[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

                              ----------                              
                                                                   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

                              ----------                              


                       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.

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's Operational Evolution Plan 
(OEP) is the general blueprint for enhancing capacity. It was a good 
plan, but it has been impacted by September 11th and the financial 
condition of the airlines. Given the slowdown in travel, now is a good 
time to determine exactly what is needed.
    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.

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.

        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 ETS 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 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.

    (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 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 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.

   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.

                                  
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