- FEDERAL AVIATION ADMINISTRATION REAUTHORIZATION

[Senate Hearing 108-846]
[From the U.S. Government Publishing Office]

S. Hrg. 108-846

FEDERAL AVIATION ADMINISTRATION REAUTHORIZATION

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

HEARING

before the

COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

__________

FEBRUARY 11, 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

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Page
Hearing held on February 11, 2003................................ 1
Statement of Senator Brownback................................... 4
Statement of Senator Burns....................................... 5
Prepared statement........................................... 6
Statement of Senator Inouye...................................... 5
Statement of Senator Lautenberg.................................. 34
Prepared statement........................................... 34
Statement of Senator Lott........................................ 2
Statement of Senator McCain...................................... 1
Statement of Senator Rockefeller................................. 4

Witnesses

Blakey, Hon. Marion C., Administrator, Federal Aviation
Administration................................................. 7
Prepared statement........................................... 10
Mead, Hon. Kenneth M., Inspector General, Department of
Transportation................................................. 13
Prepared statement........................................... 17

Appendix

Kerry, Hon. John F., U.S. Senator from Massachusetts, prepared
statement...................................................... 39
Response to written questions submitted to Marion C. Blakey by:
Hon. Maria Cantwell.......................................... 48
Hon. Daniel K. Inouye........................................ 49
Hon. John McCain............................................. 40
Hon. Ron Wyden............................................... 46
Response to written questions submitted by Hon. John McCain to
Hon. Kenneth M. Mead........................................... 54

FEDERAL AVIATION ADMINISTRATION REAUTHORIZATION

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TUESDAY, FEBRUARY 11, 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. Good morning. Today's hearing is the first in
a series of reauthorization hearings on the Federal Aviation
Administration's programs. The FAA accounts expire this year,
and it is this Committee's intention to develop and report out
a reauthorization proposal in a timely manner. To do that, it
would be preferable for us to have the administration's
reauthorization proposal in hand. I would urge the
administration to submit its reauthorization proposal as soon
as possible, which they have not done for a long period of
time. However, given the importance of this issue and the
number of other competing priorities in the Senate, we will
move forward without it if necessary.
The FAA is solely responsible for ensuring the safety and
efficiency of our Nation's civil aviation system. The
importance of the aviation industry to our Nation's economy has
become all too evident in the months following the tragedy of
September 11, 2001. The industry is in a crisis that has deeply
concerned 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 the proper agency oversight. Our
aviation system has been the leader in safety and efficiency,
and we must act this year to ensure that this continues to be
true.
The last reauthorization bill, AIR-21, enacted in 2000,
provided historic funding levels for investment in our aviation
system. We have made great progress in capacity and
infrastructure improvements, but we must continue to make the
appropriate level of funding available to ensure that
infrastructure is further improved, our safety is maintained,
and the security of our aviation passengers remain a priority.
At the same time, we must be aware of the problems our
airlines face. Without an airline industry, there is no need to
reauthorize the FAA. This reauthorization will not be an
especially easy task. There will be many competing programs for
a limited amount of money. Revenues going in the Aviation Trust
Fund are declining. We must make some tough decisions about
funding and other issues.
I remain committed to moving forward with the
reauthorization bill at a rapid pace. I know our new
Subcommittee chair, Senator Lott, along with Senator
Rockefeller, and the continuing involvement of other Members of
the Committee, will make this happen, and it is important.
I think we ought to look at this FAA reauthorization in the
context of two incredibly important issues, one, the crisis in
the airline industry. I met with some members of labor
yesterday about how we are going to address labor-management
issues. Three airlines are bankrupt. Some believe there will be
more. That is one aspect of this issue that directly affects
the FAA, and the other is the FAA's interface with the TSA. I
am not sure we have sorted that out yet, and I would be very
interested in hearing Mr. Mead or Ms. Blakey's comments on
that.
We had a hearing last week on the TSA, and Mr. Mead
informed us, no one else did, that there is a $3.5 billion
shortfall between revenues and expenses just for the TSA. Where
is money coming out of? The Aviation Improvement Program. I do
not think Ms. Blakey thinks that is a good idea, do you, Ms.
Blakey?
Ms. Blakey. No.
The Chairman. So we have some very, very serious issues to
address as part of this reauthorization, and by the way, on
this issue of funding, I do not know how you lay another tax on
an airline ticket. I do not know how you take more money out of
AIP, which leaves general revenue, but that will be, I think,
part of the discussion we have with the witnesses.
I want to thank the witnesses for being here today, and I
want to recognize Senator Lott, the distinguished Subcommittee
Chairman, and then Senator Rockefeller.

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

Senator Lott. Thank you, Mr. Chairman. I congratulate you
for having this early hearing and for your commitment to moving
the FAA reauthorization bill this year. I had some meetings
this past weekend with our counterparts on the other side of
the Capitol, and they indicate that they plan to work
aggressively on this issue also and to have legislation ready
in the House before Memorial Day, so that is a positive sign,
because at an earlier point, there had been some indication
maybe they were going to put the highway bill ahead of this
bill, and now it looks like that may not be the case, and I
think that is the right thing to do.
I would like to welcome today's witnesses and thank them
for appearing before the Committee, and thank them for the job
they do. I am especially looking forward to hearing the
proposals for the FAA reauthorization from a fellow
Mississippian's viewpoint. The administrator is originally from
Tupelo, Mississippi, or at least she grew up there, and I have
been very impressed with the job she has done, but that is what
I expected from her with that background.
Mr. Mead, also I must say that I enjoyed your testimony
last week, and I have told others how impressed I was with the
job you do in your role as the IG. You not only give a very
close look at programs and problems, you are honest about it,
but you also try to suggest ways that maybe we could deal with
it, and boy, we need more of that, so I am looking forward to
hearing from you today.
As Chairman of the Aviation Subcommittee for this Congress,
one of my first priorities has been to meet with all segments
of the aviation industry. Senator Rockefeller has been doing
that over the years and, of course Senator McCain, to make sure
we understand everybody's viewpoint and explore new ideas of
how we can be helpful to this very important part of America's
economy.
When I took the Chairmanship of this Subcommittee a good
friend said, why did you do that, they are having all kinds of
problems, and I said, that is why, because I think this is too
important a segment of our economy to ignore the problems and
not try to see if there is something Congress can do.
A lot of the problems are going to have to be dealt with by
the industry, but this year is especially important, with
security risks, security costs, what we are going to do with
regard to the impact on the industry if there is a war that
goes forward in Iraq, how that would further affect the
industry and, of course, the FAA reauthorization, which is very
important legislation.
I remember when we passed it last time it was not easy, and
a lot of give-and-take between this Committee and its
leadership and the appropriators in the Senate and the House. I
hope maybe this time it actually will not be quite that
difficult, but it will take a lot of work to get it done.
We plan to have several hearings. I have talked to Senator
McCain about other hearings we think will be necessary. I am
going to be visiting with Senator Rockefeller some more about
his view of how we can develop the legislation working with our
Chairman and full Committee and Ranking Member.
In the immediate aftermath of 9/11, I think the Congress
acted incredibly responsible in trying to step up to the
challenges that aviation security was having, and the industry
was having. Now we need to go take a look at what we can do to
help stabilize the industry, look at the burdens we are putting
on them, look at what the future should be, what is the vision
for aviation for the next 10 or 20 years. I do not think we do
enough of that kind of thinking, and I enjoyed having a chance
to talk with the administrator about that.
We do need to look at ways to enhance safety, security,
efficiency, and competition. I am particularly interested in
the air traffic control systems, and the use of airport
improvement programs. We put lots of money into the air traffic
control system, billions, and yet, it still is not where we
would like it to be, and I think we are going to have to make
sure that we have the capacity in the future, when more demands
do come along. We need to modernize the system and, obviously,
it can be done.
We also have to pay attention to the impact we have had on
airports in terms of lost AIP funds, additional security
demands, and what are their responsibilities and our
responsibilities.
This is going to be a bipartisan effort because this is
something our people deserve, they expect us to approach it
that way, and beside that, it is one of the few areas that
Senators legislate on that we have to actually endure the
consequences, and so we will be trying very hard to do the
right thing, and to be helpful and constructive as this
legislation is developed.
Thank you, Mr. Chairman.
The Chairman. Senator Rockefeller.

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

Senator Rockefeller. Thank you, Mr. Chairman. I will be
brief. I agree with everything that Senator Lott said, and I do
think that the Airport Improvement Program is sacred,
especially if you come from Mississippi, West Virginia, Montana
or Kansas, I do not know about Arizona and Hawaii. You guys are
kind of big, but to us it is everything. It is everything.
We have got to look at our rural airports. We have got to
make sure the Trust Fund does not get vitiated. We have seen
that happen so often. I think we have done the right thing
since 9/11, but having said that, we still have a lot more to
do in terms of aviation security. That is the linkage with TSA
that Chairman McCain mentioned.
But I agree with what has been said about both of you. I
think over the years, Mr. Mead, you have really proven yourself
a stalwart. We have a lot of work to do, and thank you.
The Chairman. Senator Brownback.

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

Senator Brownback. Thank you, Mr. Chairman, and thanks for
holding the hearing. Welcome, administrator. Thanks for coming
to Wichita recently and touring the industry there. It is an
important sector, and it is important we do the
reauthorization.
I just want to call your attention to one issue. It is a
narrow issue, and other people have talked about the bigger-
frame issues, which I agree with, but one that I am concerned
about from my home State and for the Central Region is a recent
analysis on the nonprimary entitlement programs within general
aviation. This is an analysis looking at the Central Region, it
looked at my State as well as the whole country. In FAA's
Central Region, which includes Kansas, only 28 percent of the
nonprimary airports would receive the annual maximum
entitlement compared to a regional average of 66 percent.
Twenty-eight percent for the Central Region, 66 percent for
a normal region, and then looking at my State revealed that
only 45 percent of Kansas' nonprimary airports would be
eligible to receive the annual maximum entitlement of $150,000
compared to 70 percent Nationwide, so 45 percent in my State,
normally 70 percent. I am concerned that we are not receiving
the national average.
I know it is a narrow issue for your consideration. We need
to look at the broader issues as well, but it is a big concern
to my State, which is a State that is heavily dependent upon
general aviation. It is heavily dependent on these nonprimary
airports for industry, for the building of the aircraft, and
the use of them as well. I would hope that you could at some
point in time take a look at that.
I look forward to your thoughts and comments about what we
can do for the state of the airline industry overall, that is
obviously in a great deal of difficulty. Thanks for being here.
The Chairman. Senator Inouye.

STATEMENT OF HON. DANIEL K. INOUYE,
U.S. SENATOR FROM HAWAII

Senator Inouye. Thank you very much, Mr. Chairman. I am
here to thank Administrator Blakey and the FAA for the very
considerate and sensitive way you and the FAA responded to the
special needs of the State of Hawaii. As you are well aware,
over 95 percent of the people who travel to and from Hawaii do
so by air, and we are hostages to tourism. That is our major
industry, and the airlines play a major role in that. If it
were not for the sensitive and considerate way you have
responded, I think we would be bankrupt today, so I want to
thank you personally.
Thank you very much.
The Chairman. Senator Burns.

STATEMENT OF HON. CONRAD BURNS,
U.S. SENATOR FROM MONTANA

Senator Burns. Thank you, Mr. Chairman. I will put my
statement in the record. I just want to bring up a couple of
points this morning that we have heard, and a lot of concerns
out of general aviation, and with regard to the working
relationship with TSA, and maybe some rulemaking going on down
there that is sort of out of the loop, so to speak, or out of
the box. We are concerned about some of that in the name of
homeland security, and I think it goes back to the way we
actually built the foundation of this building, we left out a
couple of gaps.
The Federal Government, I guess, has mandated the expansion
of the Air Marshal Program, which is doomed to fail. I wish we
would just do away with the Air Marshal Program right now. We
have authorized pilots to be armed in the cockpit. Now we have
got a bureaucracy that is putting them through hoops that
should not be even talked about, but I will tell you, in the
sense of security, why in the world do we allow our pilots to
arm themselves and to secure the flight deck, and then put a
weapon back in the cabin? That makes no sense at all.
We do not even build jails anymore where the guards are
armed inside the turnkey of the hardest criminals, and when you
do that, you change--and I know, if you have got another
hijacking, I know the first guy that is going to get jumped on.
That is going to be that Air Marshal, and the weapon gets in
the wrong hands, and that changes the landscape and the
dynamics of that operation quite a bit.
So I am not near the--when you did not have any other
security on there, maybe it had merit, but I think that merit
is gone, and actually is a detriment to our security right now,
as far as operation of an airplane in the air.
And I am kind of concerned about this rulemaking in a
sense, because you know, everybody says public service is
great, but the bureaucracy has forgotten that it is service to
our citizens. We have got to stop putting people out of
business that have been in operation a long, long time, and
understand their business very well, and we are just not
communicating, and that is something that you inherited, and I
know you are not going to change that overnight, but I just
want you to know that we are aware of it here in Congress, and
I think we have to take some common sense steps as far as
security is concerned, and I think we can do that.
And the Chairman is exactly right. I do not see how we can
put another tax on an airline ticket, but there is some
inaccuracy there, but not--do not get me started on airline
fares, because I was a little upset last week. I can fly round-
trip from here to San Francisco three times for what it cost me
to fly once round-trip to Montana, so we are subsidizing the
competitive routes, and that is of great concern to me.
So thank you, Mr. Chairman, for this hearing. I look
forward to the testimony.
[The prepared statement of Senator Burns follows:]

Prepared Statement of Hon. Conrad Burns, U.S. Senator from Montana

Thank you Mr. Chairman for calling this important hearing regarding
the Reauthorization of and the current state of the Federal Aviation
Administration.
I am pleased to be here this morning to discuss FAA Reauthorization
and the plans that the administration has for aviation as well as
transportation security. Over the course of the past year and half we
have witnessed many changes in our national aviation system. While I
believe we have made great strides in security I also believe we have
some questions that need answered.
I think it is important that we carefully consider all of the
changes forced on aviation both users and consumers in the name of
security. Over the past year and a half the Federal government has
asked consumers to dramatically change their habits on aircraft and in
the airport. Some have accepted the so-called hassle factor as a cost
of travel while many have not.
In some cases, the Federal Government has grounded general aviation
users from flying at the cost of jobs and businesses. Over the past
year and a half the Federal Government has grounded general aviation
businesses on several occasions. Some of my colleagues believe we need
to continue to do so in the name of security. Congress needs to get out
of the business of putting people out of business.
The Federal Government has asked the airports to forego badly
needed AIP funding in order to pay for federally mandated security
costs while significantly impairing their ability to ensure revenue
streams. Although many of the airports have accepted these costs, they
have done so at their own expense. We need to find ways to stretch
taxpayer dollars by further streamlining the environmental assessment
process.
The Federal Government has mandated the expansion of an air marshal
program that is, according to media reports, failing miserably.
Consequently, Congress has deterred violence on commercial passenger
aircraft by allowing pilots to carry weapons on the flight deck but did
not foresee the bureaucratic hurdles of implementation.
I am concerned that the voice of Congress is being shrugged off by
some in the Administration who believe they know what is better for the
people of this country. I would like to invite those individuals out to
my state to explain a more secure country is directly related to job
loss and the end of family owned businesses.
This should be the root of our efforts as we enter this
reauthorization process.
I realize the FAA is not responsible for the actions of TSA and
Dept. of Homeland Security but I would like to see accountability on
behalf of the people who are now unemployed or whose business has been
forced out of the economy.
Finally, I would like to stress how important general and
commercial aviation is to rural America and states like Montana.
Considering our long distances, sparsely populated areas, and erratic
climate, we are more dependent on aviation than most.
I think it is very important that we ensure the future of regional
airlines and the Essential Air Service program. Policies that attack
transportation in rural states attack our economy, access to health
care and standard of living.
During the negotiation on the reauthorization bill, we cannot, and
should not, allow a one-size fits all standard on rural states. There
are many issues that will need to be addressed this year and I look
forward to working with my colleagues on this bill.

The Chairman. Thank you very much, Senator Burns. The
problem that you cite obviously is exacerbated if we have major
airlines go out of business.
Anyway, Ms. Blakey, we would like to begin with you. Thank
you for appearing before the Committee today, and we look
forward to listening to your testimony, and you will need to
pull the microphone over in front of you.

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

Ms. Blakey. I do want to say thank you, and good morning,
Chairman McCain, Members of the Committee. It is a pleasure to
appear before you today for the first time as the Federal
Aviation Administrator, and before I begin, I do want to
acknowledge the new Chairman of the Aviation Subcommittee from
the great State of Mississippi, Senator Lott. Thank you very
much.
The Chairman. He needed that, Ms. Blakey.
[Laughter.]
Ms. Blakey. Us Mississippians do stick together, I have to
admit, but I also want to thank this Committee, as a broader
matter, for the speedy confirmation I received this fall. I was
obviously in a big rush to get to this relaxing job I am
currently in, but I very much appreciated the quick action on
that. Thank you.
It is an honor to be here at the helm of this agency that
has such a vital and a dynamic mission. Over the past 5 months,
and that is all it has been, that I have been in this job, I
have to tell you I have witnessed not only the energy and
dedication of the staff, but the really formidable technical
expertise of the employees of the FAA, who work every single
day to ensure and strengthen the safety of the system. It is an
agency, I believe, with truly exceptional talent, and I am very
proud to represent them here today.
This year, we will work together to reauthorize the FAA's
programs. The administration is currently coordinating a
reauthorization proposal, as Chairman McCain noted, and I do
believe it will serve as a strong foundation for the
development of reauthorization legislation. I am looking
forward to sharing that proposal with you as soon as I possibly
can.
It is a proposal that really has a fundamental underlying
theme. It is one that has been developed by Secretary Mineta:
safer, simpler, smarter. This concise statement underscores the
U.S. Department of Transportation these days, because we put a
premium on performance, on flexibility, and on accountability
to deliver results, and at the FAA, we are going to do our part
to deliver that vision as a part of reauthorization.
Now, to be successful, I must tell you I believe we have to
build on AIR-21. Your hard work on this statute resulted in
important innovations in safety, and the environment, and it
significantly increased the levels of funding that we have
available. Now, in my view, is not the time to stray from this
course. What we need to do is build on that important
legislation.
Chairman McCain already articulated, as others did here,
the serious state of the airline industry. We know what is
happening to the revenues there. We know what is happening to
our Trust Fund as a result. This is the time for continuity,
and for stability, which is what AIR-21 provided us. There are
refinements that are needed, and you will see those reflected
in our proposed legislation, but the decision you made 3 years
ago, were sound, and we believe we should rely on them.
Understandably, the focus on this Committee, the Congress,
and the country as a whole has been on security for the last 16
months. The results of your collective work, along with the
TSA, have been formidable. Those results speak for themselves--
federalizing all baggage screeners, ensuring all checked
luggage is screened, and augmenting security on the aircraft.
Your efforts have without a doubt made aviation much more
secure.
The FAA did play an integral role in this. We contributed
people, and resources to assist the new agency at its start-up,
and during that same period, maintained our focus on safety. We
continue to work closely now with the TSA to guarantee that
safety programs are interrelated and well-coordinated with the
security programs without policy contradictions, and without
requirements that overlap.
We also are working on a series of ongoing crisis
management exercises to test this working relationship, and to
clarify our individual responsibilities during all sorts of
emergency situations. Every day, we at the FAA help to ensure
the safety of an airline industry that is in serious economic
peril. I know we all agree, at the same time, safety cannot be
shortchanged, no matter how tough the economic circumstances
are.
Just recently, I met with the FAA managers overseeing US
Airways and United Airlines, as well as with the senior safety
managers of those carriers. We met together to determine where
we were on employee training, internal airway oversight
mechanisms, and our own stepped-up inspection program internal
to the FAA supporting those airlines.
I am happy to tell you that those programs are adequately
supported. In fact, I can report that both airlines fully
maintained their commitment to safety, even as, unfortunately,
they are reducing other parts of their operation, and the FAA
will continue its increased oversight there as well.
At the same time, the FAA has got to continue to improve
safety for the entire aviation industry--and I stress the word,
improve. By becoming a more data-driven, more performance-based
organization, the FAA will be better able to prevent future
accidents by using data to detect problems in advance, by
looking at disturbing trends. An approach based on measurable
facts allows us to identify hazards, analyze and assess risks
in advance, prioritize actions, and measure and document
results.
This approach, of course, places a premium on information-
gathering and -sharing, and that is why the FAA is committed to
programs like the Flight Operation Quality Assurance Program,
or FOQA, as it is known, where airlines gather and analyze
operational data directly from the flight data recorders on an
ongoing basis. We are also committed to the Aviation Safety
Action Program, where we get confidential reporting of safety
information.
As you now, AIR-21 made an important contribution with the
provision on FOQA that has greatly assisted the data-collection
effort, and I am glad to tell you that that is going smoothly
and increasing as we speak. Thanks for your support on that.
In addition, data analysis plays an important role in the
overall Safer Skies initiative we have. As you know, the goal
of Safer Skies is to reduce the accident rate by 80 percent by
2007. Let us not take that goal for granted. We are working
very hard to achieve it. It is a tough goal, but I can also
tell you we are on track.
While our commitment to safety is paramount, we also must
remain committed to expanding capacity, as many of you noted
here today already, throughout the system. Although the
devastating effects of September 11 continue to impact the
number of people who fly in this country, recovery of traffic
is inevitable. I think we all agree on that, and now is the
time, during this temporary downturn in air traffic, to focus
on increasing airport capacity.
Both the President's Executive Order on Environmental
Streamlining and the $3.4 billion investment included in the
President's 2004 budget for the AIP program--and this is a
number that, of course, is consistent with AIR-21 funding
levels as well--demonstrate the administration's commitment to
expanding capacity.
I am very fond of a saying that the Aircraft Owners and
Pilots Association uses, a mile of road will get you a mile, a
mile of runway will get you anywhere, and I think we need to
really stress that as we are talking to folks about why airport
capacity is so tremendously important.
With the current downturn, we have a unique opportunity to
increase capacity before it returns to the pre-9/11 levels.
Increasing the capacity can basically be accomplished in three
ways. We have new technologies, new procedures, and new
pavement. We need all three, and we have got to invest wisely
in a way that is fiscally sound, and is consistent with
projected traffic forecasts and that we, at the same time, know
that the three can maximize each other.
I think we really have to be committed to avoiding the
nightmare delays that we experienced in the summer of 2000. We
all remember those days too well, and we have to commit
ourselves to avoiding that.
And I have to tell you, I feel very strongly our work
cannot stop at our own borders. Aviation is a vital engine of
economic well-being for people everywhere. It is a driving
force for thousands of businesses and industries not only
abroad, but here in an interrelated, international system.
At first, we may think of many of those as having no
relationship to aviation but, in fact, they do. It is an
enormous economic driver. I therefore want to stress my
commitment to strengthening the FAA's role in international
aviation. We have to significantly step up our global
leadership, technology, aviation standards, and last but not
least, in raising the safety bar throughout the world. There
are some significant issues out there on that front, and we
have to address them.
Finally, while the FAA is often focused on making
improvements in the system and around the world, the FAA has
got to look at the way we ourselves do business. We are
committed to improving our cost accounting process and becoming
a performance-based organization. Currently, the FAA has
implemented cost accounting in two lines of business and
several support organizations but, while we currently track 80
percent of our costs on a monthly basis, we still have a lot of
work to do.
We plan to implement the program in the remaining three
lines of business this year, but there has been slippage on a
new financial system which is called DELPHI. It is a
Department-wide system, and that is pushing some things back.
This year, we will focus on implementing DELPHI and converting
the cost accounting system to work effectively with DELPHI, and
then, the next year, 2004, we are going to resume bringing on
line the remaining three lines of business so that we can
manage all of our costs effectively.
The FAA has also worked hard, I have to tell you, to
implement performance-based pay system, a system that links
organizational goals and individual staff performance at every
level, and demands accountability. There is a lot more, again,
that remains to be done there, and we are working every day to
bring more of our workforce into this system, because we
believe it is truly a foundation for becoming a genuinely
performance-based organization.
Now, in closing, I have to simply note on a good news point
that this year marks the centennial, of course, of the historic
Wright Brothers flight at Kitty Hawk in 1903. When you look
back on those early days of aviation and at how truly dangerous
aviation and air travel was at that point, I think there is a
tendency this year to pat ourselves on the back, and a little
back-patting would not be a bad thing in the current climate,
but I have to say at the same time, while we marvel at
everything that has been accomplished this last 100 years,
complacency has no place in aviation. Along with your help, we
at the FAA look forward to charting an even safer, a more
dynamic next 100 years in aviation.
I look forward to your questions.
[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 state
of the Federal Aviation Administration (FAA). Before we begin I would
like to acknowledge the new Chairman of the Aviation Subcommittee,
Senator Lott, from the great state of Mississippi. I look forward to
working with him as well as the other Members of this Committee during
my tenure as Administrator. I would also like to take a moment to thank
the Members of the Committee for acting so expeditiously to confirm me
as Administrator last year. I very much appreciate your vote of
confidence and pledge to work hard to meet the demands of this
challenging job.
As we are all aware, the FAA's programs will be reauthorized this
year, so this hearing is well timed to establish a baseline for that
discussion. The Administration is preparing a reauthorization proposal
that, I think, will serve as an excellent basis for the development of
reauthorization legislation.
As we consider reauthorization, one of the most pressing challenges
we face is the dire economic condition of the airline industry.
Although several low-fare airlines have remained profitable during this
difficult time, two of our major carriers are in bankruptcy and most of
the others continue to incur financial losses. This Committee
recognized the importance of this situation by holding your first
hearing of the 108th Congress on this issue. Your concern supports the
fact that the airline industry, as we all know, is critical to the
overall economic growth of this country. While FAA has no authority
over economic matters, it is critical to the FAA that the desperate
economic condition of some airlines in no way be permitted to
compromise safety. It should also be noted that the downturn in air
travel has decreased the amount of revenue being contributed to the
Airport/Airway Trust Fund at a time when FAA faces continued demands
with respect to both safety and capacity.
First, as always, let me address safety. Under the superb
leadership of Secretary Mineta, the Department's emphasis on safety has
never been greater. As a modal Administrator within the Department, I
consider myself to be, first and foremost, a safety advocate. Last year
was one of the safest ever--no accidents of scheduled flights. While
that record ended with the tragic accident in Charlotte earlier this
year, the accident just served to emphasize that our focus on safety
and preventing accidents cannot be affected by balance sheets. I'm sure
my friends in the airlines would be the first to agree, cost cutting by
the airline industry cannot apply to safety.
I have personally met with the FAA managers overseeing US Airways
and United Airlines to satisfy myself that we have appropriately
expanded our review of these carriers. The approach we are taking with
these carriers is to focus our safety oversight on areas that may be
more at risk during a financial crisis. For example, we want to ensure
that employee training and internal oversight mechanisms are adequately
supported. Any cuts by the airlines in these areas could signal a
fundamental crack in the safety foundation of the airline that would
require immediate FAA action. We are prepared to step in on a moment's
notice if we have evidence of a deterioration of safety. To date, I am
happy to report that we have seen both airlines maintain their
commitment to safety analysis and audits even as they reduce other
parts of their operation.
With respect to FAA's oversight of the industry as a whole, our
challenge is to maximize our inspector workforce to make the most of
our resources to ensure that unacceptable compromises are not being
made by the airlines. We redirect our surveillance resources to areas
of concern that have been identified through an analysis of our
inspectors' observations, industry data bases and consideration of the
airline's overall financial and management condition. This is a
proactive approach to make sure that airlines have safety built into
their operating systems and also ensure compliance with safety
regulations that will improve upon our excellent safety record.
One of the things about which I feel very strongly, is that
meaningful safety improvement will only be attained if we focus our
efforts on making FAA a data driven, performance based organization.
Our safe system can become even safer if FAA can get in front of
accidents by using data to detect problems and disturbing trends. In
our system safety approach we are identifying hazards, assessing and
analyzing risks, prioritizing actions, and measuring and documenting
results. This is a continuous, data driven approach that places an
emphasis on information gathering and sharing. We need as much data as
possible to make informed decisions, which is why FAA is committed to
programs like the Flight Operational Quality Assurance (FOQA) and
Aviation Safety Action Program (ASAP). AIR-21 contained a provision on
FOQA that has greatly assisted us in our data collection efforts. Data
analysis plays an important part in our Safer Skies initiative, which
is all about taking actions that will achieve the greatest benefits in
preventing accidents. When we started this initiative several years
ago, the goal was to reduce the accident rate by 80 percent by 2007 and
we are on track to do that.
One way we are keeping on track is by establishing agency goals
each year that we hold ourselves accountable to meeting. These goals
represent the initiatives we at FAA believe will do the most to improve
safety, capacity and efficiency. Last year, FAA met nine of the ten
goals set. Our on-time flight arrival rates were up. Our equipment-
related delays were down. There were fewer accidents and fewer serious
runway incursions. The transition of FAA's former security programs to
the Transportation Security Administration (TSA) was a smooth one. The
one area where FAA failed to meet the goal we set was in the area of
operational errors. Even though we were successful in reducing the
overall number of errors by 11 percent last year, we did not reduce the
most serious category of errors and that is what we must focus on this
year. We hope to do that through increased management attention,
improved communications, and additional training. As of February 1, I
am happy to report that we have reduced overall errors by 11 percent
and the most serious category of errors by 12 percent. I am currently
working to establish the strategic goals for my term.
Safety is a day in, day out commitment. By setting goals, staying
focused and holding ourselves accountable, we will demonstrate our
commitment to safety.
I want to note that, with respect to the transition of FAA's former
security functions to the TSA, FAA will continue to work closely with
TSA even as TSA becomes part of 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 and we will continue to work closely with TSA
in this critical area.
While our commitment to safety is extraordinarily important, we
must also remain committed to expanding airport capacity. Although the
devastating events of September 11th continue to impact the number of
people flying in this country, recovery of the system is inevitable.
The temporary down turn in air travel affords us with a great
opportunity to continue to focus on increasing airport capacity without
unacceptable disruption to the system. In response to the costly,
frustrating and totally unacceptable delays that plagued the system in
the summers of 1999 and 2000, the FAA made needed changes, such as
identifying and addressing choke points in the system, and developing
and refining regular communications between the airlines and the FAA
command center to deal with daily problems in the system.
One of the studies FAA conducted revealed a number of airports with
capacity constraints that impacted the national airspace system (NAS)
as a whole. FAA has a real and important role to play in addressing the
problems at these airports and other airports throughout the country.
The Administration's commitment to remain focused and take advantage of
this temporary reduction in air traffic to expand capacity is evidenced
by both the President's Executive Order on environmental streamlining
and the $3.4 billion investment included in the President's 2004 budget
for the Airport Improvement Program (AIP), a number consistent with the
funding in AIR-21.
The President's Executive Order (EO) recognizes that needed
capacity projects are essential to the well-being of the American
people and a strong economy, but have too often been unnecessarily
delayed by inefficient review processes. The EO established a high-
level interagency Task Force chaired by the Secretary of Transportation
to expedite reviews for designated high-priority projects and to
recommend ways to streamline and simplify reviews for transportation
projects in general, consistent with the nation's commitment to
environmental stewardship.
In challenging fiscal times, the President's commitment to the AIP
program is another example that he wants our focus on expanded airport
capacity to continue unabated. The importance of investment in airport
infrastructure goes beyond alleviating a congestion problem at a
specific location. It can provide relief to the entire NAS. The economy
relies on aviation to move people and products, and aviation relies on
an efficient NAS to accommodate the capacity demands placed upon it. We
must work together--Congress, federal, state and local governments, and
industry stakeholders--to use this downturn in travel to prepare for
the inevitable return of air traffic better situated to avoid the
nightmares of past summers. We must embrace our role as architects of
the future and support the infrastructure necessary to meet the needs
of future generations.
In order to ensure that FAA moves forward in all these areas, one
of my top priorities is to provide consistency and predictability to
the way FAA works with industry. I do not want any variations in FAA
policy or practice in the regions or field offices. I want our industry
partners in the United States and around the world to know what they
can expect and count on when dealing with the FAA.
I also want to increase FAA's international profile. Aviation
safety should be one of our most important exports. FAA is broadening
our network of partnerships with civil aviation authorities, as well as
promoting our relationships with regional safety organizations. We are
in a position to be very helpful in providing technical assistance to
those countries that want to improve aviation safety oversight or air
traffic control services. We must also guard our position as a world
leader in aviation safety, air traffic, and environmental issues. The
world is getting ever smaller and if FAA can help improve safe air
travel for U.S. citizens and citizens of the world no matter where they
travel, we should embrace that role. Just as past pioneers expanded the
world's horizons, I want FAA to be a pioneer in transportation and
improve aviation around the world.
Finally, in the five months I have served as Administrator, it has
become apparent that FAA's operational costs must be brought under
control. Since any future growth must be manageable, our decisions must
be made in an informed manner. Just as our safety decisions should be
driven by data, so should our management decisions be driven by cost
data. Consequently, we must push forward our efforts to set up our new
financial system, DELPHI, and complete the implementation of our Cost
Accounting System (CAS) and Labor Distribution Reporting (LDR)
initiative. We will use this information to improve the decisions we
make. Recently, the Department's Inspector General, Ken Mead, pointed
out that we have additional work to do on internal controls related to
the system we use to capture labor costs. I am committed to make these
changes, and to additional enhancements that may be required in the
future to assure the integrity of our cost information.
Mr. Chairman, I want the FAA to become, not a performance-based
agency, but THE performance-based agency; one by which other agencies
will be measured. We will start with the Air Traffic Organization and
then work our way through the rest of the agency. The Air Traffic
Services Subcommittee of the Management Advisory Council has embraced a
formal set of eight performance metrics that will be reviewed on a
quarterly basis at their meetings. This evaluation will enable the
Subcommittee to measure the effectiveness and efficiency of the air
traffic services provided to our customers. The Subcommittee has been
extremely helpful by using their business acumen to provide advice on
how best to serve our customers, while retaining business-like
efficiencies.
In conclusion, this year marks the centennial of the Wright
Brothers' historic flight at Kitty Hawk. The flight was marked in feet,
not miles or time zones, yet it is hard to measure the impact of that
moment on the way the world has evolved since that momentous day. When
you look back on those early days of aviation and how dangerous air
travel was compared with other modes of transportation and compare them
with today when aviation is the safest way to travel, it is easy to pat
ourselves on the back and feel content with how far we've come. While
we can and should marvel at all that we and our forbearers have
accomplished in the past 100 years, complacency has no place in
aviation. We must continue to set and work to achieve goals with
respect to safety, capacity and efficiency. I want to know that I was
part of the unimaginable advancements in aviation that will take place
in the next 100 years and I want you to know that I stand ready to work
with you to take those first steps in the second century of flight to
make our world a better place.
This concludes my prepared statement. I am happy to answer your
questions at this time.

The Chairman. Thank you, Administrator Blakey.
Mr. Mead.

STATEMENT OF HON. KENNETH M. MEAD, INSPECTOR
GENERAL, DEPARTMENT OF TRANSPORTATION

Mr. Mead. Thank you, Mr. Chairman. I appreciate the
opportunity to testify today on the FAA. I know it is not the
subject of this hearing, but there are numerous other issues,
like service to small and medium-sized communities I know the
Committee will be tackling as well.
I want to start off by saying I look forward to working
with Administrator Blakey, who I am certain is going to be a
fine administrator, particularly with her NTSB safety
background. It is worth noting that, like former Administrator
Garvey, Ms. Blakey is starting off on a 5-year term, which will
bring stability and leadership. Before this reform, the average
tenure of the FAA Administrator was about 18 months and
sometimes, frankly, it showed in the agency's performance.
In my prepared statement, I go through a number of items
that I consider, to be very significant achievements over the
past 5 years, and I think there is a linkage there between the
stability of leadership, of having one person at the helm for a
period of time, more than 18 months, and those achievements,
but at this hearing, we are here to consider the FAA of today
and the pending reauthorization.
As we see it, there are four central issues. The first is
making FAA a performance-based organization by controlling the
costs of its operations and cost growth in major acquisitions.
Second is building aviation system capacity now to prevent
a repeat of the gridlock conditions experienced in the summer
of 2000.
Third is striking the balance on how airport funds will be
used for the needs of aviation system capacity and safety, and
how they will be used to fund security.
And finally, is aviation safety.
I will take each one of these in turn.
Performance-based organization, a very perplexing issue
here. In 1996, Congress exempted FAA from most personnel and
acquisition rules so that FAA would operate more like a
business. That is, services would be provided to users cost-
effectively, major acquisitions would be delivered on time and
within budget.
FAA was also directed, by this Committee, in fact, to
establish a cost accounting system so that they would know
where their money was being spent right down to the facility
level. In AIR-21, Congress took some additional steps to make
FAA more businesslike--among them were reorganizing FAA's air
traffic control management structure and establishing a chief
operating officer position.
Well, it is 6 years later and we do not see sufficient
progress towards FAA becoming a performance-based organization.
The growth in FAA's budget has gone from about $8 billion in
1996 to $14 billion today. That is an increase of nearly $6
billion. Only about one-third of that increase went to higher
authorized amounts for airport funding.
During that same period, we have seen inordinately large
increases in workforce costs, as well as significant cost
growth and schedule slips in major acquisitions. Continued cost
growth of this magnitude is simply not sustainable, given the
multibillion-dollar declines in projected Aviation Trust Fund
receipts.
A frame of reference: the Trust Fund in 2004 is going to
take in about $10 billion. That is at least $2 billion short of
what people thought it would take in. The budget is calling for
about $14 billion.
I do not believe the answer to the cost growth problem is
to increase aviation fees, taxes, or other charges, regardless
of what you call them. Passengers already pay a significant
amount. Nearly 26 percent of a $100 nonstop ticket will go to
taxes and fees, on a $200 single connection round-trip ticket,
about $51. Just like airlines have had to rethink the basics of
their business because they are financially stressed, FAA must
also reexamine how it does business.
The reality of personnel reform that we see has been
soaring workforce costs and significantly higher salaries.
There is no doubt that labor-management relations with the
controllers have improved, but FAA's operations budget has
increased by nearly 65 percent, or $3 billion.
The average base salary for a fully certified controller
has risen to over $106,000, a 47 percent increase over the 1998
average of $72,000. Salaries for the lowest-paid controllers
are today about $64,000. The lowest-paid group represents about
1 percent of the controller workforce.
When premium pays like overtime and Sunday pay are
considered, total salaries are substantially higher. The 10
highest-paid controllers in 2002 earned between $192,000 and
$214,000. In fact, over 1,000 controllers earned over $150,000
in 2002, compared to only 65 of them in 2000.
As a performance-based organization, you would also expect
to see pay and performance linked together, but frequently,
that is not the case. In fact, only about 36 percent of the FAA
employees receive increases based on their individual
performance, the remainder receive largely automatic increases.
In our work, we have also found that there are somewhere
between 1,000 and 1,500 sidebar agreements, or memoranda of
understanding that FAA managers have entered into, some
committing taxpayer funds not in writing, but sometimes with a
shake of the hand. Many of these serve legitimate purposes, but
we found some that have large cost implications and they are
over and above the controller base pay.
Examples: One MOU provides controllers with an additional
cost-of-living adjustment. At 111 locations, controllers
receive between 1 and 10 percent in incentive pay which is in
addition to the Government-wide locality pay. The total cost in
2002, $27 million.
We have also seen MOUs that may set a very costly precedent
for giving incentives to controllers for getting trained on and
accepting new systems.
One MOU for a new air traffic control free flight tool gave
each controller an incentive $500 cash award and a 24-hour
time-off award while the system was being fielded. At six
facilities alone, that resulted in the FAA incurring
approximately over $1 million in individual cash awards, 62,500
hours in time off.
At Philadelphia, there was a verbal agreement that gave
each employee $1,000 and 3 days off in connection with the
deployment of the new STARS system. Extend that practice
Nation-wide, and you will, the budget will go through the roof.
Another MOU we reviewed allows controllers transferring to
larger facilities to begin earning the higher salaries
associated with their new positions substantially in advance of
their transfer. At one location, controllers received the
increase 1 year in advance of the transfer, going from an
annual salary of $54,000 to $99,000. During that time, they
remained in their old location controlling the same air space
and performing the same duties.
So management of these MOUs has to become a lot tighter. We
found the controls over that process are virtually nonexistent.
No one knows the exact number or nature of these agreements,
there is broad authority among managers to negotiate MOUs and
commit the agency; no standard guidance for negotiating,
implementing, or signing MOUs; and no requirement for
estimating potential cost impacts. Administrator Blakey and I
are working together on this issue, and she is, I am certain,
committed to bringing it under control.
I would like to turn to acquisition reform. Here, results
have been mixed, in our view. Contracts are awarded more
expeditiously, and a number of systems have come in on time.
But the bottom line is that significant schedule slips,
schedule growth, and substantial cost growth are all too
common.
A point of reference: five major projects we tracked have
experienced cost growth of over $3 billion. That equates to the
equivalent of a full year's budget for air traffic control
modernization.
As for FAA's cost accounting system, it was to be completed
by 1998 at a cost of $12 million. However, after over 6 years
of development and a price tag of over $38 million, the cost
accounting system is still not complete. Perhaps later this
year, according to the latest schedule. It seems elementary to
me that for an organization that is going to be performance-
based, it must know where its costs are. Given projections of
controller retirements, it would also help greatly in knowing
how many controllers we need, and where we need them.
With a budget of $14 billion, FAA cannot credibly claim to
be a performance-based organization until it has a full cost-
accounting system and uses it.
Regarding the 2000 FAA reauthorization reforms, the
position of chief operating officer has not been filled, and I
am not persuaded that the ATC subcommittee that Congress
created can realistically be expected to discharge the broad
range of responsibilities it was given. They are vast--
approving the FAA budget, the cost accounting system, FAA's
modernization plans, the administrator's personnel selections,
FAA strategic plan, and personnel bonuses. This is an area I
think we may need to rethink.
I do understand the subcommittee is currently working to
develop performance metrics, and that is a good step. One set
of metrics I hope they include are metrics on cost control,
like any business would have.
I would like to turn to the other three issues facing the
committee in FAA's reauthorization. The first is capacity. No
one wants to relive the summer of 2000. I think DOT, FAA, and
the aviation community are moving smartly to prevent that from
happening through a combination of runways, new technologies,
better use of air space, and greater use of nonhub airports. If
we wait to fix this capacity problem until passenger demand
returns, it is going to be too late. It will be trying to
change a tire on a moving car. So even though the demand is not
there right now, and the gridlock is not there, now is the
time, as Administrator Blakey says, to keep the pressure on.
The second is aviation security, and funding it. We talked
about this last week. The number one issue I see are these
truck-size explosive detection systems. Right now, at most
airports, they are in the lobby, but that is not the end-state
solution. They are going to have to be put at the big airports,
in the baggage systems. The price tag for that is--I have seen
estimates as high as $5 billion but, I put it for the time
being at about $3 billion. This is an almost immediate issue
the airports are facing, and nobody knows how it is going to be
paid for.
I would urge caution before tapping the AIP, the Airport
Improvement Program to pay for that. Historically, FAA has
spent about a little over $50 million a year on security. In
2002, that jumped to a half a billion. That is not sustainable
if we are also going to deal with capacity and safety.
And finally, on safety, I think Administrator Blakey's
statement speaks eloquently and very clearly to this. It is
amazing, until the recent Air Midwest crash in Charlotte, there
had not been a fatal accident, a commercial aviation accident
in the United States in 14 months. I would add that, while
progress has been made this past year in aviation safety, the
risk of aviation accidents due to operational errors and runway
incursions still needs work. Progress has been made there. They
have declined, but they remain much too high.
For a frame of reference: Once every 10 days, a collision
on the ground or in the air is very narrowly averted in this
country.
The administrator pointed out also, they have increased
surveillance at financially distressed carriers. I see the need
for that continuing for sometime. We plan audit work to stay on
top of it. A word of caution here. We have seen some shifts in
who does the maintenance on airlines, some shifts to
outsourcing at repair stations. I would urge FAA to make sure
that in their stepped-up oversight of the industry, that they
also step up oversight of these outside repair stations that
are performing an increased amount of maintenance.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Mead follows:]

Prepared Statement of Hon. Kenneth M. Mead, Inspector General,
Department of Transportation

Mr. Chairman and Members of the Committee:
I appreciate the opportunity to testify on reauthorization of the
Federal Aviation Administration (FAA). We look forward to working with
Administrator Blakey, who I believe will be a fine Administrator,
especially with the safety background she brings from the National
Transportation Safety Board. Also, like former Administrator Garvey,
she has a 5-year term, a reform established by the Congress to bring
stability and continuity in leadership. Before this reform, the average
tenure of an FAA Administrator was about 18 months. Stability in FAA's
leadership will be essential in addressing the formidable challenges
facing FAA today. Administrator Blakey will require substantial support
from the Congress and the Administration to address them.
Reflecting on the past 5 years, stability in leadership contributed
materially to what we consider a sustained and improved focus on safety
and an overall good safety record, successfully managing the Y2K
computer problem, obtaining a clean opinion on agency-wide financial
statements, bringing new Free Flight controller tools on-line,
deploying the Display System Replacement on time and within budget,
expeditiously shutting the system down safely on September 11th,
improving communications links with the Department of Defense since
September 11th, and setting in motion required actions to prevent a
repeat of the summer of 2000 when the aviation system experienced
unprecedented delays, flight cancellations, and near gridlock.
Today, there are four central issues that need to be considered in
FAA's upcoming reauthorization: (1) making FAA a performance-based
organization by controlling the costs of its operations and cost growth
in major acquisitions; (2) building aviation system capacity and more
efficient use of airspace to prevent a repeat of the summer of 2000;
(3) striking a balance on how airport funds will be used for aviation
system capacity, airport safety, and security; (4) aviation safety as
FAA's top priority.

Major Improvements Are Needed to Position FAA as a Performance-Based
Organization
In 1996, FAA was given two powerful tools-personnel reform and
acquisition reform. FAA was also directed to establish a cost
accounting system so that it would know, at the facility level, where
it was spending money and for what. The expectation was that by
relieving the agency from government rules and establishing a cost
accounting system, FAA would operate more like a business--that is,
services would be provided to users cost effectively and air traffic
control modernization programs would be delivered approximately on time
and within budget. In the Aviation Investment and Reform Act for the
21st Century (AIR-21), Congress took additional steps to make FAA more
business-like by reorganizing Air Traffic Control's management
structure and establishing a Chief Operating Officer position.
Seven years later, we do not see sufficient progress toward
achieving those outcomes. The growth in FAA's budget--from about $8.2
billion in Fiscal Year (FY) 1996 to $14 billion in FY 2004 represents
an increase of $5.8 billion. About one-third of this increase is
attributable to higher authorized amounts for airport funding. However,
during this period, we have seen large increases in workforce costs, as
well as cost overruns and schedule slips in major acquisitions.
Continued growth in those categories of that magnitude is
unsustainable, given the fiscal situation and multibillion-dollar
declines in projected Aviation Trust Fund receipts. FAA cannot assume
that a robust stream of Trust Fund receipts or other revenue will be
available to cover its cost growth. In fact, current estimates show
that over the next 4 years, Trust Fund tax receipts are expected to be
more than $10 billion less than projections made in April 2001.
We do not believe the answer to cost growth at FAA lies in an
increase in taxes, fees, or other charges. Most airlines are in extreme
financial distress, and passengers already pay a significant amount in
taxes, fees, and charges--nearly 26--percent of a $100 non-stop ticket
goes to taxes and fees; a $200 single-connection round trip ticket
includes about $51 or 26 percent in taxes and fees. Just like the
airlines have had to rethink the basics of their business, FAA also
must re-examine how it does business. FAA needs to redouble its efforts
to become performance based in deeds as well as in words. This, in our
opinion, is a primary challenge facing FAA and ought to be a major
focus of the upcoming reauthorization.
To date, the most visible results of personnel reform are soaring
workforce costs and significantly higher salaries. While during this
period there has been improved labor/management relations with
controllers (FAA's largest workforce), FAA's operations budget, which
is mostly payroll, has increased 65 percent or $3 billion. The average
base salary for fully certified controllers has risen to over
$106,000--a 47 percent increase over the 1998 average of $72,000.
Because of collective bargaining agreements, only about 36 percent of
FAA employees receive pay increases based on individual performance,
and the remainder of FAA employees receive largely automatic pay
increases.
We also found that there are somewhere between 1,000 and 1,500 side
bar agreements or Memorandums of Understanding (MOUs) that FAA managers
have entered into. Many serve legitimate purposes, but MOUs can add
millions to personnel costs. However, FAA management does not know the
exact number or nature of these agreements, there are no established
procedures for approving MOUs, and their cost impact on the budget has
not been analyzed. We briefed Administrator Blakey of our concerns
regarding MOUs, and we are working with the Administrator and her staff
to address this issue.
Acquisition reform results have been mixed--contracts are awarded
more expeditiously, and FAA's ``build a little, test a little''
approach has clearly avoided failures on the scale of the multibillion-
dollar Advanced Automation System acquisition. In addition to progress
with Free Flight Phase 1, FAA has deployed systems such as the Display
System Replacement (new controller displays for en route facilities)
and the initial phase of HOST (computer that receives, processes, and
tracks aircraft movement throughout domestic and en route airspace) on
time and within budget. But the bottom line is that significant
schedule slips for major air traffic control acquisitions and
substantial cost growth are all too common. For example, the Standard
Terminal Automation Replacement System (STARS) (new controller displays
and computer equipment for terminal facilities) has slipped at least 4
years, and the Wide Area Augmentation System (WAAS) (a new satellite-
based navigation system) has slipped 5 years. Moreover, five major
projects we track have experienced cost growth of $3 billion-the
equivalent to a full year's budget for modernization.
As for FAA's Cost Accounting System (CAS), it was to be completed
by 1998 at a cost of $12 million. However, after over 6 years of
development and a price tag of $38 million, FAA is now planning to
complete its CAS by September 2003, assuming no further slippage.
Additionally, we found that in two of the five lines of business where
the CAS has been implemented, problems exist such as not allocating
costs to individual facilities, which limit the system's usefulness. A
CAS is essential for setting benchmarks and measuring performance, and
it would help greatly in determining how many controllers we need and
where we need them. This is important given projections of controller
retirements.
Regarding the 2000 FAA reauthorization reforms, these reforms
established the position of Chief Operating Officer and an Air Traffic
Control (ATC) Subcommittee, which was empowered to, among other things,
approve budgets, strategic plans, and plans for improving the safety
and modernization of the ATC system. The Chief Operating Officer
position has never been filled, and the ATC Subcommittee has not
fulfilled its charter. The reauthorization process offers an
opportunity to rethink the powers and responsibilities of the ATC
Subcommittee in terms of how it will fit within the FAA organizational
structure, what it can realistically be expected to do, and how it will
interface with the current powers and duties of the Administrator. We
understand the Subcommittee is currently working to develop performance
metrics. One series of metrics, in our opinion, should include cost
control metrics and the extent to which acquisitions are brought in on
time and within budget.
Now, I would like to briefly discuss capacity, airport improvement
funds, and safety.

Striking a Balance Between How Airport Funds Will Be Used to Pay for
Security and Capacity
A major issue for airports is funding the next phase of explosives
detection systems (EDS) integration. Thus far, nearly all EDS equipment
has been lobby-installed. The Transportation Security Administration's
(TSA) planned next step (integrating the EDS equipment into airport
baggage systems) is by far the most costly aspect of full
implementation. The task will not be to simply move the machines from
lobbies to baggage handling facilities but will require major facility
modifications. We have seen estimates that put the costs of those
efforts at over $3 billion, and this is an almost immediate issue
facing the airports.
A key question is who will pay for those costs and how. While the
current Airport Improvement Program (AIP) has provided some funding in
the past for aviation security, we urge caution in tapping this program
until FAA has a firm handle on airport safety and capacity
requirements. In FY 2002, airports used over $561 million of AIP funds
for security-related projects. In contrast, only about $56 million in
AIP funds were used for security in FY 2001. Continuing to use a
significant portion of AIP funds and passenger facility charges (PFCs)
on security projects will have an impact on airports' abilities to fund
capacity projects.

Safety As FAA's Top Priority
The U.S. air transport system is the safest in the world, and
safety remains the number one priority for FAA. Until the recent Air
Midwest crash in Charlotte, there had not been a fatal commercial
aviation accident in the United States in 14 months.
Progress has been made this past year in reducing the risk of
aviation accidents due to operational errors and runway incursions, but
both remain much too high. Operational errors and runway incursions
should remain an area of emphasis for FAA because at least three
serious operational errors and one serious runway incursion (in which
collisions on the ground were narrowly averted) occur, on average,
every 10 days.
In the current financially-strapped aviation environment, FAA must
remain vigilant in its oversight to sustain a high level of aviation
safety. As the Administrator's testimony states, FAA has increased
surveillance at financially distressed air carriers. FAA has recognized
the need and taken steps to heighten surveillance. We see the need for
heightened surveillance continuing for some time to come and plan audit
work to stay on top of this.
Additionally, we are encouraged by the Administrator's commitment
to programs such as Flight Operational Quality Assurance (FOQA). FOQA
provides objective, quantitative data on what occurs during flight
rather than what is subjectively reported by individuals. FAA could use
these data to identify safety trends and accident precursors.
A word of caution: FAA needs to pay close attention to the level of
oversight it provides for repair stations. In the past 5 years, there
has been a significant increase in air carriers' use of these
facilities. In 1996, major air carriers spent $1.6 billion (37 percent
of their total maintenance costs) for outsourced aircraft maintenance.
Whereas, in 2001, the major air carriers outsourced $2.9 billion (47--
percent of their total maintenance costs). FAA needs to consider this
shift in maintenance practices when planning its safety surveillance
work. We are now completing a review of FAA oversight of repair
stations.

Introduction
The aviation landscape has changed dramatically since FAA was last
reauthorized. Airlines were in much better financial shape, the Trust
Fund had collected more tax revenue than ever before, and future
estimates projected even higher revenues coming in. Two years ago, we
were focused on alleviating aviation gridlock and airline delays, and
improving customer service--all of these issues are now on the back
burner.
Today, reauthorizing FAA programs has to be viewed against the
backdrop of the financial health of the industry, the decline in
travel, and how airlines are revamping operations. Two large network
carriers have entered into bankruptcy, and others are taking steps to
avoid similar courses. Overall, domestic enplanements were down nearly
18 percent in November 2002 compared to November 2000.
As a result of the slow economy and the decline in air travel,
there has been a significant decrease in tax revenues coming into the
Trust Fund. Projected tax revenue from the Aviation Trust Fund for FY
2004 has dropped from approximately $12.6 billion estimated in April
2001 to about $10.2 billion estimated in January 2003. Current
estimates show that over the next 4 years (FY 2004 through FY 2007)
Aviation Trust Fund tax revenues are expected to be about $10 billion
less than projections made in April 2001.

Although revenues to pay for FAA's programs have fallen
dramatically, FAA's costs have not. FAA's budget has increased nearly
$6 billion over the past 7 years-escalating from $8.2 billion in FY
1996 to $14 billion in FY 2004. About one-third of this increase is
attributable to higher authorized amounts for airport funding. However,
during this period, we have seen large increases in workforce costs, as
well as cost overruns and schedule slips in major acquisitions.
AIR-21 gives priority to FAA's Airports and Modernization accounts
by requiring that revenue from the Trust Fund be allocated to those
accounts before allocating any revenue to FAA's operating budget. For
example, as shown in the following chart, the difference between
revenues and FAA's operating budget came from the General Fund.

General Fund Contribution for FY 2003 ($ in Billions)
------------------------------------------------------------------------
FY 2003
------------------------------------------------------------------------
Estimated Trust Fund Contribution $10.3
Less Airport Funding ($3.4)
Less Modernization ($3.0)
Less Research and Development ($0.1)
Residual Trust Fund Revenues Available for Operations $3.8
Operations Budget $7.1
Difference (Amount from the General Fund for Operations) $3.3
------------------------------------------------------------------------

For FY 2004, FAA's budget request of $14 billion exceeds projected
Trust Fund revenues by over $3 billion. Assuming no new taxes, this
shortfall will have to be made up either by drawing down the
uncommitted balance of the Trust Fund or tapping the General Fund.

Making FAA a Performance-Based Organization Through Controlling Costs
in Operations and Major Acquisitions
Controlling Operating Costs. Although Congress envisioned that
personnel reform would result in more cost-effective operations, this
has not occurred. Since 1996, FAA's operating costs have increased
substantially. As shown in the following graph, FAA's operations
budget, which is 82 percent payroll costs, has increased from $4.6
billion in FY 1996 to $7.6 billion in FY 2004--an increase of over 65
percent. Given the decline in Aviation Trust Fund revenues and the
financial situation of the airlines, a continuation of this growth can
no longer be sustained.

Much of the increase in operations costs has been a result of
salary increases from collective bargaining agreements negotiated under
FAA's personnel reform authority. The 1998 collective bargaining
agreement with the National Air Traffic Controllers Association
(NATCA), which created a new pay system for controllers, was a
significant cost driver. Under the agreement, controllers' salaries
increased substantially. For example,

The average base salary for fully certified controllers has
now risen to over $106,000--a 47 percent increase over the 1998
average of about $72,000 (as shown in the table below). This
compares to an average salary increase for all other FAA
employees during the same period of about 32 percent, and for
all Government employees in the Washington, DC area of about 30
percent.

Average Base Salaries for FAA Employees
------------------------------------------------------------------------
Average Base Salary Fully Certified Air Non-Controller FAA
(Including Locality) Traffic Controllers Employees
------------------------------------------------------------------------
2003 $106,580 (after 4.9 $78,080
percent increase)
1998 $72,580 $59,200
Percentage Increase 46.8 31.9
From 1998 to 2003
------------------------------------------------------------------------

When premium pays (such as overtime and Sunday pay) are added,
controllers' total salaries can be substantially higher. For example,

The 10 highest paid air traffic controllers in calendar year
(CY) 2002 earned between $192,000 and $214,000. In fact, over
1,000 controllers earned over $150,000 in CY 2002
(approximately 6.7 percent of the controller workforce). That
number compares to only 65 controllers that earned over
$150,000 in 2000 (approximately 0.4 percent of the controller
workforce).

Following the NATCA agreement, other FAA workforces began
organizing into collective bargaining units including employees from
the Office of Chief Counsel, Office of Financial Services, and Office
of Airports. Today, FAA has 48 collective bargaining units as compared
to 19 collective bargaining units in 1996.
The dramatic increase in bargaining units has complicated FAA's
plans for fielding its agency-wide compensation system (created in
April 2000), because FAA's 1996 reauthorization requires that FAA
negotiate compensation with each of its collective bargaining units.
This has also complicated FAA's plans to create a link between pay and
performance. The agency-wide pay system does away with automatic
Government-wide pay increases, and instead is designed to provide
variable pay increases based on an individual's and the agency's
overall performance. However, several of FAA's collective bargaining
agreements have provisions that allow for higher increases than allowed
under the agency-wide pay system without considering an individual's
performance. For example,

This year under terms of the NATCA collective bargaining
agreement, all controllers received an automatic pay increase
of 4.9 percent, regardless of their individual performance. FAA
provided a similar increase to all Air Traffic field managers
and supervisors.

Because of these contractual requirements, only about 36
percent of all FAA employees receive pay increases based on
performance as established in the agency-wide pay system (FAA's
core plan). The remainder of FAA employees receive largely
automatic pay increases.

FAA has also been less than effective in managing its labor
agreements. For example, outside the national collective bargaining
agreement with NATCA, FAA and the union have entered into hundreds of
side bar agreements or MOUs. These agreements can cover a wide range of
issues such as implementing new technology, changes in working
conditions and(as a result of personnel reform(bonuses and awards, all
of which are in addition to base pay.
We found FAA's controls over MOUs are inadequate. For example,
there is:

--no standard guidance for negotiating, implementing, or signing MOUs;

--broad authority among managers to negotiate MOUs and commit the
agency;

--no requirement for including labor relations specialists in
negotiations; and

--no requirement for estimating potential cost impacts prior to signing
the agreement.

In addition, FAA has no system for tracking MOUs, but estimates
there may be between 1,000 and 1,500 MOUs agency-wide. The total cost
implications associated with these MOUs are not known. While many serve
very legitimate purposes, we found several agreements that had
substantial costs. For example,

As part of the controller pay system, FAA and NATCA entered
into a national MOU providing controllers with an additional
cost of living adjustment. As a result, at 111 locations,
controllers receive between 1 and 10 percent in ``Controller
Incentive Pay,'' which is in addition to Government-wide
locality pay. In FY 2002, the total cost for this additional
pay was about $27 million.

We reviewed a number of MOUs that were not cost-effective and, in
our opinion, neither necessary nor in the best interest of the
Government. For example,

One MOU we reviewed allows controllers transferring to
larger consolidated facilities to begin earning the higher
salaries associated with their new positions substantially in
advance of their transfer or taking on new duties. At one
location, controllers received their full salary increases 1
year in advance of their transfer (in some cases going from an
annual salary of around $54,000 to over $99,000). During that
time, they remained in their old location, controlling the same
air space, and performing the same duties.

We have briefed Administrator Blakey on our concerns regarding
MOUs, and we are working with the Administrator and her staff to
address this issue.
Improving Management of Major Acquisitions. FAA spends almost $3
billion annually on a wide range of new radars, satellite-based
navigation systems, and communication networks. Historically, FAA's
modernization initiatives have experienced cost increases, schedule
slips, and shortfalls in performance. While progress has been made with
Free Flight Phase 1, problems persist with other major acquisitions.
In 1996, Congress exempted FAA from Federal procurement rules that
the agency said hindered its ability to modernize the air traffic
control system. Now, after nearly 7 years, FAA has made progress in
reducing the time it takes to award contracts, but acquisition reform
has had little measurable impact on bottom line results--bringing
large-scale projects in on time and within budget. The following chart
provides cost and schedule information on five projects largely managed
since FAA was granted acquisition reform.

----------------------------------------------------------------------------------------------------------------
Estimated Program Costs Implementation Schedule
(Dollars in Millions) Percent ------------------------------
Program ---------------------------- Cost
Original Current Growth Original Current
----------------------------------------------------------------------------------------------------------------
WAAS $892.4 $2,922.4* 1227 1998-2001 2003-TBD**
STARS $940.2 $1,690.2** 80 1998-2005 2002-TBD**
ASR-11 $752.9 $916.2 22 2000-2005 2003-2008
WARP $126.4 $152.7 21 1999-2000 2002-2003
OASIS $174.7 $251.0 44 1998-2001 2002-2005
----------------------------------------------------------------------------------------------------------------
*This includes the cost to acquire geostationary satellites and costs are under review.
**Costs and schedules are under review.

These five acquisitions have experienced cost growth of over $3
billion and schedule slips of 3 to 5 years. Problems with cost growth,
schedule slips, and performance shortfalls have serious consequences--
they result in costly interim systems, a reduction in units procured,
postponed benefits (in terms of safety and efficiency), or ``crowding
out'' other projects.
For example, STARS, which commenced operations at Philadelphia this
past year, has cost FAA more than $1 billion since 1996. Most of these
funds were spent on developing STARS, not delivering systems. When the
STARS development schedule began slipping, FAA procured an interim
system, the Common Automated Radar Terminal System (Common ARTS) for
about $200 million. FAA is now operating Common ARTS (software and
processors) at approximately 140 locations.
Moreover, in FY 2002 alone, FAA reprogrammed over $40 million from
other modernization efforts (data link communications, oceanic
modernization, and instrument landing systems) to pay for cost
increases with STARS. As a result of these cost and schedule problems,
FAA officials have proposed scaling back the program from 182 systems
for $1.69 billion to a revised estimate of 73 systems for $1.33
billion. No final decision has been made, and FAA is currently
reevaluating how many STARS systems it can afford.
Several other modernization projects are experiencing setbacks. The
Integrated Terminal Weather System, or ``ITWS'' provides air traffic
managers with a 20-minute forecast of weather conditions near airports.
FAA planned to complete deployment of all 38 systems by 2004 at a cost
of about $286 million, but production costs have tripled from $360,000
to $1.1 million per system. FAA cannot execute the program as intended
and, absent additional funding, will defer adding several planned
improvements and may procure fewer systems than intended.
In addition, FAA intended to have the Local Area Augmentation
System (Category I)--a new precision approach and landing system--in
operation in 2004. It is now clear that this milestone cannot be met
because of additional development work, evolving requirements, and
unresolved issues regarding how the system will be certified as safe
for pilots to use. Moreover, the more demanding Category II/III
services (planned for 2005) are now a research and development effort
with an uncertain end state. This means that benefits associated with
the new precision approach and landing system will be postponed.
Our work has also found that FAA has not followed sound business
practices for administering contracts. We have consistently found a
lack of basic contract administration at every stage of contract
management from contract award to contract closeout. For example, we
found that Government cost estimates were:

--prepared by FAA engineers, then ignored;
--prepared using unreliable resource and cost data;
--prepared by the contractor (a direct conflict of interest); or
--not prepared at all.

FAA has stated that it will take actions to address these
concerns--the key now is follow through.
In addition to strengthening contract oversight, FAA needs to
develop metrics to assess progress with major acquisitions, make
greater use of Defense Contract Audit Agency audits, and institute cost
control mechanisms for software-intensive contracts. With schedule
slips and cost overruns in major acquisitions, it should be noted that
FAA is not getting as much for its $3 billion annual investment as it
originally expected.
Tracking Costs. An effective cost accounting system is fundamental
to measuring the cost of FAA activities and provides the basis for
setting benchmarks and measuring performance. It represents the
underpinning for FAA's operation as a performance-based organization
through the development of good cost information for effective
decision-making. The 1996 Reauthorization Act for FAA required the
agency to develop a cost accounting system. However, after over 6 years
and $38--million, FAA is now planning to complete its CAS by September
2003, assuming no further slippage. Additionally, we found that in two
of the five lines of business where the CAS has been implemented,
problems exist such as not allocating costs to individual facilities,
which limit the system's usefulness.
To have a credible cost accounting system and to effectively
measure employee productivity, FAA needs an accurate labor distribution
system. Cru-x is the labor distribution system FAA chose to track hours
worked by air traffic employees (FAA's largest workforce). However, in
September 2002, FAA and NATCA entered into an MOU that significantly
reduced the system's ability to track employee productivity.
Specifically, the MOU eliminated the requirement for controllers to
sign in or out, and Cru-X was not programmed to identify or assign the
time controllers spend on collateral activities when not controlling
air traffic. We brought this issue to the attention of the
Administrator, and she directed that appropriate internal controls be
incorporated into the Cru-X labor distribution system.

Building Aviation System Capacity and More Efficient Use of Airspace to
Prevent a Repeat of the Summer of 2000
FAA needs to be strategically positioned for when demand returns
through a combination of new runways, better air traffic management
technology, airspace redesign, and greater use of non-hub airports; it
would be shortsighted to do otherwise. FAA estimates that air traffic
(measured in terms of operations) will return to its pre-September 11th
growth pattern between 2005 and 2007. FAA's OEP is the general
blueprint for increasing capacity. As currently structured, the plan
includes over 100 different initiatives (including airspace redesign
initiatives, new procedures, and new technology) and is expected to
cost in the $11.5 to $13 billion range, excluding the costs to build
new runways, but the true cost of implementing the plan is unknown. FAA
estimates the plan will provide a 30 percent increase in capacity over
the next 10 years assuming all systems are delivered on time, planned
new runways are completed, and airspace users equip with a wide range
of new technologies.
While airspace changes and new controller automated tools will
enhance the flow of air traffic, it is generally accepted that building
new runways provides the largest increases in capacity. The OEP now
tracks 12 runways scheduled for completion in the next 10 years. Four
of the runway projects are expected to be completed in 2003 at Denver,
Houston, Miami, and Orlando airports. However, construction on several
other airports has been delayed from 3 months to 2 years. FAA needs to
continue to closely monitor new runway projects, (see Attachment).
Progress has been made with OEP initiatives, but much uncertainty
exists about how to move forward with systems that require airlines to
make investment in new technologies. FAA and the Mitre Corporation
estimate the OEP would cost airspace users $11 billion to equip with
new technologies. For example, FAA and Mitre estimate the cost to equip
a single aircraft with Automatic Dependent Surveillance-Broadcast
ranges from $165,000 to almost $500,000, and the cost for Controller-
Pilot Data Link Communications ranges from $30,000 to $100,000
exclusive of the cost to take the aircraft out of revenue service.
FAA is working to retool the OEP. FAA needs to synchronize the OEP
with FAA's budget, set priorities, and address uncertainties with
respect to how quickly airspace users will equip with new technologies.
It also needs to ensure the costs associated with multibillion-dollar
modernization projects not in the OEP are considered when establishing
priorities and are integrated with OEP initiatives.
It is a good time to rethink what reasonably can be accomplished
over the next 3 to 5 years, and what will be needed by FAA and industry
given the decline in Trust Fund revenue and the financial condition of
the airlines. According to the Associate Administrator for Research and
Acquisition, it is likely that the OEP will shift from a plan that
relied heavily on airspace users to equip their aircraft to one that
places greater emphasis on airspace changes and procedural changes that
take advantage of equipment already onboard aircraft. FAA has an
opportunity to set priorities, flesh-out benefits, adjust to a changing
business model, and develop a reasonable path for moving forward with
the OEP before system-wide capacity problems return.

Striking a Balance Between How Airport Funds Will Pay for Capacity and
Security Initiatives
A major issue for airports is funding the next phase of EDS
integration. Thus far, nearly all EDS equipment has been lobby-
installed. TSA's planned next step (integrating the EDS equipment into
airport baggage systems) is by far the most costly aspect of full
implementation. The task will not be to simply move the machines from
lobbies to baggage handling facilities but will require major facility
modifications. We have seen estimates that put the costs of those
efforts at over $3 billion, and this is an almost immediate issue
facing the airports.
A key question is who will pay for those costs and how. While the
current AIP has provided some funding in the past for aviation
security, we urge caution in tapping this program until we have a firm
handle on airport safety and capacity requirements. In FY 2002,
airports used over $561 million of AIP funds for security-related
projects. In contrast only about $56 million in AIP funds were used for
security in FY 2001. Continuing to use a significant portion of AIP
funds on security projects will have an impact on airports' abilities
to fund capacity projects. The following chart shows how AIP funds were
used and for what type of project in FY 2002.

AIP funds as well as passenger facility charges (PFCs) are eligible
sources for funding this work. However, according to FAA, PFCs are
generally committed for many outlying years and it would be difficult,
requiring considerable coordination among stakeholders (i.e. airports
and airlines), to make adjustments for security modifications at this
point. The following chart shows how PFC funds have been used since
1992.

There have also been proposals to raise the cap on PFCs; however,
we urge caution before adding additional fees or taxes for air travel.
Consumers already pay a significant amount in aviation taxes and fees.
For example, a $100 non-stop round trip ticket includes approximately
$26 (26 percent) in taxes and fees. Put differently, the airlines
receive approximately $74 and the government and airports get $26. A
$200 single-connection round trip ticket includes approximately $51 (26
percent) in taxes and fees. Here the airline gets approximately $149
and the government and airports get $51.

Aviation Safety As FAA's Top Priority
The U.S. air transport system is the safest in the world and safety
remains the number one priority for FAA. Until the recent Air Midwest
crash in Charlotte, there had not been a fatal commercial aviation
accident in the United States in 14 months.
Progress has been made this past year in reducing the risk of
aviation accidents due to operational errors and runway incursions.
Operational errors (when planes come too close together in the air) and
runway incursions (potential collisions on the ground) decreased by 11
percent and 17 percent, respectively, in FY 2002. Notwithstanding these
improvements, operational errors and runway incursions should remain an
area of emphasis for FAA because at least three serious operational
errors and one serious runway incursion (in which collisions were
narrowly averted) occur, on average, every 10 days.
In the current financially-strapped aviation environment, FAA must
remain vigilant in its oversight to sustain a high level of aviation
safety. Currently, airlines are restructuring and changing the way they
operate. For example, carriers are standardizing their aircraft fleet
(e.g., parking older aircraft), using aircraft repair stations to
complete more of their maintenance work, and relying on internal flight
operational quality assurance programs to reduce costs and increase
safety. FAA has systems in place to closely monitor air carriers'
operations, such as aircraft maintenance, once an airline has declared
bankruptcy. As the Administrator's testimony states, FAA has increased
surveillance at these carriers based on analysis of inspectors'
observations and industry databases.
Additionally, we are encouraged by the Administrator's commitment
to programs such as Flight Operational Quality Assurance (FOQA). FOQA
provides objective, quantitative data on what occurs during flight
rather than what is subjectively reported by individuals. FAA could use
these data to identify safety trends and accident precursors.
A word of caution: FAA needs to pay close attention to the level of
oversight it provides for repair stations. In the past 5 years, there
has been a significant increase in air carriers' use of these
facilities. In 1996, major air carriers spent $1.6 billion (37 percent
of their total maintenance costs) for outsourced aircraft maintenance.
Whereas, in 2001, the major air carriers outsourced $2.9 billion (47
percent of their total maintenance cost). FAA needs to consider this
shift in maintenance practices when planning its safety surveillance
work.
That concludes my statement Mr. Chairman. I would be pleased to
address any questions you or other Members of the Committee might have.

The Chairman. Well, thank you very much, Mr. Mead.
I guess I would like to start my questioning by noting, as
you did at the end of your statement, that it was 14 months
before the Air Midwest tragedy in Charlotte, and that is a very
impressive record, and so I think when we look at the big
picture aspects of aviation safety we can be encouraged, but I
think, Mr. Mead, you raise some very serious issues.
First of all, on the MOUs, Ms. Blakey, obviously you have
got a problem there. If I were you, I would appoint a little
group to get that under control, and I say that in the context
of a $5.8 billion increase in FAA funding since 1996. I do not
think you are going to see commensurate increases in funding.
As Mr. Mead points out, a large amount of those increases
has been to workforce costs. You are going to have to get the
workforce costs under control, and we recognize the strain, the
efficiency, and the incredible talent that is required to
handle air traffic, especially in major parts of the country.
Everyone is aware of that, but you are going to have to get
that under control.
I hope that the debacle concerning the cost accounting
system is not symptomatic of the way you are getting things
under control. To put in a cost accounting system, there
obviously has been no accounting of the work that was done to
put in place a cost accounting system. Would you agree?
Ms. Blakey. Well, I come at this from a little bit
different perspective from the Inspector General, because,
having served in five different Government agencies, I will
tell you the truth, there are very few cost accounting systems
out there, period. So I will say this----
The Chairman. Well, but you certainly did not contemplate a
cost from 12 million to 38 million, and still not have it done
yet.
Ms. Blakey. We are going to get it done. I will tell you,
that the two lines of business, we have involved right now are
about 75 percent of the workforce. We really are covering a
large waterfront right now, and I think we have got to get it
right.
One of the things I want to do is work with the Inspector
General's office to make sure that as we mesh this with the
overall financial system for the Department, and then as we
begin to use this data--because you know, cost accounting is
only so good as you are actually then are letting it drive your
decisions. I think that is really where we need a good bit of
help still, so I will tell you that it is a work in progress,
but we will get it done, and certainly by 2004, which is
further out than I would like, but we will make that.
The Chairman. Thank you.
Now, Mr. Mead, let us talk about the most pressing issue
here, and that is this disparity between the funding that is
necessary for aviation security, including funding TSA, and the
amount of revenue, and I believe you testified last week before
Senator Lott that there was like, a $3.5 billion shortfall, is
that correct?
Mr. Mead. Yes. When the security act was passed, sir,
Congress enacted a number of fees, and you cannot tell exactly
from the legislative record, but I think Congress probably
thought that they were establishing fees that would cover a
very substantial part of the price tag, and we are going to end
up getting about $2 billion in fees. The rest is being made up
of appropriated funds at the present time, and the point we
were discussing last week and I highlighted in my testimony
today is this explosive detection machine price tag, which, as
I said, is at least $3 billion, and where that money is going
to come from.
The Chairman. Over a 1-year period?
Mr. Mead. Well, actually the law said that--the law really
established a sense of urgency. I think everybody knows about
the December 31 date. I think the Department did everything
possible to get to the December 31 date, but we all know the
end state on these explosive detection machines is to have them
integrated into the baggage system, not stuck around lobbies
everywhere.
In fact, if you were going to screen luggage in the lobby,
you would not have room to walk in some of these airports. So I
am concerned that, given the urgency that we all have to
install these in the baggage systems, that we come to an early
resolution of how we are going to pay for them, and that we not
just go along thinking that the other guy is going to pay,
because that is not going to happen, and the security is
important.
I have reservations, myself--I am certainly not speaking
for the administration--about tapping that Aviation Improvement
Program fund to any consequential degree. I think it is
reasonable that there be an uptick in the amount that the AIP
pay over and above the $50 million or so that it has been
paying over the years, but I would be very, very careful about
getting too deep into it.
The Chairman. This $3 billion is not in the President's
budget, right?
Mr. Mead. No, the $3 billion, people have not decided yet
how they are going to pay for the integration of these machines
into the baggage systems.
Senator Lott. Would you allow me to join in this
discussion?
The Chairman. Please.
Senator Lott. Do you have any recommendations on how we
deal with that? Really, we have two choices, or three. I think
Senator McCain talked about this last week. (1) We are going to
have to scale down what we are willing to spend, or what is
going to have to be spent in these areas, or (2) we are going
to have to come up with more money, and there is a limited
number of ways you can do that, increase ticket fees, which is
not going to happen. The airlines have to, or the airports will
have to eat it, which they are already under severe pressure,
both of them, or we are going to have to take it out of the
general fund. Or is there another idea?
Mr. Mead. I have one I would like to put on the table. I
would establish a capital fund. You might call it a revolving
fund of sorts, and into that capital fund, I would dedicate
moneys for the installation of these machines, and the revenue
stream for that capital fund, that is, how you would fund it,
would come from multiple sources. I would take some from AIP, a
reasonable amount. I would take some from the security fee that
has already been established, and the remainder from general
funds.
The Chairman. By fees, you are saying PFC's?
Mr. Mead. No, I was not saying PFC's. This is another thing
they established. You established a security fee. It is not
called a PFC. I think the maximum is about $10 on a round-trip
flight, and general appropriations, and I would feed that money
into this capital fund. It would provide a stable funding
source.
I think I would have the management of that fund comprised
of some representatives of the airport community, FAA, and
probably the Transportation Security Administration, which
would be over at DHS, but you are going to have to have a
stable funding source, and it is going to have to have $3 or $4
billion in it, and I think the outlay--the $3 billion I would
say is probably going to go out over the next couple of years,
if we keep the accelerator to the floor, as we should, on
integrating the explosive detection machines into the baggage
systems.
The Chairman. So this would clearly be a part of the
reauthorization bill the Fed is setting up, some kind of a
revolving fund, or something along the lines you are talking
about?
Mr. Mead. Clearly.
Senator Lott. Moving these explosive detection machines
into the baggage area, is that something that is needed or
required technologically, or is it for aesthetic or convenience
sake? So, they are in the lobby. I mean, we are dealing with
security here, and it may be a little inconvenient, but is
there an urgency to this?
Mr. Mead. At smaller airports, Senator Lott, the lobby
approach will work. At your big airports, you do not have
enough machines out there right now to screen 100 percent of
the baggage through them, and the only place you can do that
efficiently is by putting them into the baggage system. That is
pretty much what they have done in Europe.
The Chairman. This brings up another question. Is there any
technology on the boards that reduce the size of these machines
and make, perhaps, us able to do this task without the present-
day technology?
Mr. Mead. Well, some of these issues on the technology
would be more appropriately discussed in a closed session, but
what we have out there now is what we are going to have for
about the next 2 or 3 years.
There is the trace technology. I do not know if you are
familiar with that. That is the much smaller machines when you
go and somebody takes a swab and they swab your bag.
The Chairman. I have had it many, many times, especially
after they have recognized me.
[Laughter.]
Senator Lott. Did they swab you, or just the luggage?
[Laughter.]
The Chairman. After the pat-down.
Mr. Mead. Swabbing is part of the solution, but it is
extremely labor-intensive.
Senator Lott. You mentioned that CFO position, or chief
operating position had not been filled.
Mr. Mead. No, sir.
Senator Lott. You did not mention something. You said that
some position----
Mr. Mead. The chief operating officer.
Senator Lott. At FAA?
Mr. Mead. At FAA. The Congress in AIR-21, they set up a
structure. They said, okay, we have the administrator, we have
the deputy administrator, and now we are going to have a chief
operating officer, and they gave him a high--a pretty good
salary, and then they said, there will be also something called
a Management Advisory Committee that would advise the
administrator that would be comprised of people in the aviation
industry, and then they established something called the Air
Traffic Control Subcommittee.
Senator Lott. Who is they? Us?
Mr. Mead. You. The Congress.
[Laughter.]
Senator Lott. That is what I thought.
Mr. Mead. With all respect, Senator.
Senator Lott. Do we need a COO? What do the administrator
and the deputy administrator do?
Mr. Mead. Well, I believe that is one of the outstanding
issues, sir.
The Chairman. We might consider that in the
reauthorization, whether we really need that or not.
Ms. Blakey, do you have an opinion on that?
Ms. Blakey. Let me suggest this. The Congress and the FAA
both have worked very hard on this concept of pulling together
both our research and acquisition activities, and all of the
operations for the National Airspace System in one
organization, and the intent is very serious that it be a truly
performance-based organization.
The kind of effort, business plan that needs to be
developed, and private sector skills could be brought to bear
on having financial management cost accounting, or as I say,
labor distribution accounting that will go into this. I think a
chief operating officer could be very valuable to us, and I
will tell you that I have gone ahead and reengaged a search
firm to look for the right person, whose driving characteristic
is strong management skills, to address those very needs that
the Inspector General has been pointing out this morning, so I
am supportive of it as it is currently constituted.
Some changes in the legislation are needed. My predecessor,
Jane Garvey, in fact, testified last summer about a number of
those, and we would very much like you to consider those, but
they are, if you will, technical changes, smaller changes, not
setting aside the whole concept.
Senator Lott. We would be interested in getting more
information about the need for it and what you think about it,
and in that connection, do you expect that we will get
administration recommendations with their thoughts on the FAA
reauthorization in the next 30 days?
Ms. Blakey. You will certainly get our recommendations.
They are currently in interagency coordination, and I would
very much like to get them to you quickly. I know that this
spring is an opportunity for our reauthorization, and we very
much want to work with you to achieve that.
Senator Lott. I hope you would stay behind it and not let
it drag out, because if you do, it would be my hope we would go
forward with or without it, with the Chairman's permission.
Now, on the AIP issue and the security funds, there are
costs that have come out of that. Obviously, we had
extraordinary times, we took money out of that, but I am very
worried about the long-term impact on the safety and
improvements that we need at airports if we continue to drain
that for security costs. Do you have any comment on that, Ms.
Blakey?
Ms. Blakey. It is certainly something, I think, to have
concern about, because last year, we did see a very dramatic
increase in the amount of AIP money that went for security.
From the previous year level of about $56 million, $561 million
went in 2002. That is an 800 percent increase. Now, obviously
that would be extremely difficult to sustain over time.
I think at the FAA, we are looking at these needs as being
something that are, in effect, something of a bubble, the
Inspector General indicated, a 2-year, possibly a third year
out there. Certainly we understand, in the current economic
climate, that there have to be contributions from a variety of
sources to deal with this, but I certainly would urge that the
Committee look seriously at the various options on that front,
because over the term there is no question that it would impact
very significantly our capacity.
Mr. Mead. I neglected to mention something in our
discussion of the AIP. You know, the way the law works, if you
are a big airport, it is likely that you are going to get much
less AIP money under the current law, because you are allowed
to charge a PFC, and it is economically sensible to do so.
Well, another issue we need to worry about here is that for the
very, very large airports, they do not rely on the AIP as much,
and so they rely on PFCs, so if we fix the problem with the
AIP, and the extent to which the drawdown would be for
security, and you control that, you still have the PFC issue,
that you do not want them necessarily looking to the airport
and saying, well, deal with this through your PFCs.
You see, PFCs never come to the Federal Government. It is
completely separate, although it is certainly authorized by
federal law.
Senator Lott. Well, I know that Senator Burns wants to ask
some questions, and I see Senator Lautenberg is here. Let me
just make three points that I want to emphasize to you, Ms.
Blakey. I hope you will follow up on these MOUs. They have got
to be brought under control. I do think we have got to continue
to look at modernization. We put $30 billion for modernization
in the past two decades. Have we gotten a lot of modernization
for our cost? And I do think you need to look at this vision
thing of where we are going to be in 10 or 20 years.
And last but not least, I presume you are going to pursue
the President's budget request with regard to increased numbers
of air traffic controllers, just because we have got a down
slope coming in terms of air traffic controllers retiring. We
have got to start getting ready for their replacements.
Thank you.
The Chairman. Senator Burns.
Senator Burns. Thank you, Mr. Chairman. I just want to
remind the Committee, I got to looking at some figures here,
and the observation that the Chairman made a while ago that we
cannot put another tax on anything in the airline industry to
raise any more funds, and it sounds like we need some more, and
then you hear about this MOU business, and I do not know
whether we need more money or more supervision, but just to
give you an idea, there is a 7.5 percent ticket tax, there is a
$3 flight segment tax, a 6.25 tax on cargo weigh bills, 4.3
cents per gallon on commercial aviation fuel, 19.3 cents-per-
gallon on general aviation gasoline, 21.8 cents-per-gallon on
general aviation jet fuel. There is a $13.20 arrival tax for
international, and the same when you depart, and a 7.5 percent
tax on second-party sales of airline award frequent flyer
miles.
I do not know where else we can go for taxes to raise any
more money, when you take a look at that, and I do not know
what--I do not have a clue how much revenue that raises, but it
just sounds like an awful lot of money to me, and I just want
to bring those figures up to remind people that we do not have
a revenue problem, maybe we have an efficiency problem
somewhere along the line.
On January 24, the TSA issued a direct and final rule,
preapproved by the Transportation Security Oversight Board,
that I believe undermines the due process and the fair
rulemaking process. As issued, the TSA is in a position to be
the accuser, the judge, jury, and the court of appeals when it
comes to pilot certificates.
With the issuance of this new rule, the TSA can pull an
airman's, or a pilot's certificate using secret criteria
determining that the airman is or may pose a security risk. The
pilot may appeal the decision, but can be refused the
opportunity to confront his accuser or the evidence employed
against him. As an agency representative who will implement
this rule, number 1, do you believe this is a fair rulemaking
process?
Ms. Blakey. This rulemaking process, of course, has been
one that has been worked out between the Department of Justice,
and the Department of Homeland Security, TSA largely. We are in
a position, therefore, of trying to work with the procedures
themselves to make sure that we are as fair as is possible in
implementing it.
There is an appeal process. Needless to say, these cases
are just beginning to evolve in the system, and I think what we
can commit to you is to keep a very sharp oversight on this,
and to therefore look at questions that may arise that may
cause us to at least discuss further with the Department of
Homeland Security any policy issues that should be addressed on
this as we move forward. It is something, as I say, that was
determined largely by the security needs of the country. We are
in a difficult situation where classified information can be
very much the driver on those pilot revocations.
Senator Burns. Well, it just seems like to me that you
mentioned three different agencies that have three different
goals. Are we fuzzing up this business of jurisdiction and who
can and who cannot do things?
Ms. Blakey. The authority for this came through and resides
with the Transportation Security Administration and, therefore,
the Department of Homeland Security.
Senator Burns. You know, I am an advocate of homeland
security, but I do not think--I just think that we have got
things that confuse--I know I am, and I know the flying public
and even those people who fly airplanes and must have a license
and certificates. This looks like an almost impossible
situation, if a person is wrongly accused cannot face his
accuser. This flies in the face of the American judicial
system. Are you going to turn into an EPA?
Ms. Blakey. Well, what I can commit to you is this. The FAA
has had a long history, as you know, in issuing pilot
certificates and overseeing that process, and we will certainly
apply not only the experience we have, but the kind of
reputation that we have established for equity over the many
years to this as well.
Senator Burns. I am very concerned about this, Ms. Blakey,
and I shall be monitoring it, because we are hearing some very
troubling noises now from GA pilots, and that concerns me,
because GA is awfully important in the State of Montana, and so
far, we have got people who are really hurting financially up
there. You put some people out of business. I think we ought to
open up National to general aviation again, but that is another
day, another story.
But thank you very much, Mr. Chairman.
The Chairman. Senator Lautenberg.

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

Senator Lautenberg. Thanks very much, Mr. Chairman. I
apologize for not being here to hear the administrator's
comments, and Mr. Mead and I have sat across the table many
times over lots of years.
Though I sit in the freshman's section, the fact is that
the white hair, the wrinkles, and the length of service
indicates that I am here for a much longer period of time than
one would judge by my most recent election, and Mr. Mead, as
usual, you are thorough, at times bedazzling in the information
that you present because of the volume of material that has to
be considered.
And Mr. Chairman, I commend you for getting the hearing
started on this reauthorization process, and I ask consent to
put my formal statement in the record.
The Chairman. Without objection.
[The prepared statement of Senator Lautenberg follows:]

Prepared Statement of Hon. Frank Lautenberg,
U.S. Senator from New Jersey

Mr. Chairman, Senator Hollings, thank you for holding this first
hearing on FAA Reauthorization, focusing on aviation technology and
safety. I also want to thank Administrator Blakey and Inspector General
Mead for appearing here today.
Mr. Chairman, I have worked on transportation safety for many
years, from the law I wrote to raise the drinking age to 21, to my
initiatives to get oversized trucks off the highways, to my .08 blood
alcohol drunk driving law. I look forward to continuing my safety work
on this Committee as we craft the FAA Reauthorization bill.
I do want to raise one particular aviation safety issue that I find
very troubling--possible privatization of the air traffic control
system. In the aftermath of September 11th, the American people
demanded one thing in particular of their government: they wanted
government personnel-- not private contract firms--to perform security
screening of baggage at our nation's airports.
That is why I was so surprised to find out that the Administration,
through the OMB A-76 process, stripped air traffic control of its
``inherently governmental'' status last year, setting the stage for
privatization. To me, that makes no sense, especially after September
11th.
It is the opposite of what the public wants. I know that the
official line from the Department of Transportation is that it does not
intend to privatize air traffic controllers. But that contradicts the
Administration's recent actions through the A-76 process.
In addition, the Administration has already solicited bids to
outsource the jobs of air traffic control specialists, who maintain,
repair and monitor the system. We currently have the best air traffic
control system in the world. Our federal air traffic controllers, air
traffic specialist and flight service station controllers are expert
professionals who perform under pressure every day to keep our skies
safe.
I believe our air traffic controllers are almost a wing of the
military--and they play a major role in homeland security. When the
Space Shuttle Columbia tragically exploded in the skies over Texas, it
was the air traffic controllers who directed aircraft away from the
falling debris field.
These men and women perform a critical government function, It
should not be farmed out to private contractors. Just as the American
people want government workers checking their baggage, they want
government workers to protect their safety and security while they are
in the sky.
I hope the witnesses will address this issue. Thank you Mr.
Chairman.

Senator Lautenberg. The reference I make is principally
toward what I will call the risk of privatization, the
considered privatization of many parts of the air traffic
control system. It concerns me that we just took a whole
workforce, 25,000 plus people, baggage screeners, and took them
from the public sector and put them in the Government sector,
or the private sector, rather, and put them in the Government
sector and now, with the air traffic controllers, we are
talking about the possibilities of just the reverse of that,
and preparations, though subtle, are certainly there to be able
to move the force to the private side.
And to me, the air traffic control system that we have in
this country is a miracle at work. The safety record, the
volume of activity that takes place, the movements every day
across this country of ours, including those aircraft that
arrive from other countries, everything is looked at, and 9/11,
which was a benchmark in atrocity for America placed an
enormous burden on the aviation system, such that it had to
shut down, but in those intervening hours right after the
assault took place, it took a very delicate balance of
direction to the aircraft that were flying at the time. How do
you get everybody out of the sky? How do you get them out of
the way? How do you make sure that there is no further damage
likely to follow?
It was in my view, a miracle of both efficiency and
strategy, and I am one of those who admires so much of what we
have done in the FAA air traffic control system, and I am
concerned, Mr. Mead, with the increased costs that you talk
about, the controllers that were in the $200,000 range, and I
would ask you this, all these people I assume are subjects for
overtime pay when they exceed their regularly scheduled hours,
so is the problem the costs, is that where you go first, or is
it the requirements that come first?
The system was in such a state of shock after 9/11, and
overtime, was it a fairly customary thing, I think, always in
the FAA, because of the strict requirements, and the fact is
that days often get elongated by weather and other conditions.
What would your estimate be? Did you evaluate what it was that
brought the components of salary to those levels?
Mr. Mead. Yes, and, in fact, for the 10 highest-paid that I
referred to, the ones that went from 195 to 212-something, in
that neighborhood, those people averaged $66,000 per person in
various premium pays, which would be Sunday pay, overtime,
controller-in-charge pay, there is another category called
holiday pay, or holiday differential.
By far the largest category was overtime. The average per
person in the high $100,000 categories was about $43,000, so a
controller earning about $200,000 a year, you can count on that
being, average, $43,000 of it being overtime.
Senator Lautenberg. Twenty-five percent of the pay.
Mr. Mead. Yes, and the premiums overall were even more than
that, but I would hasten to add that this cost accounting
system, which sounds very ``auditorish,'' and maybe ``green
eyeshadish,'' would really help you sort through how many
controllers were at that facility at the time this overtime was
being incurred, comparing one facility to another, that sort of
thing.
Senator Lautenberg. Yes. It is obvious that there are
components in there that are not just strict pay increases that
have come about whimsically, just to be nice to some people. We
are, after all, reaching to get people to take on these tasks.
We still have locality pay, I think, do we not? I remember
hearing some talk about the elimination of that kind of
premium.
Mr. Mead. There is two. There is a locality pay, the
general Government locality pay, and on top of that,
controllers at about 110 facilities get a kicker of between 1
to 10 percent of salary on top of Government locality pay.
Senator Lautenberg. Why did we introduce those incentives?
Mr. Mead. Well, I think it is probably a vestige of when,
you will recall when they were back on the general schedule,
the regular Civil Service system, there were hard-to-staff
facilities.
Senator Lautenberg. Absolutely.
Mr. Mead. And then after the reforms where the FAA was
allowed to negotiate as to pay, and they got big pay increases,
then they retained the incentive pay, so that is why you have--
the average salary that I quoted of about $105,000 for the
fully certified controller is exclusive of those incentive
pays.
Senator Lautenberg. I am not defending the extravagant
wages, but I am asking that we examine exactly how we got to
where we are, because if someone is in a rural-type community
out in the West or Midwest, and is asked to move to Chicago, or
New York, or Los Angeles, the costs of living are significantly
different in many of these places, as I learned in my
discussions with controllers, and I know a lot of them. I used
to visit with them in Newark and La Guardia and other airports
as well, and found out that they had difficult decisions to
make when they were asked to move to another place.
I used to run a good-sized company, a company that now has
40,000 employees, and I know that we, years ago, going back
many years, you could say, hey, you are going to Lexington,
Alabama, it is a small town, but it is an opportunity. They
would say yes. Now they say, well, as soon as I talk to my wife
and kids, I will let you know whether it is of interest, and we
are subject to those kinds of pressures.
One thing that strikes me is that we ask more of them, the
controller workforce, I think, than we are asking of the
industry generally, and I am for helping keep these companies
flying, but the fact is that they are all competing for extra
business, paying substantial sums in advertising and marketing,
and giving premiums, and you name it, to build the traffic. And
as a consequence, the air traffic system has to stay with it
even if the airplanes are not filled, and even if the revenues
of the airlines are less than sufficient, the fact of the
matter is that the demands on the system persist. And we did
not get the safety record that we have because we were
inefficient. We got it because people worked very
conscientiously.
And we have, again, every right to look at the costs for
these operations no matter what the task, but I look at the FAA
almost, Mr. Chairman, as another extension of our military, a
compulsory service for our country to function, and when the
controller system is under consideration for privatization, to
me it is akin, almost, to asking whether we want to hire
mercenaries to go to the front lines if we can get them.
I do not know what you do if a company goes on strike, does
not meet its commitment to its employees, does not provide the
pension funds that it has promised, et cetera. I think we would
be in a whole different business.
And I commend each of you for the work that you have done,
and the Chairman for initiating these reviews. We have got a
lot of work to do. When I hear the questions asked--and New
Jersey, you know, is the place where much of the research on
security-type equipment is done, and I was on the Pan Am 103
review committee, and we looked very, very deeply in how we can
protect ourselves against cargo-carried bombs, and we found out
that a lot of money went into research.
The size of this thing is ugly. It is not an aesthetic
thing at all. It is as inefficient as could be to have to take
luggage from one place and move it over to another and have it
out of the mainstream, and as you said so clearly, the fact of
the matter is that a lot of these airports do not have room for
these truck-size pieces of equipment, and the trace system has
not proved to be as efficient as we would like to see, and
getting things smaller is a task that we are going to have to
work on, but we dare not sacrifice security in the process.
I thank you, Mr. Chairman, for the opportunity to talk to
our witnesses, and the fact that you brought them in so early
The Chairman. Thank you very much, Senator Lautenberg.
Thank you. We will be obviously engaged in intense
discussions, and as we move forward, it would be our intention
to try to report out a bill sometime within the next couple of
months if not sooner. Recognizing the difficulties we had last
time, we have a lot of work ahead of us.
I thank the witnesses. This hearing is adjourned.
[Whereupon, at 10:50 a.m., the Committee adjourned.]

A P P E N D I X

Prepared Statement of Hon. John F. Kerry,
U.S. Senator from Massachusetts

Mr. Chairman, I would like to thank you for holding this hearing
and thank the witnesses for their testimony. We're here today to
discuss the reauthorization of the Federal Aviation Administration's
(FAA) budget and its programs, a subject of critical importance given
the safety and security concerns that have arisen since September 11,
the poor financial state of the airline industry, and the overall
mission of the FAA. Although the Transportation Security Administration
(TSA) has primary jurisdiction over aviation security, the FAA will
remain a partner in security and is still responsible for the overall
safety of air traffic in the United States.
Apart from security concerns, there are a number of important
issues confronting the FAA that will need to be addressed during the
reauthorization period. This includes the administration's plans to
privatize the air traffic control system, the projected shortage of air
traffic controllers and the likely increase in air traffic and runway
congestion over the next few years, the projected shortfall in the
Airport and Airway Trust Fund (AATF), and ensuring that enough money
from the Airport Improvement Program (AIP) is spent on improving
airport facilities, reducing noise, and addressing capacity issues.
Although it is not technically part of FAA reauthorization, I am
concerned over the impact the administration's plan to privatize part
or all of the air traffic control system may have on air traffic in the
United States, and I hope it will be debated as we proceed with
drafting legislation. Last fall the President changed the designation
of air traffic services from ``inherently government'' to
``commercially competitive,'' thus allowing for the possible takeover
of the air traffic control system by private contractors. I cannot
think of a worse idea than handing over responsibility for the nation's
air traffic control system to a private company, and I am surprised
that even this administration would entertain such a notion. After
September 11 we felt it necessary to make baggage and passenger
screening a federal responsibility because private screening was
obviously inadequate and most people agreed that in this age of
heightened alert only professionally trained federal workers could
provide our best protection against terrorism. I ask my colleagues: if
we don't trust private screeners to inspect baggage why would we trust
a private entity to run our nation's air traffic control system? The
United States Government has developed and maintained the largest,
safest, and most complex air traffic system in the world. Other nations
have attempted privatization with questionable results. This work
should only be performed by well trained and experienced federal
workers. These men and women perform a valuable service to their
country arid their jobs should not be contracted out to the lowest
bidder. Privatizing the air traffic control system is a bad idea and I
sincerely hope the administration takes a closer look at the harm this
could cause our nation.
Although air travel is down from its pre-9/11 peak, it will recover
to earlier levels. Keeping up with capacity will be one of the biggest
challenges this agency will face in the years to come; Increasing
capacity will mean more than just building new runways and expanding
existing facilities, it will mean ensuring that the FAA has enough
controllers to monitor the nation's air traffic. As such, the projected
shortage of controllers over the next three to five years is alarming.
It is estimated that by 2010 the FAA will need an additional 2,000
controllers. Considering that the rate of controller attrition is
expected to increase by 150 percent over the next ten years, the
importance of hiring a new generation of controllers cannot be
underscored enough. Failure to address this problem will lead to longer
delays and overworked employees. It is imperative that the FAA hire and
train enough controllers to meet the inevitable demands on air and
runway space. Without enough air traffic controllers to guide planes,
runway construction is a moot point. I look forward to hearing the
FAA's plans to make up for this shortfall.
Another important issue during reauthorization will be the
continued viability of the Airport Improvement Program. Since passage
of the Aviation and Transportation Security Act a significant
percentage of AIP money has gone towards security related projects
instead of more traditional uses such as noise reduction, capacity
enhancement, and facility improvements. Although this was certainly
warranted given post-September 11th security concerns, I believe that
we should consider alternative means to fund security initiatives if
this imbalance continues. Installing EDS and ETS devices in every major
American airport alone will cost between $3 and $6 billion. Given that
the administration's FY 2004 request for the AIP is $3.4 billion, the
same amount expended in FY 2002, and that the AIP is receives its
funding from the AATF, it may be necessary to devise alternative
funding mechanisms solely for security projects.
Mr. Chairman these are the issues which concern me as we consider
the reauthorization of this importance federal agency. I look forward
to working with my colleagues during the reauthorization period and
passing a bill which best serves the interests of the American public.
Thank you.
______

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

Question 1. There are currently 219 airports participating in the
FAA Contract Tower Program, which continues to enjoy bipartisan support
from Congress as a cost-effective way to improve air traffic safety at
smaller airports. This public/private sector partnership also receives
consistently high marks from the DOT Inspector General, National
Transportation Safety Board, airports and aviation users. The FAA late
last year sent the District Court for the Northern District of Ohio a
revised study on the contract tower program that was ordered by the
Court as part of a federal lawsuit filed by the controllers' union in
1994 to overturn the program.

(a) Can you provide the Committee with a status report on this
lawsuit?
Answer. After FAA informed the court that it had completed its
review under 0MB Circular A-76, and determined that the agency should
continue to acquire air traffic control services for low level activity
towers through the Federal Contract Tower Program, NATCA filed a motion
to amend its 1998 complaint to challenge this determination. The court
granted NATCA's motion. The Government, in a single motion, moved for
summary judgment or alternatively moved to dismiss the Amended
Complaint. The basis for this motion was that the agency had complied
with the Circular, and that all issues had been resolved. NATCA
objected, claiming it could not respond to the motion without
discovery. The court ruled that NATCA was entitled to discovery and on
June 9, 2003, FAA responded to the discovery request. NATCA will have
until the end of July to respond to the Government's motion.

(b) Also, given the success of the contract tower program for
smaller communities, what are your plans to ensure the future viability
of the regular and the cost-sharing program, particularly as it relates
to funding?
Answer. The FAA will continue to budget for any increases in the
current Federal Contract Tower Program, for new starts in the program,
and to work with communities on the cost-sharing program.

Question 2. The FAA has made a concerted effort in recent years to
streamline the review and approval process for key capacity-related
projects.
(a) 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.

(b) 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 EISs 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.

(c) 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.

(d) Do you support efforts in Congress to make further improvements
to the process?
Answer. Yes. The Administrations 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 3. 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 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.

Question 4. How can FAA assert that the near-term need for OEP
rollout is reduced (i.e., lower congestion) when it is clear that
overall traffic continues to increase with the dramatic growth in
regional and commuter operations since 9/11, and with the attendant
increases to safety risks?
Answer. FAA continues to strongly support the Operational Evolution
Plan (OEP) and recognizes the need, both short term and long term to
continue our initiatives to increase capacity. However, the impact of
the events of September 11th, and the subsequent downturn in the
aviation industry has impacted the OEP schedule.
The OEP, by its very nature is collaborative and requires the
participation of FAA, airlines, airports, avionics manufacturers and
engine producers. Unfortunately, the stress of the industry's severe
financial situation has limited the level of participation of many of
our stakeholders. Accordingly FAA has had to change the OEP schedule to
reflect this new environment. However, the objective of the OEP has not
changed. Rather, it has been adjusted to reflect this new environment
and the industry's current financial limitations. The plan still
includes investments in additional runways, though with some schedule
changes, as well as the roll out of several capacity enhancing
technologies to include required navigation performance, collaborative
decision making, and more efficient approaches to airspace management.
The airline industry is recovering and should reach its pre-September
11th operating levels within the next couple of years. Further,
passenger levels and revenue miles, for some carriers, particularly low
cost, regional, and commuter airlines, have shown substantial increases
in the number of flights and passengers carried. The OEP does address
these needs and focuses additional emphasis on airspace redesigns at
key regional airports.

Question 5. I understand that FAA and NATCA have tentatively agreed
to extend the air traffic controller contract for two years. Has this
agreement been finalized? Will this extension further increase the
operating costs of the agency?
Answer. The extension agreement is only tentative and subject to
the union agreement to renegotiate those Memorandums of Agreement (MOA)
we have identified as having significant cost and operational impact or
improperly affected management rights. The MOA renegotiation team met
in June 2003 and will reconvene in mid-July 2003 to continue working
towards resolution. If all these MOAs are successfully renegotiated,
this will help contain subsequent increases in operating costs due the
contract. Under the tentative extension, the air traffic controllers
will only receive those pay increases granted to other federal
employees.

Question 6. Now that you have been at the FAA almost half a year,
do you have any priorities or goals for you term?
Answer. Since my arrival at the agency, I have been working with my
senior managers to set strategic direction for the Federal Aviation
Administration during my term. This has been a thoughtful and data-
driven process. We are very close to finishing a new draft Strategic
Plan--our Flight Plan--in conjunction with our FY 2005 budget
development. We will of course be asking you and your staff, industry,
other government agencies, and our employees and unions for comment
before we finalize this plan.
The new FAA Flight Plan will have four goals--Increased Safety,
Greater Capacity, International Leadership, and Organizational
Excellence.
Increased Safety
Safety is the FAA's primary responsibility. Our dedication to
keeping the skies safe is perhaps the single most important step we can
take to revive the industry. Just as aviation is a key component in the
economic health of our nation, safety is central to the public's
interest, as well as to the economic health of aviation. Passengers
must know they are safe. They will not fly if they do not have
confidence in the system.
While aviation accident rates are at their lowest levels ever, the
FAA will not become complacent; there is always room for improvement.
We will continue to develop technologies that will utilize our airspace
in safer, more efficient, and more environmentally-friendly ways. We
will continue to work with industry to collect data that allow us to
identify risks and prevent accidents before they happen, rather than
the old ``fix-and-fly'' method of identifying a problem once an
accident has already occurred. We will continue our partnerships with
industry to reduce the commercial accident rate, improve runway safety,
and maintain the zero-accident record of commercial space
transportation. We are also making a special commitment in Alaska,
where the challenging operating environment has led to an unacceptably
high aviation accident rate. For this reason, we are targeting
innovative safety solutions that will reduce the number of accidents.
Success in Alaska will lead to safety improvements throughout the
national airspace system.
The FAA is also committed to moving the United States from a
ground-based navigation system to one located within the aircraft
itself. Through the use of onboard technology, pilots will be able to
navigate aircraft to any point in the world using only geographical
coordinates. Required Navigation Performance (RNP) is an important step
in this direction. Because of its high degree of precision, RNP allows
for more efficient use of the airspace. In addition, RNP will enable
the development of constant angle descent approaches, thereby,
increasing safety. Simply put, RNP will allow us to fly more planes,
closer together, and more safely than ever before.
The FAA will continue to improve its safety oversight of air
carriers, manufacturers, and airport operations. We will complete the
implementation of a Safety Management System for FAA's Air Traffic
Services. We are also making a significant changes in how we measure
public safety with the development of a new single safety index that
will take into account all air accident injuries (not only fatal
injuries) and their impact on passengers, employees, the public, the
industry, and the economy. This new index will serve as a vital trend
indicator that allows us to measure the effectiveness of many of our
safety initiatives.
Safety must and will remain the FAA's top priority as the aviation
industry readjusts itself to a world transformed by terrorism and
economic challenges. It is the key to confidence in the system. It is
the key to the future of aviation.
Greater Capacity
The global economy, the war on terror, the war in Iraq, and Severe
Acute Respiratory Syndrome (SARS) have all dealt major blows to U.S.
air travel. Passenger levels are down 8 percent from where they were in
early 2001, and current industry forecasts suggest that demand will not
rebound until 2005 at the earliest.
It will rebound, however. So while the airlines struggle to
reinvigorate their industry at this critical time, the FAA must
continue to work with local governments and airspace users to redesign
a decades-old airspace that will meet the capacity demands of the
future. This redesigned airspace will have to accommodate more traffic
while easing delays; increase safety and security while addressing
noise and air quality; and smooth air travel between land and sea while
disentangling it in major metropolitan areas. More specifically, we
will ease congestion over eight metropolitan areas; improve overall
capacity at the nation's top 35 airports by 30 percent; increase the
number of flights by building new runways; and increase traffic
coordination and communication through new technologies. The end result
will be an airspace that is more efficient, less costly, safer, and we
will accomplish this in an environmentally friendly manner.
Capacity, like safety, is not only a priority but a necessity. Air
travel cannot grow if aviation capacity does not grow with it.
Passengers will not travel if they cannot move through the system
safely, seamlessly, and efficiently. Capacity is therefore a vital link
to realizing the full power and potential of aviation.
International Leadership
The FAA has operational responsibility for almost half of the
world's air traffic. We certify more than 70 percent of the world's
large jet aircraft. We provide direct or indirect assistance to 129
countries around the world to help them improve their aviation systems.
The United States, represented by the FAA, is the largest contributor
of intellectual and financial support to the International Civil
Aviation Organization (ICAO), which represents 188 of the world's civil
aviation authorities.
The FAA is, therefore, inextricably engaged in an international
network of partnerships aimed at promoting and enhancing air safety
around the globe. While growth in aviation over the last half century
has taken place primarily in the United States, growth over the next
century is going to occur primarily overseas. The FAA wants to assure
that U.S. citizens are able to travel as safely and efficiently abroad
as at home.
To achieve this, the FAA must work effectively with its key
bilateral partners as well as with regional and multilateral aviation
organizations, support the global implementation of proven air traffic
technologies and procedures, and effectively leverage the technical and
financial resources available to raise the requirements and oversight
of all civil aviation authorities to a high global safety standard.
While the worldwide air accident rate has improved over the last
ten years, it remains consistently greater than that of the United
States. The FAA is committed to working with our international partners
to bring our experience, expertise, and new technologies to create a
safer, more efficient, economical, and environmentally friendly global
airspace.
Organizational Excellence
To achieve the ambitious goals outlined in this Strategic Plan, the
FAA must itself become a world-class enterprise. This will require
strong leadership, performance-based management, and improved fiscal
responsibility. Consistent with the President's Management Agenda
(PMA), this also means the FAA must set targets, measure performance,
and be accountable for the results. The PMA is intended to make the
government ``citizen-centered, results-oriented, and market-based,''
and consists of the following five initiatives:

Strategic management of human capital
Competitive sourcing
Improved financial performance
Expanded electronic government
Budget and performance integration

The PMA and FAA's Organizational Excellence goal both focus on
government accountability while providing important services in a
responsible and cost effective manner. The FAA's goal is structured to
ensure that FAA employees clearly understand the agency's mission and
priorities, faithfully execute their duties to accomplish this mission,
and get the most out of every tax dollar. This means the FAA must set
targets, measure performance, and hold ourselves accountable for the
results.
Controlling costs is essential. Working with our employees and
industry partners, the FAA must consistently refocus investment
priorities on programs and services that perform, while ending those
that are redundant or ineffective. To accomplish this, we will
establish an agency-wide cost-control program to identify where costs
can be cut and reinvested to meet the initiatives outlined in this
plan. The agency will also accelerate the development of data and
analytic tools that will allow us to make management decisions based on
sound business principles.
The FAA's workforce is the key to achieving our mission. We are
committed to finding and eliminating barriers to equity and opportunity
at the FAA. The range of diversity at the agency directly relates to
the strength of our organization. Furthermore, we will make sure all
personnel have the tools and resources they need to address
successfully the challenges we face. In turn, employee compensation and
salary increases should be performance-based, allowing the agency to
control costs and reward success.
Our commitment to meeting these initiatives will determine our
policies as we head into the future: Where to focus our resources,
where to stop focusing resources, how to best serve the flying public,
how to help the industry through a critical crossroads, and how to help
American aviation advance safety and efficiency for travelers all over
the world.

Question 7. Congress has required that the FAA have both a
Management Advisory Committee and an Air Traffic Subcommittee to advise
the Administrator on managing the FAA. What is your impression of the
usefulness of these two panels? Would you recommend any legislative
changes to their structure or function?
Answer. I have found both the Management Advisory Council (MAC) and
the Air Traffic Services (ATS) Subcommittee to be extremely useful in
different ways. The MAC has provided me with both formal and informal
advice, and provided helpful information and perspectives for me during
my initial months as Administrator. With their industry knowledge, keen
insight, and willingness to help, the MAC is a valuable asset to the
FAA. The ATS Subcommittee brings another valuable, though different,
perspective to the FAA's Air Traffic Service. With their expertise in
private industry, the Subcommittee has focused ATS on becoming more
performance based, more customer focused, and with a greater attention
to cost saving initiatives. In this time of continuing budget concerns,
the knowledge the Subcommittee members bring will benefit the FAA and
the Country.
In our reauthorization legislation, we proposed changes to the MAC
and Subcommittee. The proposed changes are:

Modify the structure and membership of the ATS subcommittee
of the MAC by separating it from the MAC to be a stand-alone
ATS Board.

Add the FAA Administrator as member and Chairman of the ATS
Board.

Modify the authority of the ATS Board by revising its
approval authority and involvement in the air traffic
organization's budget.

Modify the MAC to change the requirement of Presidential
nomination for the one remaining aviation interest position and
FAA air traffic services labor position to Secretarial
nomination and no Senate confirmation.

Question 8. What is the FAA doing to enhance safety oversight over
air carriers that are in financial difficulty? Do you have any concerns
about the safety of carriers in financial difficulty?
Answer. In addition to monitoring an air carrier's regulatory
compliance, FAA inspectors are constantly monitoring their carriers
financial and labor relations circumstances so they have a complete
picture of the airlines status.
When inspectors see indicators of financial trouble or when the
press reports significant financial distress, the inspectors increase
their interaction with the airline's management and adjust their
surveillance plan to increase their focus on areas that might be at
risk due to financial cut backs.
Each carrier's experience is different and requires that the
surveillance plan be tailored to the circumstances. As a carrier
reduces its schedule, its fleet, and its employee ranks, the impacts of
these reductions must be constantly evaluated and surveillance plans
amended. Areas of adjusted surveillance would include: training to
ensure employees who are reassigned are properly prepared for their
assignments; maintenance to ensure that discrepancies reported by
pilots are properly addressed; and other areas affected by the
carrier's plans.
The carrier's quality assurance and quality control process are
monitored to ensure they are being followed and that findings are being
addressed. Data and trends--such as dispatch reliability, on time
performance, and minimum equipment list deferrals--are monitored and
surveillance is retargeted if the data indicates a negative trend.
Through increased focus and continual adjustments in tailored
surveillance plans, the FAA adequately addresses airline safety
concerns.

Question 9. The GAO has warned Congress about an impending wave of
air traffic controllers over the next decade. What is the FAA doing to
prepare for this wave of retirements?
Answer. Staffing standards have been revised based on recent
traffic forecasts. These standards are an important element, along with
projected retirements losses, to predicting future controller
requirements and hiring needs. With the drop in staffing requirements
due to reductions in air traffic, the 302 additional positions in the
FY 2004 budget, and the FAA's hiring plans for future years, the agency
is positioned to meet all of its staffing needs.
The agency is sensitive to the additional hiring needs needed to
address the surge in retirements. The FAA's annual retirement
projections have been very accurate, and the FAA has been meeting its
annual hiring goals. Over the last 6 years, the agency has hired more
than 3,000 new controllers.

Question 10. Your testimony states that the air traffic
subcommittee will use eight metrics or measures to monitor the
performance of the FAA's air traffic control system. Will these metrics
be public and how will they relate to the FAA's goals that it develops
under the Government Performance and Results Act (GPRA)?
Answer. The air traffic subcommittee's eight measures are, for the
most part, already part of the public domain. Three of the eight
metrics, Operational Errors, Runway Incursions, and Percent of Flights
On-Time, are included in DOT's Performance Plan for FY 2003 as metrics
reportable under GPRA. Four of the remaining five metrics are measures
contained in the Air Traffic Services Performance Plan, and are
available in the FAA's Aviation System Performance Metrics database.
Proposals to develop the last metric, a financial metric, are being
explored.
The metrics have been extensively briefed, and were presented to
the subcommittee in January, with status briefings in April and July.
The performance metrics will be a regular portion of all ATS
Subcommittee meetings. The eight measures, and supporting second level
metrics, are designed to give a Chief Operations Officer a clear and
continuous view of the performance of the FAA. Although Russell G. Chew
will be joining FAA as the COO this August, during the time that FAA
has not had a COO, FAA used these metrics to monitor the performance of
the air traffic control system.
______

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.

(a) 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.

(b) 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.

(c) 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. Administrator Blakey, 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 that your agency is doing that would respond
to this recommendation?
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. Administrator Blakey, 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
developing a wide variety of 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 this 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. In this
project Boeing is a full partner in this research initiative, supplying
their manpower and fabrication expertise.

Question 3. Administrator Blakey, in FY 2003, TSA requested $5.3
billion for aviation security expenses. For FY2004, the Department of
Homeland Security has requested $4.8 billion just for aviation
security. This is projected against FYs 2003 and 2004 revenues from the
passenger security fee of about $1.7 billion annually, along with
yearly contributions of $300 million from the airlines. This leaves a
gap of about $3 billion each year.
In FY 2002, airports used an unprecedented amount of AlP funds for
security-related projects. Historically, only about 1.5 percent of AlP
funds were used for security, while in FY 2002 17 percent of AlP funds
(or over $561 million) were spent on security-related projects. I am
concerned specifically, that the Administration may propose using AlP
funds, which normally are targeted towards capacity and safety-related
improvements, to pay for the necessary security upgrades at our
airports. However, it is evident that if we continue to use this level
of AlP funds for security needs, there will be trade-offs in other
airport programs.
So my question is how will these aviation security costs be paid
for? And as a follow up, will the Administration continue to use
significant AlP funds for security?
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.
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.
______

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

(a) 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.

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

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.

(b) 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 ElS, 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 ElS 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.

(d) 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-l00 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 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. John McCain to
Hon. Kenneth M. Mead

Question 1. Are there any MOUs that directly impact or increase the
operating costs of the agency?
Answer. Yes. In our work we found there are between 1,000 and 1,500
side bar agreements or Memorandums of Understanding (MOUs) that are
outside the national collective bargaining agreement with controllers.
Many serve legitimate purposes, such as providing incentives to
controllers for reducing operational errors. However, we found some
MOUs that added millions of dollars to personnel costs. For example:

One MOU for a new free flight tool controller software
system (URET) gave each controller a $500 cash award and a 24-
hour time-off award for meeting certain training milestones on
the new system. At 6 facilities alone, this resulted in FAA
incurring approximately $1.3 million in individual cash awards
and 62,500 hours in time off FAA and NATCA are now negotiating
for further implementation of URET at the next 14 locations.

At Philadelphia, there was a verbal agreement that gave each
employee $1,000 in cash and 3 days off in connection with
deployment of the new Standard Terminal Automation Replacement
System (STARS). Currently, STARS is scheduled to be deployed to
more than 170 terminal facilities, and it is unclear if FAA
will enter into similar agreements at other locations.

Question 2. What changes does the agency need to make to improve
its MOU negotiating process?
Answer. FAA needs to put controls in place over its process for
negotiating, approving, and implementing MOUs. For example, we found
FAA has:

no standard guidance for negotiating, implementing, and
signing MOUs;

broad authority among managers to negotiate MOUs and commit
the agency;

no requirement for including labor relations specialists in
negotiations;

no systems for tracking the extent of signed MOUs; and

no requirement for estimating potential cost impacts prior
to signing the agreement.

In January 2003, we briefed the FAA Administrator on our concerns
regarding FAA's process for negotiating, approving and implementing
MOUs. To the agency's credit, FAA has taken steps to address our
concerns. For example, FAA has implemented new procedures for MOUs,
which includes limiting approval authority and requiring that both the
Human Resources and Budget divisions review proposed MOUs before they
are signed by management. FAA is also in the process of identifying
those MOUs that are problematic and costly arid has begun
correspondence with NATCA to reopen several agreements. These actions
are clearly steps in the right direction.

Question 3. What suggestion have you made to the FAA regarding its
handling and approving of MOUs?
Answer. In our January briefmg to Administrator Blakey, we
recommended several actions FAA needed to take to correct the
deficiencies in the agency's process for negotiating, implementing, and
approving MOUs. For example, we recommend that FAA establish a team of
labor relations specialists to review all MOUs and identify costly or
problematic agreements that needed to be rescinded or renegotiated. We
also recommended that FAA develop and distribute standardized guidance
over the MOU process including designating authority for negotiating
and approving MOUs, implementing a system for tracking MOUs, requiring
that cost estimates be prepared for all proposed MOUs, and requiring
that proposed MOUs be reviewed by FAA Labor Relations.
Since we briefed the Administrator, FAA has taken actions to bring
the MOU process under control. In May 2003, FAA issued an agency order
making significant changes to FAA's policies and procedures over the
MOU process. For example, the newly adopted procedures in the order
require that:

a labor management relations specialist lead national and
regional negotiations;

proposed MOUs are analyzed for affordability relative to
anticipated funding levels;

MOUs contain mandatory provisions, such as specific
expiration dates; and

copies of all local, regional, and national agreements be
sent to the Director and Employee Relations for inclusion in a
national database.

In our opinion, the new procedures, if properly implemented, will
provide FAA with much needed controls over the MOU process.

Question 4. I know that Administrator Garvey made some
recommendations with respect to the COO and the Air Traffic Control
Subcommittee. Have you reviewed them? Do they make sense?
Answer. We have reviewed Administrator Garvey's recommendations,
and in general believe that the recommendations will improve the
functions of the Air Traffic Control (ATC) Subcommittee and the COO
office. Of particular benefit would be the fact that the ATC
Subcommittee would be given greater autonomy in making decisions
regarding Air Traffic Control, and the fact that the Administrator
would be designated as the permanent Chairman of the Subcommittee.

Question 5. What can be done to further improve the operational
error rate and reduce runway incursions?
Answer. To further improve the operational error rate, FAA must
ensure that air traffic controllers are properly trained, especially
those controllers who have multiple errors or errors that pose a
moderate or high safety risk. In our April 2003 report, we also
recommended that FAA (1) improve its oversight of facilities and
regions that continue to have a high number of operational errors and
(2) monitor the Controller-in-Charge (CIC) Program on a facility basis
and perform detailed analyses of those facilities that show increases
in operational errors while CICs on duty.
To reduce runway incursions further, FAA must continue to identify
and implement technologies to aid pilots and to prevent runway
incursions at high risk airports. As we recommended in our Apnl 2003
report, FAA needs to move expeditiously to: (1) advance low-cost
technologies to high risk airports; and (2) expedite technologies, such
as in-cockpit surface moving map displays, to aid pilots in reducing
runway incursions. FAA also needs to implement recommendations from its
recently completed technological reviews of 13 problem airports and
conduct technological reviews at 4 additional airports.

Question 6. Is the Operational Evolution Plan still a valid
blueprint for the FAA to increase capacity? How much of it needs to be
revisited?
Answer. FAA's Operational Evolution Plan (OEP) was a good plan
because it provided focus on capacity enhancing initiatives (such as
new runways, airspace changes, and new technologies), and addressed key
problem areas, such as airport throughput. However, much has changed
since the Plan was introduced; major network carriers are in fmancial
distress and projected Trust Fund revenues will be much less than
previously forecasted. The Plan is still valid but given the current
environment, FAA needs to set priorities and link the Plan with the
agency's budget. FAA also needs to address uncertainty with respect to
how quickly airspace users will equip with new technologies in the Plan
(estimated at $11 billion).
FAA has efforts underway to revise the OEP but the extent of change
to the Plan in terms of cost and schedule of key elements is not yet
clear. FAA and industry officials told us that considerable benefits
can be obtained through airspace changes, new air traffic procedures,
and taking advantage of systems currently onboard aircraft--all which
do not require airspace users to equip with new systems. This
represents an important shift in the Plan. Senior FAA officials told us
that hard decisions about funding OEP initiatives and related major
acquisitions need to be made. This is because some large-scale, billion
dollar acquisitions are not in the Plan but critical for its success.
For example, En Route Automation Modernization program (revamping
hardware and software at all FAA facilities that control high altitude
traffic) is not in the Plan but needs to be considered when revising
the OEP. FAA expects to publish a revised OEP this December.

Question 7. Funding sources are clearly going to be a concern as we
reauthorize. What options should we consider to provide appropriate
funding for aviation?
Answer. This Reauthorization has to be viewed against the backdrop
of the decline in air travel, and the significant decrease in tax
revenue coming into the Trust Fund. Current estimates show that over
the next 4 years (FY 2004 through FY 2007) Aviation Trust Fund tax
revenues are expected to be about $10 billion less than projections
made in April 2001.
Within that context, the options are very limited, and a key focus
for FAA will have to be containing costs in all its accounts. However,
a particular emphasis must be directed towards containing operating
costs. FAA's operating budget, which is 82 percent payroll costs, has
increased from $4.6 billion in FY 1996 to $7.6 billion in FY 2004--an
increase of over 65 percent. Given the decline in Aviation Trust Fund
revenues and the financial situation of the airlines, a continuation of
this growth can no longer be sustained.
In terms of the Airport Improvement Program, a major issue for
airports will be funding the next phase of explosives detection systems
(EDS) integration. Thus far, nearly all EDS equipment has been lobby-
installed. The Transportation Security Administration's (TSA) planned
next step (integrating the EDS equipment into airport baggage systems)
is by far the most costly aspect of full implementation. The task will
not be to simply move the machines from lobbies to baggage handling
facilities, but will require major facility modifications. We have seen
estimates that put the costs of those efforts at over $3 billion, and
this is an almost immediate issue facing the airports.
A key question is who will pay for those costs and how. In FY 2002,
airports used over $561 million in AIP funds for security-related
projects. In contrast, only about $56 million in AIP funds were used
for security in FY 2001. Continuing to use a significant portion of AIP
funds and passenger facility charges (PFCs) on security projects will
have an impact on airports' abilities to fund capacity projects.
One option Congress may wish to consider is establishing a ``set
aside'' within the Aviation Trust Fund designated just for airport
security-related projects; the costs of which could be absorbed by re-
directing a portion of the passenger security fee into the Trust Fund.

Question 8. Your testimony states that despite some progress made
by the FAA in improving its procurement process, cost over-runs and
schedule delays are still not uncommon in major modernization programs.
What factors contribute to this problem? Why are some programs, like
Free Flight, successful while others are not?
Answer. A number of factors contribute to cost growth, schedule
slips, and performance shortfalls with modernization projects. These
include: underestimating the complexity of large and complex software-
intensive acquisitions, unstable requirements, poor cost estimating,
concurrent development and production efforts, unresolved human factor
issues (for both controllers and pilots) and poor contract oversight.
In addition, new satellite navigation systems (such as the Wide Area
Augmentation System) have been impacted by complex problems in
certifying systems as safe for pilots to use. It is important to note
that certifying new communications, navigation, and surveillance
systems represent a new way of doing business for FAA because both air
and ground elements of new systems need to be assessed in terms of
safety.
FAA's Free Flight Phase 1 program was successful in part because it
was broken up into smaller projects of limited size and scope, and used
a ``build a little, test a little'' approach to fielding new systems.
For example, new automated controller tools, such as the Traffic
Management Advisor, were deployed at a limited number of sites Further,
FAA made the use of the new tools ``voluntary'' for controllers. Also,
FAA postponed decisions about certifying Free Flight Phase 1 systems
until more experience was gained in how the technologies would actually
be used on a daily basis. In contrast, major programs such as Standard
Terminal Automation Replacement System and the Wide Area Augmentation
System are large, technically complex programs that are required to be
fully certified before they are deployed. We also note that the both
the Standard Terminal Automation Replacement System and Wide Area
Augmentation System consisted of concurrent development and production
phases, which increases cost and schedule risk.

Question 9. Your testimony talks about the need for FAA to become a
``performance-based'' organization. What does that mean?
Answer. In 1996, FAA was given two powerful tools--personnel reform
and acquisition reform. FAA was also directed to establish a cost
accounting system so that it would know, at the facility level, where
it was spending money and for what. The expectation was that by
relieving the agency from Government rules and establishing a cost
accounting system, FAA would become more ``performance based'' and
operate more like a business. That is, services would be provided to
users cost effectively and air traffic control modernization programs
would be delivered approximately on time and within budget. In the
Aviation Investment and Reform Act for the 21st Century (AIR-21),
Congress took additional steps to make FAA more business-like by
reorganizing Air Traffic Control's management structure and
establishing a Chief Operating Officer position.

Question 10. Some parts of the airline industry have recommended a
``tax holiday'' for taxes they pay into the Aviation Trust Fund. What
would be the effect of such a ``holiday'' on the FAA' s programs?
Answer. Our understanding is that the industry wants the government
to suspend taxes that are collected into the Airport and Airway Trust
Fund. These taxes, which include the passenger ticket tax, segment tax,
and commercial fuel tax, pay for all of s annual modernization and
capacity-enhancing budget, and most of FAA's operating budget. If these
taxes are suspended, it would significantly alter the way FAA is
funded.
For example, the Trust Fund balance is projected to be
approximately $4.6 billion by the end of FY 2003. If a tax holiday was
granted at the beginning of FY 2004, the remaining Trust Fund balance
would cover only 33 percent of FAA's FY 2004 budget, with the rest
being paid out of the General Fund. In addition, future FAA budgets,
which will be in excess of $14 billion, would be completely funded by
the General Fund, which is already facing significant challenges.

Question 11. Mr. Mead, in the Administration's budget, the
President has proposed spending down the uncommitted balance in the
Airport and Airway Trust Fund. Do you believe this is prudent? You have
expressed concern about the growing general fund component of the FAA
budget? Do you agree with this approach?
Answer. Given the current budgetary and economic demands currently
facing the Federal Government, spending the uncommitted balance of the
Airport and Airway Trust Fundfor aviation-related needs makes sense.
However, two caveats to this approach must be considered. First, the
funding mechanisms contained in the Administration's proposal are
contingent upon the Trust Fund meeting revenue projections. The current
Trust Fund projections were made prior to the war in Iraq and the SARS
outbreak, and there are still significant uncertainties of when air
travel will rebound. If revenue projections are not met, it will simply
mean that more of FAA's operating budget will have to be fmanced from
the General Fund. Second, the Administration's proposal is obviously
only a short-term solution to FAA's funding dilemma. Clearly, the long-
term solution is to bring FAA' s operating costs into line with the tax
revenues that fund it.