department of Transportation's 
Inspector General (DOT/IG) have made, and ensure that management is 
held accountable for results.
    During the last several years, the Congress has provided 
legislative relief for FAA to facilitate management improvements in 
most of its core organizational areas, especially acquisitions and 
personnel. In addition, we and the DOT/IG have conducted extensive 
program reviews and made numerous recommendations for improvement. 
Although FAA has made improvements in some of these areas, many of the 
problems that the legislative relief was expected to remedy continue to 
plague the agency. As our work has shown, a major factor contributing 
to the continuation of the agency's problems is that FAA has not taken 
full advantage of the legislative relief that the Congress provided and 
has not fully addressed many of our and the DOT/IG's recommendations. 
The following examples illustrate FAA's incomplete implementation of 
its existing statutory authorities and of our recommendations.
    In 1995, the Congress granted FAA unique and powerful legislative 
flexibilities to improve its major acquisition and workforce 
management. Our studies have shown that FAA has not fully implemented 
these flexibilities. Most notably, it has not included some critical 
processes or elements for evaluating results, providing feedback loops 
for modifying initiatives as necessary, and holding mangers 
accountable.
    In 2000, the Congress mandated a new governance structure to 
accelerate the modernization and improve the performance of the air 
traffic control system. One component of the new structure, the Air 
Traffic Services Subcommittee, has been meeting since January 2001 and 
is working with FAA managers to establish performance metrics for the 
air traffic control system. However, it is now 2003, and the other 
major components of the new governance structure have not yet been 
implemented.
    A key tool for efficient agency management is accurate and timely 
information on costs. FAA has been implementing a cost accounting 
system for several years, but major components are not yet in place. 
Furthermore, as we have reported, inadequate internal controls place 
hundreds of millions of dollars at risk of fraud, waste, and abuse.
    To improve its oversight of aviation safety, FAA in 1998 
implemented a new and enhanced safety inspection program--the Air 
Transportation Oversight System (ATOS). We found in 1999 that FAA had 
not finished implementing some critical steps, such as developing 
guidance for its inspectors and establishing a database of inspection 
findings for use in targeting its inspection resources to the areas of 
greatest risk. In 2002, the DOT/IG reported that the program's 
implementation remains inconsistent because FAA has not established 
strong oversight and accountability procedures, and our recent 
discussions with FAA point to a need for further improvements in its 
guidance and databases.
    Given that FAA has not yet fully implemented the statutory 
authorities that the Congress has already provided and has not fully 
addressed the recommendations that we and the DOT/IG have made, and 
given that FAA has not provided for evaluating some of the initiatives 
that it has implemented, we recommend that before initiating new 
legislation, the Congress consider using its oversight and budget 
authority to ensure the full implementation of FAA's existing statutory 
authorities, the implementation of GAO and DOT/IG recommendations, and 
management accountability.

    Question 5. The FAA recently revised outward estimates of when its 
passenger traffic will reach pre-September 11 levels. Do you believe 
there is a real need for immediate infrastructure investment?
    Answer. Although FAA does not expect passenger traffic to rebound 
until 2007, the current slowdown in the aviation industry and the 
economy provides a window of opportunity to prepare for future growth 
at those airports where congestion and delays were the most significant 
in 2000. Moreover, if the type of infrastructure investment involves 
building runways then timing is critical given that we found that it 
can take between 10 to 14 years to build a runway.

                                  
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