[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
             KEEPING U.S. AVIATION MANUFACTURING COMPETITIVE

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

                                (109-59)

                             FIELD HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                                AVIATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                   MARCH 22, 2006 (WITCHITA, KANSAS)

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure




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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                      DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-    JAMES L. OBERSTAR, Minnesota
Chair                                NICK J. RAHALL, II, West Virginia
SHERWOOD L. BOEHLERT, New York       PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee       ELEANOR HOLMES NORTON, District of 
WAYNE T. GILCHREST, Maryland         Columbia
JOHN L. MICA, Florida                JERROLD NADLER, New York
PETER HOEKSTRA, Michigan             CORRINE BROWN, Florida
VERNON J. EHLERS, Michigan           BOB FILNER, California
SPENCER BACHUS, Alabama              EDDIE BERNICE JOHNSON, Texas
STEVEN C. LaTOURETTE, Ohio           GENE TAYLOR, Mississippi
SUE W. KELLY, New York               JUANITA MILLENDER-McDONALD, 
RICHARD H. BAKER, Louisiana          California
ROBERT W. NEY, Ohio                  ELIJAH E. CUMMINGS, Maryland
FRANK A. LoBIONDO, New Jersey        EARL BLUMENAUER, Oregon
JERRY MORAN, Kansas                  ELLEN O. TAUSCHER, California
GARY G. MILLER, California           BILL PASCRELL, Jr., New Jersey
ROBIN HAYES, North Carolina          LEONARD L. BOSWELL, Iowa
ROB SIMMONS, Connecticut             TIM HOLDEN, Pennsylvania
HENRY E. BROWN, Jr., South Carolina  BRIAN BAIRD, Washington
TIMOTHY V. JOHNSON, Illinois         SHELLEY BERKLEY, Nevada
TODD RUSSELL PLATTS, Pennsylvania    JIM MATHESON, Utah
SAM GRAVES, Missouri                 MICHAEL M. HONDA, California
MARK R. KENNEDY, Minnesota           RICK LARSEN, Washington
BILL SHUSTER, Pennsylvania           MICHAEL E. CAPUANO, Massachusetts
JOHN BOOZMAN, Arkansas               ANTHONY D. WEINER, New York
JIM GERLACH, Pennsylvania            JULIA CARSON, Indiana
MARIO DIAZ-BALART, Florida           TIMOTHY H. BISHOP, New York
JON C. PORTER, Nevada                MICHAEL H. MICHAUD, Maine
TOM OSBORNE, Nebraska                LINCOLN DAVIS, Tennessee
KENNY MARCHANT, Texas                BEN CHANDLER, Kentucky
MICHAEL E. SODREL, Indiana           BRIAN HIGGINS, New York
CHARLES W. DENT, Pennsylvania        RUSS CARNAHAN, Missouri
TED POE, Texas                       ALLYSON Y. SCHWARTZ, Pennsylvania
DAVID G. REICHERT, Washington        JOHN T. SALAZAR, Colorado
CONNIE MACK, Florida                 JOHN BARROW, Georgia
JOHN R. `RANDY' KUHL, Jr., New York
LUIS G. FORTUNO, Puerto Rico
LYNN A. WESTMORELAND, Georgia
CHARLES W. BOUSTANY, Jr., Louisiana
JEAN SCHMIDT, Ohio

                                  (ii)



                        SUBCOMMITTEE ON AVIATION

                    JOHN L. MICA, Florida, Chairman

THOMAS E. PETRI, Wisconsin           JERRY F. COSTELLO, Illinois
HOWARD COBLE, North Carolina         LEONARD L. BOSWELL, Iowa
JOHN J. DUNCAN, Jr., Tennessee       PETER A. DeFAZIO, Oregon
VERNON J. EHLERS, Michigan           ELEANOR HOLMES NORTON, District of 
SPENCER BACHUS, Alabama              Columbia
SUE W. KELLY, New York               CORRINE BROWN, Florida
RICHARD H. BAKER, Louisiana          EDDIE BERNICE JOHNSON, Texas
ROBERT W. NEY, Ohio                  JUANITA MILLENDER-McDONALD, 
FRANK A. LoBIONDO, New Jersey        California
JERRY MORAN, Kansas                  ELLEN O. TAUSCHER, California
ROBIN HAYES, North Carolina          BILL PASCRELL, JR., New Jersey
HENRY E. BROWN, Jr., South Carolina  TIM HOLDEN, Pennsylvania
TIMOTHY V. JOHNSON, Illinois         SHELLEY BERKLEY, Nevada
SAM GRAVES, Missouri                 JIM MATHESON, Utah
MARK R. KENNEDY, Minnesota           MICHAEL M. HONDA, California
JOHN BOOZMAN, Arkansas               RICK LARSEN, Washington
JIM GERLACH, Pennsylvania            MICHAEL E. CAPUANO, Massachusetts
MARIO DIAZ-BALART, Florida           ANTHONY D. WEINER, New York
JON C. PORTER, Nevada                BEN CHANDLER, Kentucky
KENNY MARCHANT, Texas                RUSS CARNAHAN, Missouri
CHARLES W. DENT, Pennsylvania        JOHN T. SALAZAR, Colorado
TED POE, Texas                       NICK J. RAHALL II, West Virginia
JOHN R. `RANDY' KUHL, Jr., New       BOB FILNER, California
York, Vice-Chair                     JAMES L. OBERSTAR, Minnesota
LYNN A. WESTMORELAND, Georgia          (Ex Officio)
DON YOUNG, Alaska
  (Ex Officio)

                                 (iii)

                                CONTENTS

                               TESTIMONY

                                                                   Page
 Bunce, Peter J., President & CEO, General Aviation Manufacturers 
  Association....................................................     7
 Greer, William W., Vice President and General Manager, Airbus 
  North America Engineering, Inc.................................    26
 Harrah, Janet, Director, Center for Economic Development and 
  Business Research, Wichita State University....................     6
 Hawley, Kevin, President, Aerospace Systems and Technologies, 
  Inc............................................................    26
 Mullins, Craig S., General Manager, Lyons Manufacturing.........    26
 Pelton, Jack J., President, Cessna Aircraft Company.............     7
 Schuster, James E., Chairman & CEO, Raytheon Aircraft Company...     7
 Turner, Jeffrey L., President and CEO, Spirit Aerosystems, Ins..    26

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

 Bunce, Peter J..................................................    42
 Greer, William W................................................    50
 Harrah, Janet...................................................    57
 Hawley, Kevin...................................................    62
 Mullins, Craig S................................................    66
 Pelton, Jack J..................................................    69
 Schuster, James E...............................................    75
 Turner, Jeffrey L...............................................    82


             KEEPING U.S. AVIATION MANUFACTURING COMPETITIVE

                              ----------                              


                       Wednesday, March 22, 2006

        House of Representatives, Subcommittee on Aviation, 
            Committee on Transportation and Infrastructure, 
            Washington, D.C.
    The subcommittee met, pursuant to call, at 10:00 a.m., at 
the National Institute for Aviation Research, Wichita State 
University, 1845 Fairmount, NIAR Room 307-309, Wichita, Kansas, 
Hon. John L. Mica [chairman of the subcommittee] Presiding.
    Mr. Mica. Good morning. I would like to welcome you to the 
hearing of the House Aviation Subcommittee. This is an appeal 
hearing of the Committee on Transportation and Infrastructure 
of the United States Congress, and we are pleased to be here in 
Wichita, Kansas, and also at Wichita State. It may be one of 
their first congressional hearings to be held here, so somewhat 
of a historical occasion, and on a very important topic, and 
the title of today's hearing is "Keeping the United States 
Aviation Manufacturing Competitive."
    I am Congressman John Mica from Florida. I am pleased to 
chair this subcommittee, and also pleased to have with us today 
my colleagues on the Transportation and Infrastructure 
Committee of Congress, and we are fortunate to be in the 
district of a very good friend, also a committee member, 
someone who takes American competitiveness very seriously, and 
also a member of the powerful House of Appropriations 
Committee, Todd Tiahrt. So thank you for hosting us today.
    Then I thought Jerry Moran was right around the corner 
across the river. Little did I know that Hays, I guess it is, 
is a 3-hour-plus drive from here. But we are delighted to also 
be in his State, and not too close, but fairly close to his 
district, I guess, as far as the crow flies in Kansas.
    Jerry Moran, who I think many of you know, is not only on 
the T&I committee, but very active on the Agriculture Committee 
and the Veterans Affairs Committee, really a senior of the 
members that we have.
    Then probably one of the most distinguished, at least from 
an intellectual and science standpoint, also age, Vern Ehlers 
from Michigan with us. He is, of course, on the T&I Committee, 
a leader on the Science Committee, and he now--I am privileged 
to serve with him, and he has taken over as Chair, challenging 
time for the Congress and the country, of House Administration. 
So we are delighted to have these distinguished members, and I 
will yield to them in just a minute.
    The order of business and proceeding today is going to be, 
first, opening statements by members. I will give my opening 
statement in just a moment. Then we have two--we have assembled 
two expert panels of witnesses. We will hear from them. And I 
would also--I will also entertain and pass a motion without--
without objection and unanimous consent that the record be left 
open for a period of 2 weeks.
    Now, it is impossible in this proceeding to have everyone 
participate who is from the aviation community here in Kansas 
or across the country to testify on this important issue. But 
we certainly welcome--and any request through the Chair or any 
of the members of the panel here, submission of additional 
testimony which will be made part of the official record of our 
proceedings today. So, without objection, for 2 weeks the 
record will be open to entertain and include those comments and 
testimony.
    With that, I think what we will do is go ahead, start right 
off. I have got some comments to open with, and then I will 
yield to other members.
    Again, I want to thank not only Wichita State University, 
but also the National Institute for Aviation Research for 
hosting this meeting of the House Aviation Subcommittee. We had 
a few minutes this morning to also tour some of the facilities 
and look at some of the programs here at the Institute for 
Aviation Research--it is very impressive--and I am sure this 
community, the State, and country can be proud of their work. 
So we thank you for your efforts and also, again, Wichita State 
for hosting us today.
    This is, in fact, a very important hearing, not only for 
Congress, but it is also an opportunity for all of us to come 
together that are interested in keeping the United States 
aviation manufacturing industry competitive, to come together, 
discuss some very important issues and how we stay ahead of the 
curve.
    After the difficult period of 2001 and the terrorist attack 
on our Nation's aviation system, America's aviation sector 
fortunately today is on the rebound, and sometimes I have some 
bad news to report, but actually, there is some good news 
today. In 2005, shipments of large civil aircraft by the U.S. 
civil aviation industry increased both in number and also in 
value. Despite a slight increase in commercial jetliner 
production, 290 aircraft, an increase of just seven from 2004, 
transport revenues did increase 7 percent to $22 billion. 
General aviation aircraft shipments--and it was good news for 
this part of the country--soared with 604 more deliveries to a 
record $8.5 billion, and civil helicopter sales surged from 
$515 million to a record $750 million. Taken together, U.S. 
civil aviation aircraft sales, which also include engines and 
parts, increased some 20 percent in 2005 to $39 billion. The 
U.S. aviation industry is forecasting--and that's a very 
optimistic forecast--but an even stronger year for 2006 with 
commercial jetliner sales increasing from 290 to somewhere 
around 400.
    Our aviation industry has the highest net trade surplus of 
all of our manufactured goods and has consistently recorded 
trade surpluses even as the overall U.S. trade balance and 
manufactured project has widened. Last year when the United 
States experienced a record trade deficit, the aviation 
industry recorded a trading surplus of some $37 billion. U.S. 
aviation exports sustained over 600,000 high-wage, high-tech 
jobs in the United States.
    Export sales help support not only the airplane 
manufacturers themselves, but many other companies, including 
small- and medium-sized enterprises. And we saw many of them as 
I drove in. You can see an array of medium- and small-sized 
businesses here in Wichita, Kansas.
    To continue growth in the aviation manufacturing sector, 
our Federal Government must have--must adopt both policies and 
support programs that allow American aviation industry to 
compete in an increasingly competitive and expanding global 
market, and that is going to be part of our discussion today, 
how we do that. Access to foreign markets is crucial for United 
States manufacturers of civil aviation and parts of civil 
aircraft, including engine manufacturers. This is the largest 
segment of the U.S. aerospace manufacturing industry accounting 
for about one-third of the total aerospace shipments measured 
by value. About two-thirds of all the large civil aircraft 
produced in the United States are shipped to customers.
    Now, what I think is very important today, and I look 
forward to some testimony on some of these issues: tax policy, 
product certification, competitive trade negotiations and 
finance opportunities, all that give the United States--that 
will give the United States' aviation manufacturers a level 
playing field. And we know that these are some of the most 
important challenges that we face, at least as our Federal 
responsibility.
    One of the most important responsibilities of--also of this 
subcommittee, is to maintain fair international marketplace and 
competition for United States companies and their employees who 
manufacture aircraft and aviation industry parts. I know the 
Bush administration and other Members of Congress, from both 
sides of the aisle, share my views on this issue.
    Today I hope to hear from leaders in American aviation, in 
the very heart of our Nation's aviation manufacturing capital, 
and I hope to hear from this capital here in the Midwest 
recommendations that we can take back to America's political 
capital in Washington and hopefully act upon. So I very much 
look forward to the proceedings today and hearing from these 
witnesses and others who will submit commentary and 
recommendations to the subcommittee. And we look forward to see 
how we can further expand this very critical sector of our 
Nation's economy.
    With those opening comments, again, I am pleased to be 
here. Let me--we won't do this necessarily in order of 
seniority, but I want to yield, first, to the gentlemen who is 
hosting U.S. today, Mr. Tiahrt. You are recognized.
    Mr. Tiahrt. Thank you, Mr. Chairman, and thank you for 
being here. I can't tell if this thing is on or not. I guess it 
is. Can you hear me in the back? Okay.
    First of all, let me thank you for coming to the air 
capital of the world. This is a great honor to have the 
chairman of the Aviation Subcommittee here and members of the 
Transportation Committee, and the chairman of the Government 
Reform Committee, Vern Ehlers, also a leading scientist in 
Congress--the leading scientist in Congress. You know, if you 
look up at the makeup of the people who are serving in the 
United States House of Representatives, I think there are only 
a couple of them that come from the scientific ranks like Vern 
Ehlers. So to have him here as part of this hearing process, I 
think, is invaluable. He brings a lot to the table, a lot of 
unique perspective.
    This is an industry that has a great advantage for the 
United States economy in that it is a trade plus as far as the 
surplus is concerned--as was pointed out by the chairman's 
opening statements, $37 billion net last year. When you look at 
a $7 trillion trade deficit, we have to have more industries 
function as the aviation industry does, producing solid 
products from solid people, and making a big advance in our 
economy and our trade around the world.
    Yet, this is a vulnerable industry. It is vulnerable to 
outside economic influence like the terrorist attacks we saw on 
September 11, 2001. Shortly following that, 25,000 aviation 
workers were laid off. We are very vulnerable to glimpse our 
economy. We are also vulnerable to tax policy. This industry is 
vulnerable to tax policy in that if we have positive 
adjustments in the Tax Code like accelerated depreciation, we 
can take an industry out of a slump and give it a good start to 
get back on its feet.
    But yet, if we change the dynamics of how people account 
for costs in the industry, for example, having to account for 
passengers on a corporate jet, and an inordinate amount of 
regulation that goes along with that, we can have a devastating 
effect on sales. So it is vulnerable in that respect.
    And in trade policy it is also vulnerable, and I think 
every time we develop new trade policy and get another trade 
agreement like we did with DR CAFTA or with NAFTA, we open up 
markets for the aviation industry. And it gives them an 
advantage.
    If you look at other countries like Brazil that make Embry 
Air--where Embry Air is located, if they have a trade agreement 
with a country that America does not have a trade disagreement 
with, it can make as much as 15 percent difference in the 
bottom line or on the bid for an aircraft. So it is a huge 
advantage when we have effective trade policy that we not only 
get in writing, but also enforce. So I think when we look at 
our economy, we look specifically at the aircraft industry, we 
need to take into account the vulnerabilities so that we can 
have a strong footing to be a big part of our future economy.
    One last thing I would like to bring up before we go into 
our questioning, Mr. Chairman, is that the government 
regulatory policy can also have a big impact on this industry. 
We have a representative here from FAA certification, and when 
that agency is underfunded, it can delay the response time to 
get new products in the market. When we have an over-regulation 
burden, perhaps the way we collect revenues for the Federal 
Government, we can also have a big impact on this fragile--
somewhat fragile industry.
    So as we move forward to prepare for the next economy, I 
hope we look not only at the great advantage that we bring 
through employing people and through providing wonderful 
products, but we also look at how the Federal Government can be 
at a disadvantage for this industry that, at times, has been 
very fragile.
    So, once again, thank you for being here. I thank Mr. Moran 
for being here as well, coming on a long drive this morning, 
and I am looking forward to the testimony and the questions.
    Thank you, Mr. Chairman.
    Mr. Mica. Thank you. And again, we appreciate your 
hospitality.
    We are also in the backyard or pretty close to the backyard 
of the other member from Kansas, who is an outstanding member, 
and I want to recognize him at this time, Jerry Moran.
    Mr. Moran. Mr. Chairman, thank you very much. Talk about a 
long distance, it may be 3 hours to my home, but the district 
is about 10 minutes from here, so we cover a good portion, and 
we are delighted to have you here--the district surrounds 
Wichita to the east, north, and the west. So we are delighted 
to have you here, and Mr. Ehlers here.
    Congressman Tiahrt, obviously, these are issues that matter 
greatly to him and the people of his district, and he is a 
member of the Transportation Subcommittee of the Appropriations 
Committee and has been an advocate on aviation issues for as 
long as I have known Todd; and it is a real honor to be in his 
district with him. And he and I welcome you and Mr. Ehlers to 
Wichita.
    This subcommittee was in Wichita, at my request, several 
years ago looking at several issues related to Mid-Continent 
Airport and airline service, and we are delighted to have you 
back.
    I am delighted to be on the campus of Wichita State 
University and to see the National Institute of Aviation 
Research, which we know is world renowned, but delighted also 
to be here in a week in which Wichita State University is--the 
Shockers are playing in the Sweet 16. It is an exciting moment 
not only for this campus, but for all of us in Kansas, and we 
wish them well.
    I have, with your permission, invited businesses in the 
First Congressional District of Kansas, the one I represent, to 
join us today, and we will hear how important aviation 
manufacturing is to small businesses in Hutchinson and Salina 
as well as Lyons, Kansas, and also would point out the 
important role that Mr. Schuster's company, Raytheon, plays in 
Salina, Kansas, a significant employer in my district.
    So we look forward to working with you. I look forward to 
hearing the testimony.
    Kansas is clearly the aviation State. There is no State in 
which these jobs matter more. Forty-five thousand jobs in 
Kansas are related directly to this industry, a $417 million 
payroll. So we appreciate your interest in the competitiveness 
of this industry, and know that it matters greatly to people of 
our State. We are delighted to welcome you to Kansas and to 
Wichita.
    Thank you, Mr. Chairman.
    Mr. Mica. Thank you. And now we will recognize, waiting 
patiently, the gentleman from Michigan, Mr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman. It is a pleasure to be 
here, and I certainly enjoy Wichita. It was good to come in 
last night, even though the hotel and people spoke English 
without an accent. I was born not too far from here, so it is 
good to encounter Midwestern people again, hard-working and 
honest as the day is long. They are well concerned about the 
name of the basketball team. I had to explain to an Easterner 
this morning that they were Shockers, not because they played 
in New York or something like that, but it had something to do 
with wheat.
    At any rate, as I think Todd mentioned, the air capital of 
the world, and it is certainly better to be in the air capital 
of the world than the hot air capital of the world in which we 
spend most of our time. I do love aviation. I always have since 
I was a child. I love airplanes. I love pilots. I love the 
whole business, which sometimes complicates my judgment on 
these issues. But I think it is an essential industry, and the 
problems, as I see it, of the industry--and I will be very 
interested in whatever testimony you have to offer because I am 
sure I don't have as good a picture as you do, but I think 
competitiveness is a major aspect.
    I think Todd mentioned trade agreements. That is a very 
important part of it. Another very important part I have been 
working on very hard is improving our educational system, 
particularly in science education so that we will have an 
adequate supply of scientists and engineers for the future, 
because we are certainly not doing a good job of that now.
    Money is a problem, money or sufficient funds to run the 
FAA. They are being slowly starved in the government ranks. The 
airlines are starving, to a certain extent starving themselves, 
but they are also a victim of circumstance. And just the 
general financial problems, particularly in manufacturing as 
well. It is a tough business out there. And I worry about the 
future, some aspects of the industry from that standpoint.
    Capacity is a huge problem in developing; it is going to be 
tougher and tougher to find anyplace to build airports, but 
that is only a small part of it. A major capacity problem, I 
think, comes from the increase in the number of airplanes in 
the future, particularly if we get--if all the predictions 
about air taxis come true. We are going to have capacity 
problems at airports, but even more importantly, capacity 
problems in aerospace and in air traffic control, and we have 
got a lot of work to do there. If we keep on starving the FAA, 
they are not going to have the money to do the research and 
develop the kind of air traffic control system we are going to 
need.
    Another issue facing us is fuel cost. That is not going to 
return--you are not going to get to low-cost fuel again, and 
the aviation industry is the only industry that does not have 
an alternative. They have to burn petroleum-based products 
because that is the only energy source, at this point, that has 
the energy density you need for air travel, something low 
weight, but with high energy content. Whereas we can build 
hybrid cars, none of that is going to work for airplanes.
    So we have to--I think it is very important for this Nation 
to get off the petroleum kick; otherwise, 15 years from now 
there will--the prices will be so outrageous for petroleum that 
no one will be able to fly anymore.
    And the final problem you have is liability. I was very 
pleased the first year I got to Congress to participate in 
changing the liability law regarding aircraft. I fought very 
hard to get it reduced to 9 years; the most we could do is get 
it reduced to a few years below what had been proposed. But it 
is still a major issue and, I think, unreasonable standards 
largely because the public does not understand aviation, does 
not understand the aircraft and the huge awards that were given 
for things, which I thought were clearly pilot error instead of 
mechanical failure.
    We solved part of the problem. At least we have the 
industry going again. But I still think it is far too long and 
leaves you in far too much danger. I think we have to address 
that as well or else develop tort reform which will limit 
punitive damages, et cetera.
    So thank you very much, Mr. Chairman. I appreciate your 
having the hearing here. I was very pleased to be able to come 
to the center of certainly small- and mid-sized manufacturing 
in the country, and I look forward to touring the facility 
afterwards as well. Thank you.
    Mr. Mica. I thank the gentleman from Michigan, and the 
gentlemen from Kansas for their opening comments, and also for 
their participation in the hearing today.
    And now we will pay our attention to the two panels of 
witnesses that we have before us. And the first panel consists 
of Janet Harrah, Director of the Center for Economic 
Development and Business Research at Wichita State University; 
Jack Pelton, who is Chairman, President and CEO of Cessna 
Aircraft; James Schuster, Chairman and CEO of Raytheon Aircraft 
Company; and Peter Bunce, President and CEO of the General 
Aviation Manufacturers Association. I would like to welcome our 
witnesses.
    As is customary--well, we are not going to run a clock 
today, but we ask you to--to summarize your remarks, and if you 
have any additional testimony, data, information you would like 
to have made part of today's record and proceeding, request 
that through the Chair.

   TESTIMONY OF JANET HARRAH, DIRECTOR, CENTER FOR ECONOMIC 
 DEVELOPMENT AND BUSINESS RESEARCH, WICHITA STATE UNIVERSITY; 
 JACK J. PELTON, PRESIDENT, CESSNA AIRCRAFT COMPANY; JAMES E. 
SCHUSTER, CHAIRMAN & CEO, RAYTHEON AIRCRAFT COMPANY; AND PETER 
   J. BUNCE, PRESIDENT & CEO, GENERAL AVIATION MANUFACTURERS 
                          ASSOCIATION

    Mr. Mica. So, with that, we will turn our attention to our 
first witness, and I shouldn't welcome you because we are here 
at your university, but Janet Harrah, Director of Center for 
Economic Development and Business Research, welcome and you are 
recognized.
    Ms. Harrah. Mr. Chairman and members of the subcommittee, 
it is a pleasure to have you here at Wichita State University. 
I have been asked to talk about the economic importance of 
aviation manufacturing to the overall U.S. economy.
    Is that better?
    Mr. Mica. Better.
    Ms. Harrah. Okay.
    Aviation manufacturing is a vital sector of the U.S. 
economy. It consists of companies engaged in the manufacture of 
aircraft, aircraft parts and engines as well as guided missile 
and space vehicles. It also includes the overhaul and 
rebuilding and conversion aircraft.
    Aircraft produced in the United States are very diverse, 
ranging from fixed-wing planes and helicopters to business jets 
and commercial airliners. The industry has a wide footprint as 
well. While States such as California, Washington, Texas, 
Kansas, and Arizona account for the largest number of aerospace 
jobs, nearly every State has employment in the aviation 
manufacturing sector.
    When you look at the overall competitive environment, it is 
indeed fierce. A few large companies dominate certain sectors 
such as the manufacture of engines. For example, together, 
General Electric and Pratt & Whitney account for about 80 
percent of engine revenues. On the other hand, there are a 
large number of companies producing aircraft parts.
    Profitability depends on efficient and timely production. 
Small companies typically compete by specializing in high-end, 
low-volume parts or high production of low-priced commodity 
parts. Large companies having economies of scale in production 
leverage their volume in negotiating with suppliers and also 
leverage their leeway pricing to customers. Consequently, 
revenues per employee are usually higher for large companies 
compared to smaller companies.
    The size of the industry is impressive as well. In 2004 the 
value added for the industry totaled $95 billion. The value of 
shipments totaled 165 billion, and the exports for the industry 
totaled 57 billion or nearly 7 percent of total U.S. exports.
    In 2005 more than 606,000 Americans were employed in the 
aviation manufacturing industry directly. Companies engaged in 
the manufacture and assembly of complete aircraft accounted for 
the largest percentage of jobs, followed by primarily engaging 
in manufacturing search and detection systems. Employment 
projections indicate that aircraft and aircraft parts 
manufacturing employment will increase about 8 percent over the 
next decade, adding more than 36,000 jobs. Total employment for 
all industries is expected to increase about 15 percent during 
the same 10-year period.
    The drop in air travel and severe financial problems of 
many U.S. airlines following 9/11 led to drastic reductions in 
commercial aircraft orders. This, in turn, resulted in 
significant employment reductions in the manufacturing sector 
in recent years. However, rising orders are expected over the 
next decade due to increases in air traffic and the need to 
replace aging aircraft.
    The outlook for the military aircraft and missiles portion 
of the industry is also better. Concern for the Nation's 
security has increased the need for military aircraft and 
military aerospace equipment.
    A growing concern for the industry is the rising need to 
have to hire replacement workers. Many engineers who entered 
the industry in the 1960s are nearing retirement. The same is 
true for production workers. For example, at many of our local 
plants here in Wichita, 50 is a median age of our production 
workers.
    In 2004, the industry employed 45,000 engineers. Training 
and attracting skilled replacements will be critical to 
maintaining the industry's worldwide competitiveness in the 
coming decades.
    The aviation manufacturing sector includes many workers, 
but in a relatively few number of establishments. Nationally 
there are, on average, about 13 workers per establishment. In 
the aviation manufacturing sector there are 161 workers per 
establishment. This reflects a large scale of many of the 
facilities in the industry.
    The industry payroll exceeds $45 million annually. In 2004, 
the average wage for the industry was $73,000 or 86 percent 
higher than the overall average of $39,000 for all private 
sector jobs. These above-average earnings reflect the high 
skills--high level of skills required by the industry. In 2004, 
17 percent of all workers in the aerospace industry were union 
members or covered by union contracts. This compares with about 
14 percent for all workers throughout private industry.
    The economic numbers for the aviation manufacturing 
industry are impressive. More than 600,000 employees, 45 
million in annual payroll, 165 billion in annual shipments and 
more than 3,700 establishments. However, these direct numbers 
tell only part of the story. The aviation manufacturing 
industry is an enormous one that has a cascading effect on 
other industries in the United States. The industry has a large 
supplier base. Companies engaged in aviation manufacturing also 
purchase large volumes of goods and services from a wide 
variety of other industries. In 2004, the cost of materials for 
the aviation manufacturing industry totaled $68 billion.
    To conclude, the economic activity linked to the aviation 
manufacturing industry totals $142 billion in annual payroll, 
and 2.8 million employees in the U.S. as a direct or indirect 
result of the industry. Thank you.
    Mr. Mica. Thank you for your testimony, and we will 
withhold questions until we have heard from all of the panels.
    The next one we will recognize is Jack Pelton, Chairman and 
President, CEO of Cessna Aircraft. Welcome, and you are 
recognized.
    Mr. Pelton. Thank you. Mr. Chairman and members of the 
subcommittee, my name is Jack Pelton, and I am Chairman, 
President, and CEO of Cessna Aircraft Company.
    I am proud to say that Cessna is the largest general 
aviation manufacturer in the entire world. Since our inception 
in 1927, we have delivered more than 187,000 airplanes to 
virtually every country in the world. Last year, we delivered 
more than 1,150 jet and piston airplanes, and this year we 
expect to significantly improve those numbers.
    As you may know, Wichita is the global center of general 
aviation. But that leadership role is not a divine right. We 
have worked hard to attain it, and we have had an unwavering 
support of government, both nationally and locally.
    But make no mistake, our role in global aviation in the 
marketplace is tenuous at best. We are beset from outside of 
our borders by rivals who have technical skills, industrial 
capacity, and government support to challenge U.S., and even 
within our borders by others who wish to take undue advantage 
of growth of general aviation as a remedy for their own 
business issues.
    Today the financial and competitive advantages of business 
jet travel are widely accepted by shareholders and CFOs. What 
was once thought as an extravagant perk is now rightly regarded 
as a valuable business tool that enhances productivity, 
competitiveness, and efficiency. The small businessman also 
relies on general aviation as a resource essential to 
expansion. In both instances, general aviation is a catalyst 
that helps strengthen our Nation's competitive position 
globally.
    Cessna is one of the many companies in Wichita dedicated to 
power flight. With more than 10,000 employees in Wichita and 
another 2,200 across the U.S., Cessna is the largest of these 
general aviation companies. But we are part of the community, 
nonetheless, a community of some 48,000 people.
    In terms of spending power, the aerospace industry in 
Wichita represents a powerful economic engine for this region 
with more than $2.6 billion in total annual payroll alone. When 
a standard economic multiplier is multiplied to that number, we 
find another $2 billion in direct economic benefit to the 
Wichita area alone. Last year, Cessna accounted for sales of 
$3.5 billion. In doing so, we spent almost 1.5 billion with our 
suppliers and our partners.
    In addition to over 400 direct and indirect suppliers in 
Wichita, we also have 900 suppliers in other parts of Kansas, 
and a total of 4,500 across America. In fact, we had suppliers 
in each of the 50 States, and this is just Cessna. Our fellow 
original equipment manufacturers had very similar supply 
chains.
    The state of the industry is very healthy right now. There 
are more than 320,000 general aviation aircraft worldwide, 
218,000 of those here in the U.S. In total, general aviation in 
America directly contributes more than $41 billion to the 
economy every year.
    General aviation plays an increasingly important role in 
our Nation's trade balance. Last year, 19 percent of general 
aviation manufactured planes that were manufactured in the U.S. 
were exported. In 2005, that number of general aviation 
airplanes exported from the U.S. rose 67 percent over 2004, 
while export billings rose 82 percent.
    At Cessna, we added about 1,000 employees in 2005, and we 
expect similar growth in our employment numbers this year. 
These jobs range from sheet metal mechanics to specialty 
engineers. This is a growing industry--for now. But we face 
threats from all directions. From international competitors, 
the threats are coming from Europe, from Russia, from Brazil, 
from Asia. We still maintain the advantage, but the gap is 
closing.
    We do not fear competition. Like all Americans, competition 
drives us to excel.
    Cessna, like other American aerospace companies, is focused 
on transforming our business and how we produce airplanes. We 
are fully committed to lean manufacturing with programs such as 
Six Sigma. We are exploiting technologies to form a virtual 
enterprise with our customers and our suppliers. We are making 
significant investments in research and development to continue 
to raise the bar on safety and ensure a full pipeline of new 
products that our customers tell us they want.
    And we are investing in our people and in our communities. 
Last year, we delivered more than 375,000 hours of training to 
our employees, and spent 1.5 million in tuition aid to our 
employees. Cessna, last year, provided more than $2.75 million 
in charitable contributions.
    We are confident that as long as the global playing field 
remains level, we will maintain our leadership position and 
continue to improve the quality of life for our employees, 
their families, our customers, our communities and society.
    But while we are doing all we can do to face the external 
threats, we also face internal threats over which we have 
little control, threats that will negatively impact our 
customers and our industries. Regulatory changes that put an 
undue financial burden on general aviation, inconsistencies in 
rural interpretations, and illogical regulatory priorities will 
eventually cripple our industry or torpedo our global 
leadership position.
    A leading concern for us right now is the issue of FAA 
certification. Bringing new aircraft to the global market is a 
culmination of years of private investment in research and 
development, and testing by manufacturers in cooperation with 
thousands of suppliers. The FAA could delegate much of that 
work, certification work, to us under the Design Option 
Authorization program; and that is being advocated by the FAA 
leadership.
    I have included details of the new burdens of FAA 
certification in my written testimony. This is just one example 
of the internal regulatory issues we face in general aviation 
manufacturing. These burdens will severely cripple our 
industry's ability to bring new products and technologies to 
the marketplace. The U.S. Government should enable the growth 
and development of aircraft manufacturing, not inhibit it.
    We strongly believe that continued congressional oversight 
of the general aviation industry is critical to its survival in 
the ever-changing global environment, and that oversight comes 
only through direct involvement such as funding, and through 
hearings as this.
    The point is, general aviation is an important contributor 
to the continued growth of our economy, both as a business tool 
and as a high-technology industry, an industry where America 
still leads the world. General aviation is a true national 
resource.
    We must learn from the mistakes of other countries, 
mistakes made in funding decisions, regulation adoption, air 
space management, resource allocation, and general 
accessibility.
    It is imperative that Congress takes the necessary steps to 
ensure that general aviation remains a formidable contributor 
to our national well-being, that you continue to take a key 
driver of our Nation's economy and trade balance and continue 
to provide an important productivity tool for our businesses.
    We believe it is in the best interest of our Nation that 
our Federal Government encourages, not inhibits, general 
aviation's growth and vitality. It is just good business sense.
    Thank you.
    Mr. Mica. Thank you for your testimony.
    We will now hear from Mr. James Schuster, who is Chairman 
and CEO of Raytheon Aircraft Company. Welcome and you are 
recognized.
    Mr. Schuster. Thank you, Mr. Chairman and members of the 
subcommittee. My name is Jim Schuster. I am Chairman and CEO of 
Raytheon Aircraft Company here in Wichita, Kansas. Raytheon 
Aircraft Company is a business unit of Raytheon Company, one of 
the world's largest defense companies that had sales in 2005 of 
nearly $22 billion and has 80,000 employees world-wide.
    On behalf of the 6,500 Kansas-based employees, welcome, 
again, to the air capital of the world. It is an honor for me 
to appear before you today.
    I am going to use my time today to tell you about our 
company and to discuss the international market.
    Raytheon Aircraft Company designs, develops, manufactures 
and supports business jets, turboprops and piston-powered 
aircraft for the world's commercial and military aircraft 
markets. Last year, Raytheon Aircraft Company had net sales of 
nearly $3 billion and delivered 416 aircraft.
    Headquartered in Wichita, we have a very proud heritage 
here. Aviation pioneers Walter and Olive Ann Beech founded the 
company in 1932, and over the years Beechcrafters, as our 
employees like to be known around the world, have built more 
than 54,000 aircraft. Some 36,000 are still flying today.
    Raytheon Aircraft Company is the third largest employer in 
the city, and the fifth largest employer in the State of 
Kansas. While our total annual payroll for Wichita alone is 
approximately $360 million, our economic impact goes far beyond 
the city limits or even the State's borders.
    We also have company-owned service centers in the U.S., 
Mexico, and in the United Kingdom. Our total global employee 
base is just over 8,000.
    Raytheon Aircraft Company has over 450 suppliers in the 
State of Kansas alone, and more than 1,800 across the United 
States. We spent $1.4 billion with our U.S. suppliers and 
partners in 2005. We also spent $300 million with 400 
international partners and suppliers located in 20 different 
countries worldwide.
    The general aviation industry today is truly international 
in nature. Not only do our airplanes travel to every corner of 
the world, our customers are based in virtually every country 
in the world.
    In 2005, the number of general aviation airplanes exported 
from the U.S. surged about 67 percent over 2004, with 557 
aircraft, while export billing rose 82 percent to $2.6 billion. 
Of the 2,857 general aviation aircraft manufactured in the U.S. 
in 2005, 19 percent of those aircraft were exported around the 
world. As the worldwide economy expands and becomes ever more 
interdependent, it becomes increasingly important for the U.S. 
Government to support the development of those markets to 
ensure our Nation's position as a global leader in aviation.
    Currently, the FAA, under the leadership of Transportation 
Secretary Norman Mineta and FAA Administrator Marion Blakey, 
recognizes this. More time and energy have been spent by our 
government to foster overseas markets, provide leadership and 
safety, and promote our industry.
    For example, the FAA is adding resources and staff to 
assist with aviation issues in China and India, two of the 
largest potential markets for general aviation over the next 
decade. These efforts will pay large dividends for the entire 
U.S. aerospace industry, and we are thankful that the U.S. 
transportation leaders are paying more attention to 
international markets and related issues.
    As other markets develop, it is important to ensure that 
the FAA and other Federal agencies continue to support aviation 
expansion into emerging markets. After China we see India and 
Eastern Europe as markets with the greatest opportunity to 
general aviation and aerospace growth.
    The aerospace industry works constantly with both Congress 
and the Executive Branch to ensure foreign markets are open to 
U.S. products. Working to break down trade barriers is critical 
to continue the dramatic increase we are seeing in U.S. exports 
of aerospace products and services.
    Congress can help maintain U.S. leadership in aviation by 
ensuring that the FAA receives the resources it needs to carry 
out its functions, including the certification of new aviation 
products.
    Jack Pelton has already discussed certification funding 
this morning, but let me just emphasize how important this is 
for ensuring continued U.S. global leadership in aviation. Our 
competitors around the world, particularly in Europe, are 
working to impose their model of regulation in emerging 
markets. With the creation of the European Aviation Safety 
Agency, known as the EASA, the European Union now has a 
powerful, single, FAA-like institution certifying new aviation 
products.
    Let me be very clear: If the certification of new aviation 
products becomes onerous or subject to delays in the U.S., 
Raytheon Aircraft Company and the rest of the U.S. general 
aviation industry will be severely disadvantaged in the global 
marketplace. The result will be a loss of our technological 
leadership, international competitiveness and, ultimately, 
jobs.
    While Raytheon Aircraft Company and our industry are going 
well today, I must reemphasize that this is an industry 
vulnerable to subtle changes in laws, regulation, and the 
economy. We need Congress to continue to carefully consider the 
issues of FAA funding and resource allocation as well as other 
regulatory changes. The future of the Raytheon Aircraft Company 
and the general aviation industry, in many ways, depends on 
you.
    Raytheon Aircraft Company firmly believes there is a solid 
domestic market for aircraft, but we look to the international 
market for growth opportunities. I urge Members of Congress to 
assist in promoting general aviation and assert the continued 
congressional oversight that is critical to the success of our 
industry, both domestically and internationally.
    Mr. Chairman, I would like to thank you and the 
subcommittee for taking the time to travel to Wichita today to 
listen to our comments and concerns about U.S. aviation 
manufacturing and keeping us competitive. In closing, I would 
like to extend, on behalf of the entire general aviation 
industry, our personal appreciation to Congressman Tiahrt for 
the strong and tireless support he provides to the aviation 
industry. Thank you.
    Mr. Mica. Thank you for your testimony.
    And our final witness on this panel is Peter Bunce, who is 
President and CEO of the General Aviation Manufacturers 
Association. Welcome, and you are recognized.
    Mr. Bunce. Mr. Chairman and members of the subcommittee, it 
is very exciting to have you here in Wichita. And just to put 
it in a little bit of perspective, 80 percent of the world's 
general aviation aircraft are produced in the United States, 
and over half of those are produced here in Wichita. So it is 
truly exciting for you to be here.
    GAMA represents 55 of the world's leading aviation 
manufacturers, and that deals not only with airframe 
manufacturing of engines, avionics and also those that supply 
parts for the aviation aircraft.
    As you mentioned before, we had a good year last year. Our 
shipments were up 21 percent, and our billings were up about 27 
percent, and we are very optimistic about 2006 and 2007, based 
on our orders. But as Congressman Tiahrt pointed out, our 
industry is fragile, and we are concerned about several things.
    One of those is that our actual flight hours last year 
decreased, according to the FAA, by about 2 percent. When you 
couple that with the fact that over 64 percent of the flight 
hours that are flown in this country are flown for business 
purposes, it really emphasizes the fact that business is 
facilitated by general aviation, and we need not do anything 
that will impact the ability of folks to be able to use the 
aircraft for business purposes.
    When you look at--is this still working? Test. I will just 
speak loudly.
    Over the last 25 years, we feel very proud that general 
aviation manufacturers in training within the community has 
been able to drop the accident rate by 54 percent for general 
aviation and fatal fatalities by over half. But we all know 
that any aviation accident is one too many. And so our general 
aviation manufacturers are committed to be able to get products 
out to the field that makes supplying easier and makes flying 
safer; and that is particularly in the realm of giving them 
systems within the aircraft to tell them where they are, and 
give them what we call situational awareness to be able to fly 
safer. That is why it is so imperative that we have the 
certification services available through the FAA to be able to 
get that technology into the cockpit quickly.
    But coupled very closely with that, as Congressman Ehlers 
pointed out, is building capacity within the system. And what 
we are very, very firm on is to be able to have this 
subcommittee, in particular, be able to keep pushing the FAA 
and other executive branch agencies to push to give you a 
coherent modernization plan; and that plan not only needs to 
contain the types of technologies that the FAA wants to 
incorporate to build to capacity in the system, but give you a 
time-phased plan that tells you how much it is going to cost to 
modernize and what savings are ultimately achieved on the back 
end.
    We are not inventing new technology. The technology is out 
there primarily produced by military. But we are giving you a 
plan. Before we go and change mechanisms of how we collect 
money, it is absolutely imperative to be able to push the ball 
forward and get to the goal line of building the product 
capacity in this system.
    Now, Mr. Ehlers also touched on that capacity when we talk 
about the introduction of very light jets. This year, we are 
going to start the certification for those jets, but there has 
been a lot of rhetoric out there about how these jets are going 
to, quote, "darken the skies with the onslaught of these 
microjets." we want to put this in perspective.
    This Nation has put a lot of investment and a lot of 
taxpayers' dollars, and put concrete out in smaller cities in 
rural America that are not serviced by airplanes. And we see 
this new market in the very light jets, and very quiet jets 
sometimes--folks are starting to refer to them as "whisper 
jets"--to be able to give service to those smaller communities 
that have runways less than 3,000 feet that can't be serviced 
by commercial airlines. We see this as not competing for the 
airspace or the airports where the commercial aircraft have 
their hub, but by diffusing traffic and providing folks an 
opportunity to use air transportation for their businesses and 
actually diffuse that traffic and get them off of, mainly, the 
highways.
    So we are very concerned that a lot of the rhetoric being 
used about this new generation of aircraft is being used for 
false purposes and not emphasizing the capability that this 
will give and the business that it will facilitate for our 
Nation.
    Also, as you touched on, helping us get out of the slump 
that we were in after 9/11. You did a lot for us with bonus 
depreciation; however, Federal tax policy can also have a 
significant unforeseen negative impact. The same legislation 
that provided GA manufacturers with bonus depreciation also 
changed the business deductibility of entertainment-related 
flights.
    I want to be very clear. No one in our industry wants--says 
it is not just to tax fringe benefits, and we are not seeking 
to repeal this provision. The problem lies not with Congress, 
but with the IRS interpretation of the methodology and 
allocation of entertainment use flights. The untold effect of 
this tax policy is that it is making folks that use business 
aviation account for seats differently than any other mode of 
transportation.
    When you look at this Nation today, we have 165,000 piston 
aircraft flying in the system, and over half of the flying time 
that we fly every year is used for business. It is an onerous 
system, and not only do you have to count seats, you no longer 
can take your spouse with you on a business trip because you 
suffer a significant tax penalty for that. And they are 
treating general aviation totally differently than we treat, 
like, a company car. And that type of singling out of aviation 
for a different type of treatment is already having an effect 
on folks that are flying aircraft, and will eventually have an 
effect on sales.
    In addition to the tax policy, we also are concerned about 
some of the export control restrictions that are placed on 
general aviation. No one wants products that are used in 
general aviation that migrate into military aircraft to be used 
by nations or people that can harm us, but it is significant to 
note that as the military uses more and more commercial off-
the-shelf technology, that it is becoming very difficult to 
differentiate between commercial and military. And as we go--
and it is even simple technology; you are talking about rivets, 
rings, and very basic things like that--we are finding that if 
it migrates its way into military technology, all of a sudden 
it makes it very difficult for our aviation manufacturers in 
the U.S. to export those products. And also it makes those 
foreign manufacturers of aircraft reluctant to want to use 
suppliers in the U.S. for that export control. So we hope to be 
able to work closely with Congress and be able to attack some 
of those issues with both the State Department and Commerce.
    The last issue is tort reform. As you all have noted, it is 
very important with what you gave us in the General Aviation 
Recovery Act to be able to help revitalize our industry. But 
what we are seeing are attacks on GARA all the time around the 
back sides of it. We have a lot of lawyers out there that will 
go ahead and sue every component manufacturer any time there is 
an aviation accident, hoping that most of those will settle out 
of court, and we can consider that a form of extortion out 
there in all practicality; and any kind of tort reform you can 
give to this industry in general, tort reform that we can start 
to be able to get a handle on, that will help suppliers.
    The significant effect of that is, we have some of our 
suppliers that actually are not bringing products to market, 
such as the flight control systems that give you better fuel 
efficiency and better immersion controls, just because they 
worry about the liability that they will have in that arena.
    I will submit the rest of my comments for the record. I 
look forward to your questions.
    Mr. Mica. Thank you. We will submit additional statements.
    We will turn to questions for our panel, and I have a 
couple. We will start with Janet Harrah.
    You mentioned that the aging--the aging population of the 
workforce, which was interesting. The President has put forth a 
proposal to increase emphasis and programs in math and science.
    What do you think we should do? Now we have got an average 
age of 50. That gives us maybe 10 years to sort of get our act 
together. Is what is being proposed adequate? And what do you 
see as far as our responsibility at the Federal level in 
providing the folks to replace this aging workforce?
    Ms. Harrah. Well, from a local and State standpoint, 
obviously you have to have adequate training, infrastructure to 
train the number of folks to replace them, whether you are 
talking about welders and--or you are talking about aerospace 
engineers.
    I think one of the things is that--if you look at the 
national policy, is the immigration policy. The ability to 
bring in students--it becomes very difficult for American 
universities to bring in students from overseas because--as a 
result of the impact of 9/11, but that is more difficult--
    Mr. Mica. That is interesting because people have said, 
well, we replace those who are aging or we don't have with 
foreign imports, basically students, but then we are finding 
now an interesting phenomenon where not as many stay as they go 
back because they have more opportunities in their own country. 
So we end up educating them to not compete with us, but to go 
back into their own respective industries.
    Ms. Harrah. That is always going to occur. That is as true 
at the international level as it was at the local level. But 
from the supply side standpoint, more will stay than will 
leave, and in the short term, we have such a short window of 
opportunity for some of these companies, we have to start 
filling them with existing engineers that work overseas now and 
have the ability to do the program to bring them over here so 
they can work. We have a limited number of slots of foreign 
workers to work in this country.
    Mr. Mica. But what would attract more students or 
individuals to math, science, or maybe we don't--maybe we don't 
need to do that. I mean, do you see anything at the Federal 
level that we can do in that regard?
    Ms. Harrah. You are asking something that is not in my area 
of expertise. I am an educator, so --
    Mr. Mica. At least you are honest about it. I appreciate 
it. Let me go to Mr. Pelton.
    You talked some about the regulatory process and 
certification. We have known that we have a backlog and people 
to provide certification in FAA. We provided some additional 
dollars, I think, some $4 million. I want to ask a two-part 
question.
    Have you seen any effects from the additional resources we 
are providing, and is FAA, doing that either having just 
difficulty finding people to fill those positions?
    And two, you mentioned delegation on the certification. 
Maybe you could elaborate a little bit more on how we can--how 
Congress can move that forward.
    Mr. Pelton. Mr. Chairman, actually, your two questions are 
linked together.
    We went back and testified last year relative to getting 
appropriations for the FAA's certification branch. We really 
applauded and appreciated your support of those dollars being 
allocated. My understanding, to the best of my knowledge, is 
that the actual money did not go into the certification 
offices, that, in fact, that money went other places. And so 
unfortunately, the FAA has not staffed and manned up to the 
needs of the industry as we see it today.
    The reason I say that the question is also interlinked is 
that it requires those near-term resources to be able to move 
industry to a position where delegation can, in fact, occur. I 
think if you listen to the FAA, they will tell you that you 
need to migrate from today's processes to a delegation 
environment which does require oversight of technical experts 
within the FAA. If there is a shortage today, that is only 
going to slow down and inhibit the process of moving to the 
delegation faster.
    So it is really complicated in the sense that we do need 
the FAA to step up and get the staffing that they need today to 
handle the near-term--near-term demands that industry is 
placing on them, while they change their business model and 
their role in the future of being oversight for delegation with 
industry.
    What we would like to see Congress do is to continue to 
encourage the FAA to move faster in the form of delegation, but 
also hold them accountable for the moneys that were sent to 
them to hire the appropriate positions that they need in the 
certification offices today.
    Mr. Mica. Well, these field hearings are nice, but 
sometimes we should have some positive, concrete results. I am 
glad that you put those comments on the record, very frankly; 
and I think one of the things that could be helpful, and I will 
ask my colleagues to join me, is that as we send Ms. Blakey and 
Secretary Mineta a letter of our concern about the diversion or 
lack of use of those funds appropriated by Congress for a 
specific purpose. And then also encouraging this delegation 
authority and expediting that to assist the industry.
    So maybe I could get--I think I have got three that will 
join me here. An affirmative nod from Mr. Ehlers, too. So we 
can do that from this hearing.
    Mr. Schuster, you cited one of the concerns we have about 
the new regulatory regime, at least in the European Union; and 
I have a quick, two-part question. One, have you seen any of 
the regulatory shenanigans or maneuvering, or is it too early 
for that?
    And then, two, how do we counter a block like the European 
Union with the new regulatory regime from proceeding unfairly 
and using the regulatory process to a competitive disadvantage 
to the U.S.?
    Mr. Schuster. Your two-part question, you answered the 
first part, I think, correctly; and it is probably a little too 
early to draw conclusions as to exactly how that is going to 
work. Speaking from Raytheon Aircraft's perspective, I would 
say it is too early. My compares here may have a different 
view.
    I think the first part of the answer to the second question 
is back here on our own soil--and it comes back to the same 
discussion we just had about the certification process and the 
FAA funding and so on in making absolutely certain that we 
don't create a system, a set of processes, here in the United 
States that are not--that don't facilitate the introduction, 
development, and launching of new aircraft; and making sure we 
have a--a system that is at least on par with what European 
manufacturers are capable of doing.
    You couple that with the fact that the industry is going 
through some pretty profound change with the emergence of 
companies like Embry Air. The competitive landscape is changing 
dramatically, and as lower-cost international players come into 
the game, the Cessnas, the Raytheon Aircrafts, the Gulfstreams, 
the Pipers and so on in the United States are going to--we are 
finding ourselves, particularly from a cost perspective, 
competitively disadvantaged in many situations. And one of the 
outcomes of that, unfortunately, is that when you have to 
compete in the international marketplace, in some cases on the 
basis of cost, or you are competing against a certification 
processes, I say that works better or faster and there are 
lower costs, you end up having to move American jobs.
    I think one of the realities that we all have to face is 
that when you put all these factors together, if you slow down 
the certifications in the United States, if there are barriers 
put in place at some of the international regions and other 
regions of the world, cumulatively the effect on this industry 
is going to be American jobs.
    And the real answer, I think, is how we solve that in 
Europe, but I think it is still in front of us. I don't think 
we have a solution today. I think that it starts--my focus is 
right back here on the FAA and making sure we get our planes 
certified.
    Mr. Mica. Thank you.
    Mr. Bunce, a final question for you. You talked about 
export controls and how they do impede--sometimes impede our 
competitiveness.
    How do you set up a regime that will determine, you know, 
whether dual-use items, what is available on the market because 
I know that we are put at a disadvantage. I have seen specific 
instances where we have delay in getting approval where someone 
else can get another product from another country with 
basically the same technology, and that sale is gone.
    How do you speed up the process? How do you deal with 
creating a level playing field?
    Mr. Bunce. Well, Mr. Chairman, I think if we take a look at 
the working groups that exist between Commerce and State, and 
also within State with the economic side of State, and then the 
military side of the State Department that actually have to 
wrestle with this, that is what we are all in, in trying to get 
people to talk together with industry. And actually at the 
State Department, the folks that are tasked with being able to 
go ahead and sort through this whole process are tremendously 
undermanned to be able to keep up with all the requests that 
are coming in to them. So they have told us, and we have tried 
to work very closely with the State Department that they want 
us to self-identify and self-regulate the items that we have 
that are both for military and commercial aircraft.
    The problem with that is that you lay a lot on the line 
when you do that. And if there--if there was a more formalized 
process where we could go in and look at the ITAR restrictions 
that are out there and be able to go ahead and say, okay, is 
this really technologically something we don't want to go to 
people that are unfriendly to us, or is this just basic--just 
basic, like rivets and rings and the things that I spoke of, 
that really are something that American manufacturers can make 
no differently than another foreign manufacturer, but we ought 
not put U.S. companies at a disadvantage.
    So I think it is working an emphasis from the Congress that 
Commerce and State work with industry to be able to have the 
mechanisms to be able to classify these products that could 
help us.
    Mr. Mica. Thank you.
    Mr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman. Most of the questions 
I had planned on asking you he has already asked, so I will--I 
appreciate the opportunity to be brief.
    Mr. Bunce, on the tax policy issue that you mentioned, I 
was not aware of that, and I think we should try to address 
that. It is--as you know, tax issues take a long time to change 
and resolve. But I wasn't even aware of that, but we can 
certainly sympathize with that because we face the same 
problems in Congress, as you know, modern taxation.
    And it comes up from an attitude of the public that somehow 
an airplane is special and a car isn't. So if I have to give a 
speech out of town and a friend offers to drive me there in a 
car, that is fine. I don't have to report it. If someone takes 
me there in an airplane, I have to pay them first-class--
equivalent first-class airfare. I have to report it to the 
Federal Government, not once but twice. We have to get away 
from the idea in this country that somehow airplanes are to be 
treated differently.
    We have the same thing in accidents. The public accepts 
with great equanimity 42,000 deaths a year from cars. And you 
have a crash of an airplane, two people killed, one injured, it 
is headlines for days.
    We somehow have to try to educate the public about that 
issue, that they should be treated equivalently and considered 
equivalently. And I would certainly be happy to work on the tax 
issue with some of my friends on Ways and Means.
    The export restrictions are a real bug to me, and again, I 
don't understand the mentality, but I recall when I first got 
into office there were export restrictions on encryption 
products for cybersecurity because the attitude was, we have it 
in America, we don't want to weaken our stance with our enemies 
abroad by having them get the same encryption abilities. So 
there are restrictions in place.
    The military persuaded enough Members of Congress, this is 
important. I fought that. I did not win. I said the other--the 
rest of the world will develop these encryption standards and 
manufacture them and sell them, and that is what happened. The 
Israelis and some other companies did it. We lost a whole 
industry right there just because of stupid export restriction 
laws.
    And if that affects you, it is going to have the same 
impact. You are going to lose business abroad because 
restrictions keep your suppliers from selling abroad.
    On tort reform and suppliers, I would be happy to try to do 
what I can with that, too. That is, as you know, the toughest 
one to change. But that, again, gets ridiculous and costs you a 
lot of money, drives your suppliers out of business. It is just 
no way to run a country, frankly. So I will work on those two.
    So no questions. I just wanted to give you some 
encouragement.
    Mr. Mica. Thank you, Mr. Ehlers.
    Mr. Moran.
    Mr. Moran. Mr. Chairman, thank you very much. I would point 
out, Ms. Harrah, that Congress has passed and the President 
signed a new student grant program for disadvantaged students 
who are pursuing issues--education in the area of engineering, 
math, and science.
    The Board of Education is now developing the rules and 
regulations, and I am hopeful that it does create additional 
opportunity for students who might not otherwise have that 
opportunity, although I have discovered that it still remains 
very difficult to get some of our best and brightest interested 
in math and science. Somehow, perhaps even at younger ages than 
high school, we have got to raise the awareness, create 
excitement within that area.
    If you have any suggestions, I would be glad to--I have two 
teenage daughters. I would be glad to have your advice on my 
personal family as well.
    The FAA certification, Mr. Pelton, my question was going to 
be really to you and to Mr. Schuster and Mr. Bunce as well.
    Is there one area of effort, one area of regulatory reform 
that we ought to be pursuing? And I guess you have answered 
that question. It really does--it is always difficult for me to 
address these issues when my constituents complain about 
bureaucracy. That is an age-old battle that we continue to 
fight.
    But if there are specific examples of where that 
bureaucracy creates a handicap, a hindrance to economic 
activity, we are better able to attack them one at a time; and 
I just would ask, is the priority, the reform that you 
mentioned, is that where we ought to focus our attention on 
certification?
    Mr. Pelton. I think the concern we have as an industry is 
that for us to be successful, it is all about time to market. 
It is being able to get our products to the market when the 
economy is up, which means you have to have a certification 
system that is responsive to the speed of the industry. And 
currently, with the staffing shortfalls and the inability to 
move as quickly as we would like to delegation, we are being 
hindered in getting product to market as fast as we would like; 
and that is showing up today when you make a submittal for a 
new model certification. You get a letter saying, get in line 
and we will prioritize based on the resources we have within 
the FAA.
    We have to break that roadblock, and I am convinced that 
breaking the roadblock is going to be industry and the 
government collaborating, both on the funding side of it with 
the government along with the delegation side to industry. It 
can't be just push it all onto the FAA. We have to take some of 
that responsibility ourselves.
    Mr. Moran. What is the average length of time, some number 
that we can compare certification here in the United States 
versus certification elsewhere in the world? Do those 
statistics exist?
    Mr. Pelton. They don't because it is very confusing as to 
size, type of certification, and complexity of certification. 
But I think it is fair to characterize today that if you want 
to certify anything new, if you are starting a new model, it is 
going to be delayed in getting into the prioritization system 
within the FAA, because they just don't have the resources to 
support all of industry's needs and demands in this robust 
economy that we have right now.
    Mr. Schuster. I will relate a meeting that I was involved 
in where you have a group of people sitting around a table 
talking about measuring the rate at which you can invest 
research and development dollars based on the negating factor 
of moving projects through the FAA certification process; and 
we think about the second and third order of effects of 
reducing research and development in an industry like this.
    It goes way beyond--people think about the loss of 
industrial jobs, factory jobs and so on, but it really does 
potentially slow the rate at which this industry continues to 
reinvest. So I have to believe those same meetings are taking 
place across the industry.
    And at the same time we are looking to Congress and to the 
FAA for solutions to that so we don't find ourselves literally 
slowing at a rate at which we are investing in an industry that 
is so important to this country. But those meetings are 
beginning to take place.
    Mr. Moran. Is the primary reason for the delay related to 
resources, dollars?
    Mr. Schuster. Honestly, Congressman Moran, I think it is 
all about the money in the end. I really think that is the 
issue. It is, if the FAA has the financial resources, support 
that it needs to do what the industry would ask them to do, I 
think many of these problems go by the wayside.
    Mr. Moran. Thank you very much .
    Mr. Bunce. If I could just add, you all were very kind to 
get the additional $4 million for us. All we ask is that 
certification be brought back to 2004 levels. That was in 
report numbers. Now we are halfway through this fiscal year, 
and the problem is that we don't see that is where the money is 
being spent.
    The FAA had a large rescission, and that is where some of 
those dollars went. It looks like the budget request that the 
FAA came in with for 2007 will get us back close to the numbers 
that we asked for. So if they do get their full appropriations 
this year for the certification branch, we are hopeful that 
will bring it back. But we are asking the Appropriations 
Committee to be able to put that mandate for the bodies in a 
bill in which we can actually say, this is what Congress 
intended.
    Do this. Help industry with that certification.
    Mr. Moran. I will yield to Mr. Ehlers.
    Mr. Ehlers. I thank the gentleman for yielding. I wanted to 
get briefly a comment from Ms. Harrah about the issues you 
raised.
    I have spent over 30 years trying to improve math and 
science education in this country, K-12, and since I got in the 
Congress, I have spent 12 years there working on it. It is 
really a tough issue, but we are losing out to other countries. 
We have been for a long time. And what makes it so crucial for 
your industry is not just producing engineers and technicians, 
but it is producing pilots, and particularly what you might 
call "lay pilots," people that enjoy flying, want to learn, and 
they just get intimidated because if they didn't have the right 
math or science in school, they have to understand vectors and 
things of this sort, it--they'll throw up their hands and say, 
well, I will just drive.
    I think it is a crucial problem, and I have--as I say, I 
have worked on it for many years, spoken in a lot of schools, 
and I found--I am starting to get credibility with the high 
school students by simply telling them, the courses they choose 
in high school are very important because if they aren't nerds, 
they are going to end up working for a nerd. That sort of 
intimidates them, and so they start looking at nerds more 
kindly. Then I say, we even have nerds in Congress, which they 
refuse to believe. I say, I can prove that I am a nerd. Of 
course, they don't believe that. I say, look, plastic pocket 
protectors; it is still there.
    But we have to change the attitudes of kids at school, and 
particularly young girls. This is the only major country in the 
world that somehow has the culture that girls can't do math and 
science, and I don't know where this comes from. But we should 
have far more young girls interested in math and science.
    Thank you.
    Mr. Mica. Okay.
    Mr. Tiahrt waiting patiently. Thank you.
    Mr. Tiahrt. Thank you, Mr. Chairman. I would like to sort 
of start this off with a conversation that I had with Mr. 
Schuster shortly after September 11, 2001, about a wire harness 
job that ended up going to Mexico, I believe. And I was sitting 
down with him talking about, you know, the possibilities of 
outsourcing in Wichita with people that do wire harnesses, and 
Jim made a comment to me, and I would like to repeat--I am 
going to paraphrase what he said.
    He said, basically, even if the wages were zero, I would 
have to consider shipping these jobs outside. And it dawned on 
me then that there were costs beyond the control of the private 
sector that impact the decisions on where the jobs are going to 
be, whether they are in America or overseas. And following that 
discussion I started looking at costs that the industry faces, 
and part of it goes back to my years at Boeing where I was a 
proposal manager, and we had thumbnail guesses--WAGS, what we 
called them, wild-ass guesses--about prices, and we had a set 
rate of about $150 an hour for manufacturing. This was over 10 
years ago.
    But in that wage was only about $17 or $18, and the rest of 
it was cost beyond just simply wages. And I realized that the 
problem in America is not wages, it is all these other costs. 
So I went through and started making a list of them, costs that 
cannot be controlled by the companies, by the CEOs. It was 
health care policy, bureaucratic red tape, it is education 
policy, trade policy, tax policy, energy policy, how we apply 
our research and development dollars, and lawsuit abuse. And 
these are all costs that companies confront and pay for, but 
have no control over.
    If you look at the origins of those costs, they came from 
Congress over the last generation, starting mostly in the 
1960s. And I think it is up to this generation of people who 
are in Congress to eliminate those barriers or certainly reduce 
them. So as I see some of these barriers come up, I would like 
to highlight some of them in this--in my questions.
    The first one I want to address, and to me it is kind of 
this--the huge elephant in the room we haven't really talked 
about much, and that is user fees; and it is a very 
controversial item because it is, in effect, a cost shift from 
one segment of the industry to the other. And, you know, when 
people ask me, who are you for on this certain policy, 
sometimes I have friends on both sides of the issue, and I say, 
I am for my friends. But the truth here is that this is a--
there are vulnerabilities in this industry that I want to point 
out.
    Historically, user fees have a detrimental effect on the 
sale of aircraft. And a good example of that is the European 
Union which has user fees. If you look at general aviation and 
see the number of aircraft per 100,000 people in the European 
Union versus in America, a big difference. Part of that is 
because of user fees. If you try to divide general aviation, 
normally general aviation is explained as nonmilitary, 
noncommercial carrier. General aviation, now they are trying to 
put another segment in here of business jets versus general 
aviation. I think that is a bad thing to do. But even if you 
look at general aviation, less single-engine aircraft per 
100,000, significantly less in the European Union. Part of that 
is user fees.
    Also, the concept of user fees creates a new bureaucracy 
within the government. We don't have a bureaucracy to do that 
now. See, here we are, once again, adding to the cost of 
American taxpayers in the form of a heavier bureaucracy.
    But I think the third thing is that the justification for 
this, I think, is inaccurate. If you look at the required air 
traffic control at, for example, DCA, Reagan National Airport, 
we shut down general aviation following September 11, 2001, and 
even today it is not back up and running to a large degree. I 
think it is about 30 flights a day come in. There was no 
reduction in the cost for air traffic control during that time 
when there was no GA.
    On the flip side, if you look at Nashville and Charlotte, 
North Carolina, Nashville, Tennessee, where they were getting 
ready to make those hubs, they ramped up, but the air traffic 
control never ramped down following when one of those hubs 
pulled out. So I think the overall basis is not--is not 
justifiable.
    So now I have addressed these issues I wanted to bring up 
here, Mr. Chairman, and I think it is detrimental to think of 
user fees.
    So going on to my questions very briefly, because I know we 
are pressed for time, and I have only taken up 5 minutes so 
far, I want to address trade policy because I think Cessna has 
had a significant gain in Central America following DR-CAFTA.
    Jack, would you just comment on that briefly?
    Mr. Pelton. As a result of the trade policy, you are right, 
Congressman Tiahrt, we have grown significantly in other 
international deliveries. What is probably the biggest pressing 
issue that Congress could help on is, if you look at the 
growing markets that we see, we shifted from what was 
classically about a 30 percent export in general aviation to an 
order book this year that was over 40 percent potential export. 
So the growth in our industry is clearly outside of our own 
borders, and we have to make sure that our policies continue to 
support that growth externally.
    Some of those policies not only have to deal with export 
policies, but also get all the way back into regulatory 
policies and bilateral agreements with other countries. The 
ITAR control and the export control policies that are necessary 
to help facilitate that growth outside of our own borders, it 
is huge. Clearly the legislation that Congress put into place 
some time ago opened a significant market in South America for 
us, and we thank you for that and encourage you to continue to 
look at, as the world continues to flatten, how we can get 
products into other parts of the world.
    Mr. Tiahrt. Thank you, Mr. Pelton.
    Mr. Schuster, I would like you to talk a little bit about 
the biggest barrier that you face now as far as increasing 
costs and the policies that surround that.
    Mr. Schuster. Well, I think you touched on it. The first 
one that comes to mind is the cost of health care.
    If you--if you were to poll the aircraft manufacturers 
around the country, I think that would show up at the top of 
every list. In a 3-year period, beginning in 2002, the annual 
health care costs at Raytheon Aircraft went up $60 million. 
That is $60 million of additional costs that you have to take 
out of the business or find in prices or deal with in other 
ways across the business.
    And, you know, I can tell you that across--in boardrooms 
across the country, this is an issue that we are all facing 
when it comes to making decisions about where we invest, how we 
invest. And the comment I made about wire harnesses, literally 
looking at the zero wage cost when you add the cost for health 
care and other benefits, especially with an aging workforce 
where you have increasing pension liabilities and so forth, you 
have to weigh very carefully where you are going to invest the 
precious dollars in capital equipment and facilities and so on. 
And that is--you know, that is an issue that we are all 
struggling with that you add to the mix.
    The fact that--I am being a little repetitive--but the 
emergence of companies like Embry Air, the cost structure--the 
manufacturing cost structure that is somewhere south of 50 
percent of what we pay in Wichita, Kansas, for the hourly 
workers and for the engineers, this issue of cost becomes an 
enormous problem for all of us.
    And when I was making notes as we were talking here, when 
you think about the international emergence of these low-cost 
manufacturers, a potential slowing of research and development 
into this industry because we have a certification process that 
is constrained--and we can argue about why and what the 
solutions are, but I don't think we would argue it is 
constrained--the potential repercussions of problems like user 
fees, and all the friction that we are placing on these 
markets, you can't point to just one and say, that is going to 
bring us down. But when you have to live with those things 
cumulatively every day, and you think about the impact on this 
industry, together those issues can, in fact, bring general 
aviation down.
    In the light of a strong economy, I think our fears and our 
concerns tend to maybe get pushed aside a little bit. I think 
the discussions and the conversations that we all have would be 
very, very different under different economic circumstances, 
and those circumstances will arise. They will come to be--one 
day we will be facing an economy that is not as strong some day 
through the natural cycles, and we have to get prepared for 
that day.
    Mr. Tiahrt. Ms. Harrah, as an educator, what incentive do 
you think we could provide to attract young men and women into 
technical fields like engineering?
    Ms. Harrah. Well, Mr. Ehlers is quite correct. A lot of 
this, you have to capture them quite young. I think probably 
grade school and junior high is where you really need to 
capture their imagination, and science and math is an area that 
I am interested in, and I want to pursue long term.
    But I think certainly at the university level, any kind of 
Federal scholarship help for those students--similar to what we 
have if you want to become a doctor; there is money available 
if you want to go and serve in rural areas. Likewise, if there 
are critical needs for science and engineering, if you provide 
some scholarship dollars for students that want to go into 
those fields and stay in the country and work here, I think 
that would be very helpful as well.
    Mr. Tiahrt. Thank you. Because I think we need to figure 
out a way to do both, reach them when they are younger and also 
provide an incentive when they approach their college and 
undergraduate degrees.
    My last question, Mr. Bunce, is it true still--one time it 
was, I know--that if there is a parts supplier in the European 
Union that can provide a part for an aircraft that is flying in 
the European Union and one that can--may have originally been 
made in America, can you--are we allowed to compete with that 
parts supplier in the European Union? Or do they have to buy 
from that European Union parts supplier when there is a need in 
an aircraft?
    Am I clear about my question.
    Mr. Bunce. Sir, I think you are clear about the question, 
but I am not familiar with what the restrictions are. My 
colleagues here might be, but --
    Mr. Tiahrt. I am sorry.
    Mr. Schuster. It is probably military.
    Mr. Tiahrt. I am sorry.
    Mr. Schuster. It may be just applying to military.
    Mr. Tiahrt. It may be just applying to military.
    At one time I heard testimony that if you are a supplier of 
aircraft parts in the European Union, you are isolated from 
competing with American parts suppliers. They have to take you 
first.
    But I would like to check that out, if--
    Mr. Bunce. We will get back to you, sir, on that.
    Mr. Tiahrt. All right. Thank you, Mr. Chairman.
    Mr. Mica. Well, thank you, and I want to thank each of our 
panelists for participating today. We look forward to working 
with you. I think this hearing is only the beginning of our new 
effort to--in Congress to make sure we keep U.S. aviation 
manufacturing competitive. So we will excuse you at this time, 
and as I said, we are going to keep the record open for a 
period of 2 weeks.
    Let me call the second panel of witnesses. We have five 
individuals on that panel: Mr. Jeffrey Turner, CEO of Spirit 
AeroSystems; we have Mr. William Greer, Vice President and 
General Manager of Airbus North America Engineering; we have 
Greg Mullins, General Manager of Lyons Manufacturing; we have 
Kevin Hawley, President of Aerospace Systems and Technologies; 
and we have Finley Nevin, President of Global Engineering and 
Technologies, Incorporated.
    So we will welcome all of those witnesses. If they would 
come up and take their respective seats .
    I welcome our second panel of witnesses today. Maybe you 
heard me before. If you have a lengthy statement or additional 
information you would like to have made part of the record, you 
can do so through a request of the Chair.

   TESTIMONY OF JEFFREY L. TURNER, PRESIDENT AND CEO, SPIRIT 
AEROSYSTEMS, INC.; WILLIAM W. GREER, VICE PRESIDENT AND GENERAL 
   MANAGER, AIRBUS NORTH AMERICA ENGINEERING, INC.; CRAIG S. 
   MULLINS, GENERAL MANAGER, LYONS MANUFACTURING; AND KEVIN 
  HAWLEY, PRESIDENT, AEROSPACE SYSTEMS AND TECHNOLOGIES, INC.

    Mr. Mica. We will go right ahead and, I will first 
recognize Jeffrey Turner, CEO of Spirit AeroSystems, Inc.
    Welcome, sir, and you are recognized today.
    Mr. Turner. Thank you, Mr. Chairman. Mr. Chairman and 
honorable subcommittee members, I want to thank you for this 
opportunity to address this important topic of "Keeping U.S. 
Aviation Manufacturing Competitive." this subject is of supreme 
interest to my company and to all of our industry.
    I am Jeff Turner, the President and CEO of a relatively new 
company, but one with a deep history of aviation manufacturing. 
Spirit AeroSystems is the world's largest independent tier-one 
supplier of aerostructures. Until June of 2005, we were a 
supplier division of Boeing Company.
    With headquarters here in Wichita, Kansas, and operations 
in Tulsa and McAlester, Oklahoma, we have 10 million square 
feet of facilities, and about 10,000 employees, about 8,500 of 
whom are here in Wichita. We have been engaged in aviation and 
aerospace manufacturing for over 75 years
    Our future is dependent on our ability to remain 
competitive globally. We strive to become the preferred partner 
to the aircraft industry supplying top quality fuselage and 
propulsion structures, wing components, and tooling services to 
original equipment manufacturers, the OEMs. In addition, we 
offer spare parts and after-market support to airline operators 
worldwide.
    We continue to be the largest supplier to the Boeing 
commercial product lines, and are actively marketing our skills 
and capabilities to other aerospace companies throughout the 
world. Our pending purchase of BAE Systems Aerostructures 
operations in Scotland and England is a prime opportunity for 
Spirit to diversify our revenue base, our geographic base, and 
grow as a world leader in our various capabilities.
    I do not believe our position on competitiveness is 
significantly different from that of other aviation 
manufacturers. Simply put, we want a level playing field upon 
which to compete in the global competition. Several factors can 
help or hinder our participation.
    The first is the funding for aviation research such as that 
here at Wichita State University's National Institute of 
Aviation Research. NIAR houses an FAA Center of Excellence for 
Advanced Materials and the NASA National Center for Advanced 
Materials Performance, and all three have helped us 
specifically compete with non-U.S. manufacturers.
    Second, the need for technical training continues to be 
essential to securing, sustaining, and retaining the skilled 
workforce needed to expand our business over the next decades. 
Projections for our community indicate that five major aviation 
companies in Wichita may need as many as 4,150 trained workers 
just this year alone.
    Third, attention must be given to developing U.S. 
engineering talent. Aerospace engineers are the source of 
future innovation that will provide American aviation 
manufacturers a competitive edge. Yet the supply is exceeded by 
the demand. At Spirit AeroSystems we hope to hire about 550 
engineers over the next 5 years.
    Fourth, capital is needed for product development, new 
process planning, and new equipment. It is a challenge for 
Spirit to compete against companies that seem to have an 
unlimited flow of public assistance to build facilities and 
fill them with equipment and trained people. This is especially 
true in developing economies that have targeted the aviation 
market.
    Fifth, health care is the number one rising cost for Spirit 
and other companies. Health insurance premiums jumped 75 
percent--73 percent over the last 5 years. Such escalation 
continues to be not only a source of competitive disadvantage 
for U.S. manufacturers in our industry, but also a considerable 
source of employee/company friction and overall employee 
concern for the future.
    Sixth, and finally, while protecting the national security, 
we must be able to compete internationally in an open and 
collaborative way. Appropriate import/export regulation 
measures are important, but they must be implemented reasonably 
with full understanding of their cost and their benefits.
    In conclusion, thank you again for the opportunity to speak 
today. This is a critical topic for Spirit AeroSystems. Our 
customers and our competitors are global and so must we be. The 
technology utilized in our products also is global, and our 
ability to work effectively throughout the world with both 
customers and partners is essential. To remain competitive, our 
U.S. industry must be supported with world-class research 
capability, engineering and technical training, and continuous 
investment in product, process, and equipment.
    Thank you.
    Mr. Mica. Thank you.
    We will now hear from Mr. William Greer, VP and General 
Manager of Airbus North America Engineering. Welcome, sir, and 
you are recognized.
    Mr. Greer. Mr. Chairman, thank you for affording me the 
opportunity to testify this morning, and also thank you for 
having this hearing in our town. My name is Bill Greer. I am 
the Vice President and General Manager of Airbus North America 
Engineering, which includes our facility here in Wichita and a 
new engineering center in Mobile, Alabama that will open its 
doors in early 2007.
    I have been involved in the industry for a lot of years, 
more than I would like to say, really. I joined McDonnell 
Aircraft in 1963 as a junior engineer working on the F4 
fighter. Since then I have worked or consulted for a number of 
companies, including Learjet which first brought me to Wichita 
in 1972.
    If I may, I would like to address three key topics with you 
today: What I see as the current state of U.S. aerospace, the 
factors currently driving American innovation, and lastly, what 
I see as the wisest course for the future. First, the current 
state of the industry.
    Mr. Chairman, I believe the experience Airbus has had in 
the United States and especially here in Wichita is quite 
relevant to the subcommittee's efforts to understand how to 
keep U.S. aerospace strong. I emphasize keep it strong because, 
in general, the current state of the aerospace manufacturing 
industry is good. And we at Airbus know this to be the case 
from firsthand experience.
    When Airbus looks for suppliers and business partners, it 
looks around the globe for the best quality, price, service, 
ongoing support and more than anywhere else Airbus finds these 
best suppliers, best supplier companies in the United States.
    Last year, Airbus spent $8.5 billion with our suppliers 
here in the U.S. for parts, components and systems and such 
items as rivets, wing panels and parts, hydraulic systems, 
landing gears, evacuation slides and engines, and that is just 
a short list. This number, $8.5 billion, represents about 46 
percent of Airbus's entire procurement budget for aircraft 
manufacturing. In fact, Mr. Chairman, more of Airbus 
procurement budget is spent here in the United States than any 
country in the world, including Europe. And as a result, Airbus 
has become the number one export customer of the U.S. aerospace 
industry.
    Our contracts with American industry in more than 40 States 
support 170,000 American jobs - the kind of jobs that are the 
backbone of the U.S. industry and U.S. economy. But this is 
only part of the story. That brings me to my second point.
    Airbus' partnerships with U.S. companies are also helping 
to drive innovation in the United States and sustain America's 
manufacturing competitiveness. I am going to give you one 
example. At our wing manufacturing plant in the North Wales 
town of Broughton, one name is displayed almost as prominently 
as Airbus, and that name is Electroimpact, a company from the 
Seattle area whose business originated with Airbus. And 
developing a wing that could lift the world's largest 
commercial aircraft, Airbus relied on Electroimpact's 
innovative engineers to design, perhaps, the most sophisticated 
tooling equipment the aerospace industry has ever seen. And the 
American engineers from this small company in Washington State 
rose to the challenge.
    Today, Electroimpact provides virtually all the tooling for 
the Airbus A380 wing. In addition to making this high-tech 
equipment here in the United States, Electroimpact employees 
from the U.S. worked side by side with the Airbus team members 
in North Wales, and thanks to its partnership with Airbus, 
Electroimpact is now a world leader in the field of high-tech 
tooling equipment.
    This story is especially relevant to this hearing. It is 
important to understand that what brought Airbus to 
Electroimpact was not cheap labor. What brought this company to 
Airbus was its engineering powers and its manufacturing 
excellence.
    Electroimpact is but one example of how our partnerships 
with United States industry produce cutting edge aerospace 
technology and equipment, which is a lifeblood of American 
competitiveness in this industry. And in my submitted testimony 
I have got several other examples as well.
    In sum, Airbus has gone from merely recognizing the 
competitiveness of U.S. aerospace technology through our 
purchases, to now sustaining this competitiveness through our 
partnerships.
    I am going to return to the theme of engineering prowess, 
Mr. Chairman. It was American know-how, again, that led Airbus 
to the United States. The Airbus North America Engineering 
Center was first opened here in Wichita in 2002 to help design 
the wings of the super-jumbo Airbus A380.
    Congressman Tiahrt--you may remember, he participated in 
our opening ceremonies and may remember that the facility was 
planned for only about 40 engineers of a certain type--I am 
delighted to report that things have changed since then. We now 
employ more than 200 engineers and we are moving to expand that 
very rapidly from that point, and we are working on all the 
Airbus products, the large airplanes anyway. We do the A380 
passenger, the A380 freighter, and the A340 and the A350.
    Now, Airbus Wichita would like to hire more engineers, 
including recent college graduates, but we are finding that 
supply is limited. This is a big concern for us, and I know it 
must be a big concern for the subcommittee as well. Several of 
the witnesses testifying have mentioned that already.
    In particular, the aging of the U.S. engineering community 
will result in an even more severe shortage of engineers within 
a decade or so, if the current trend continues. Unfortunately, 
the up-and-down cycles of our industry have taught young people 
that careers in aviation are risky. And who is to blame them 
when they are the very ones who lose their jobs in a down 
cycle?
    By the end of 2007, I will need more than 450 engineers at 
our Wichita and Mobile, Alabama, facilities. If I can't meet 
the expected demand with high quality experienced engineering 
talent available here in the United States, then I will not be 
able to continue to grow this company and maintain our 
competitive advantage in the global market.
    Now my third and final point, Mr. Chairman: the best way to 
secure American aerospace for the future. You see, I believe 
the key to remaining competitive is innovation, and one of the 
keys to innovation is to generate a large community of highly 
motivated engineers and scientists. From my vantage point here 
in Wichita, one thing is crystal clear. We must make this a 
national priority.
    I do understand that the President and Members of Congress 
have put forth several initiatives to address this issue, and 
as an engineer myself, and a manager of many others, I would 
offer some additional ideas I believe are worth considering.
    First as I mentioned, the key to remaining competitive is 
constant innovation. Once the process or a technology is 
matured, it will migrate to the lowest cost supplier. 
Consequently, American aerospace must identify the core 
competencies and continually upgrade them through the 
application of advanced technology. This subcommittee can help 
in that regard by spearheading incentives to continually train 
and retrain employees to produce complex assemblies through 
advanced technology.
    Second, the base of engineering talent must be increased 
through programs that encourage middle school and high school 
students to consider science and engineering as a desirable 
career choice. In addition, since over half the workforce are 
women and minorities, and traditionally these groups do not 
enter the engineering fields, special programs should be put in 
place to encourage their participation in engineering careers. 
Dean Toro-Ramos, of Wichita State University, has proposed such 
a program and one that I fully support.
    And lastly, funding for scholarships should be increased to 
allow any qualified student to have access to a technical 
education.
    This last idea is very important to me. Just before I 
graduated from high school, the Soviet Union launched the first 
Sputnik and our leaders responded to this challenge by putting 
scholarship programs in place to encourage more young people to 
enter the technical professions. I personally received a full 
scholarship from the State of Illinois for my engineering 
education which was based on ACT test results, and I would not 
have been able to attend university and wouldn't be talking to 
you today without that program.
    So, Mr. Chairman, I must ask that if the driver of 
competitiveness is innovation, then the key to innovation is 
competition itself, and in this or any industry, competition 
drives companies to develop products that are better, faster, 
stronger or more sophisticated than others. For the U.S. and 
aerospace industry competition results in greater fuel 
efficiency, more passenger comfort, increased ability to 
transport freight longer distances, and higher safety 
standards. And we have seen all these improvements over the 
course of years driven on large part by the helpful, beneficial 
competition between Airbus and Boeing in the marketplace.
    Competition-driven innovation led to the original Airbus 
A300, which drove Boeing to develop the 767. Then Airbus 
responded with the A330, while Boeing responded in turn with 
the 777 and now the 787. Now Airbus is creating our A350 as 
well as the A380 that I mentioned earlier. Competition drives 
innovation which drives competitiveness. This principle applies 
not just to the final product that Airbus and Boeing roll off 
the assembly line, but to nearly every piece of equipment that 
goes into these aircraft.
    This leads me back to where I started: keeping U.S. 
companies competitive with the rest of the world, and keeping 
companies such as Airbus and Boeing reliant on American 
manufacturing, will require America to remain focused on the 
fundamentals--investment in education, encouragement of 
innovative technologies, and support for robust competition in 
a global industry that thrives on innovation. With strong 
support from you and the members of this committee aerospace 
will continue to lead. Thank you very much.
    Mr. Mica. Thank you for your testimony, Mr. Greer.
    We will now hear from Craig Mullins, General Manager of 
Lyons Manufacturing. Welcome, and you are recognized.
    Mr. Mullins. Thank you, Mr. Chairman. Good morning. I am 
Craig Mullins, General Manager of Lyons Manufacturing, and it 
is an honor to be here today to give my testimony on keeping--
helping to keep U.S. aviation manufacturing competitive.
    Founded in '39, 1939, Lyons Manufacturing is a small 
company independently owned manufacturing machines--aircraft 
parts for commercial airplanes. We employ between 30 and 40 
people and one--we are one of the larger employers in the small 
town of Lyons, Kansas.
    I have worked at Lyons for more than 16 years and seen many 
changes take place in the aviation industry. My testimony today 
will cover some issues I feel hinders small businesses like 
ours.
    The first one, of course, has already been discussed is 
health care cost. In order to stay competitive with other 
employers in our area, we offer health care benefits to our 
employees. Over the years this has become more and more 
difficult due to the rising cost of offering this type of 
benefit. In the year 2000, our average annual premium for 
health care coverage for one individual was almost $5,000. In 
2005, that price increased to $11,000 annually. This is 120 
percent increase over the 5-year period.
    Needless to say, this is an expense that we pass on to our 
customers in the form of labor costs. Small companies like 
Lyons cannot continue to pay the increasing cost and stay 
competitive. Many small companies like ours are starting to 
drop health care coverage or pass the expense on to the 
employees. Every year there is a question of whether or not we 
should continue to offer health care benefits. The problem is I 
know that health care coverage is an important factor and a 
necessity to the employees. And I would lose many good people 
if that benefit would not be offered to them.
    The second factor is utilities. As in many manufacturing 
industries, utility usage is a main cost of producing goods. 
Over the last 5 years it has become an increase in expense for 
our company, and I don't see any--anything getting better in 
the near future. In year 2000, our expenditures for utilities 
was roughly 56,000. In the year 2005, it was roughly $76,000. 
This equates to about a 36 percent increase over 5 years.
    The third issue is labor. Aero structure suppliers like us 
are increasingly being forced to assume greater responsibility 
for supply chain management. If the knowledge and experience we 
possess are not adequate to undergo this kind of task, it is 
easy to fall short of our goals or our professional 
expectations.
    One of the biggest challenges will be in the education and 
training of our employees. One of the biggest challenges--
excuse me. Well-trained, educated people will make better and 
faster decisions based on unprecedented flow of data, 
information, and knowledge. Only trained and educated people 
will be able to separate useful information from useless 
information. Small towns like Lyons suffer from young adults 
leaving for college and never returning. Some young adults 
decide to stay, but never continue their education. Without an 
educated labor force, we will be left behind or unable to seize 
new growth opportunities.
    When I decided to continue my education at one of the local 
colleges here in Wichita, I found myself in a classroom of 
students working in the aviation industry. Practically all my 
classmates were receiving 100 percent tuition reimbursement 
from their employers. I remember being angry because my company 
could not afford to help me, and I had to pay to better my 
education for the benefit of the company. I am not saying I 
disagree with these companies providing education for their 
employees, but it is a problem for small companies to offer the 
same type of benefit.
    I would like to see Federal and State funding become more 
available for small companies to allow them to educate their 
employees. This would help us stay competitive in business and 
attract key employees.
    The fourth issue is material pricing and shortages. During 
the last year and a half, we have seen problems with 
availability of raw material and substantial price increases. 
Availability of aluminum and steel has created scheduling 
problems, production overtime, searching for other material 
suppliers and missed deliveries. Since we are a small company, 
we are unable to buy large quantities of raw material for 
better pricing, so we have seen price gouging due to shortages 
of this aluminum and steel plating.
    These are just a few topics that we are faced with in 
today's competitive industry. Even though we are a small 
company, we are one of thousands in this country, and I am sure 
companies small and large are facing these same issues.
    Again, I appreciate this opportunity to testify before this 
subcommittee.
    Mr. Mica. Thank you, Mr. Mullins.
    And we will now hear from Kevin Hawley, President of 
Aerospace Systems & Technologies. Welcome and you are 
recognized, sir.
    Mr. Hawley. Chairman Mica and members of the subcommittee, 
again, my name is Kevin Hawley. I am President of Aerospace 
Systems & Technologies, Inc., an aviation products company 
located in Salina, Kansas, 90 miles north of here. I wanted to 
thank you for this opportunity allowing me to testify and 
discuss topics, as I see it, for aviation business and 
maintaining our competitive edge.
    Our company is best described as a supplier to the aviation 
community, both to end users and original equipment 
manufacturers. We market ice protection systems to the general 
aviation field, from high performance piston powered aircraft 
to business jets. Our TKS ice protection system has become the 
standard for general aviation aircraft and we are realizing a 
tremendous growth in our business because of that product.
    Our company is a wholly owned subsidiary of CAV Aerospace, 
Ltd., of the United Kingdom. A majority of the components of 
the ice protection system are manufactured in the UK; however, 
a vast majority of the produced product, in terms of ice 
protection, is sold here in the United States, and our company 
acts as the focal point for that commerce.
    Our office here in Kansas is involved with TKS in four 
principal areas. First, design and engineering, certification, 
distribution, sales and marketing, and customer support.
    Maintaining business success and competitiveness in the 
aviation marketplace requires the fulfillment of a number of 
factors. Our location and infrastructure requirements are met 
exceedingly well by the Salina Airport Authority and the 
community of Salina. Most of our personnel needs are likewise 
met from within the community, both in staff and technical 
fields. As an example, Kansas State University in Salina has 
supplied many of our trade and technical personnel in terms of 
engineers and mechanics and will continue to be a resource for 
top notch recruits.
    There are, however, specific areas of concern relative to 
the success of our company and our product line. I would like 
to share those concerns with the committee and examples. There 
are three: first, certification and regulation, which you have 
heard much testimony about today; second, again, product 
liability; and third, recruitment of technical resource.
    As you can see, it is obviously a topic of almost everybody 
that has testified today, and I am just echoing that. I see 
certification as a potential log jam with future developments 
of our products. We have a good working relationship with our 
cognizant FAA representatives and appreciate the efforts they 
direct to our projects. We see, however, that the workload of 
the FAA continues to grow while staff size remains dormant or 
decreases.
    The overall effect is not a difficult concept to grasp. 
Program schedules can become more indeterminate as the FAA 
struggles to address programs. Program selection becomes more 
prioritized relative to FAA resources, potentially delaying 
response to our projects. Certification workload is transferred 
to companies via delegation increasing the demands on the 
company's resources from both a personnel and financial 
standpoint.
    I also find that the regulations are becoming more 
restrictive, but not necessarily to the benefit of the general 
public. Much, if not all, of the modifications and 
embellishments of the Federal aviation regulations have been 
accomplished with safety in mind. Pursuant of regulatory safety 
is the noblest of goals and an absolute requirement for 
aviation products, but not at the expense of introduction of 
safety products to the market.
    General aviation continues to evolve as a serious and 
realistic alternative to commercial airline travel. As they 
evolve, the aircraft must be equipped to address the many 
environments and conditions that commercial airline aircraft 
witness. General aviation is assuming the same responsibility 
as airlines by delivering occupants or passengers to a specific 
location at a specific time.
    Our ice protection products address one of those needs and 
rests on the fundamental principle of safety. TKS ice 
protection allows aircraft to safely exit or transition in 
flight ice encounters. Our product is born out of safety, yet 
its availability to the general public is often encumbered with 
the veil of regulatory safety. Our product is safe, reliable, 
and proven beyond any reasonable doubt, yet it is becoming more 
and more difficult and expensive to gain approval of our 
systems for the market.
    My next area of concern is a topic likely shared and as 
testified to today with all aviation businesses: Product 
liability. When queried about potential lawsuits, the reply is 
nearly unanimous. It is not a question of ever being sued; it 
is a question of when. It is a dark cloud that shades all of 
aviation businesses and threatens competitiveness by additional 
financial burden.
    Like most businesses, our company stands by its product and 
assumes responsibility for that product. Our responsibility 
quickly becomes warped and often exaggerated when litigation 
occurs. From my perspective, a majority of the burden is moved 
to the defendants with little responsibility placed on the 
plaintiffs. A company can be sued by anybody and those people 
allowed to fish for any evidence without overwhelmingly 
compelling evidence to support their position.
    My experience also indicates that the aviation industry is 
often treated unfairly by the litigation world. The concept of 
trial by peers is virtually non-existent because the court 
cases are often very technical when aircraft are involved.
    I do not advocate absolution of our responsibilities to the 
public and to our customers. I do, however, ask for a 
reasonable chance, within the legal system, to have a fair 
trial on unbiased terms. As an example, pre-trial arbitration 
may be one form of relief that could potentially weigh the true 
merit of a case. Likewise, the allowance of countersuit for 
damages may be another means of deterring frivolous lawsuits.
    General aviation has found relief with aged fleet of 
aircraft, but growth of new aircraft, new products and new 
innovation could be severely restricted by product liability.
    My final area of concern is, again, a common theme here 
today, and that centers around the most fundamental resource of 
any company: Its employees. Specifically, the recruitment of 
new employees. Earlier in my testimony I indicated that our 
location in Salina affords us a good source of local people for 
labor, both trade and technical. Our difficulty arises when we 
must recruit people from disciplines not available to us 
through the local educational resources.
    Our basic problem arises with recruitment of engineers. It 
is common knowledge and you have heard many times today that 
engineers are a shrinking commodity. We suffer from that every 
day. Aerospace/aviation business is good. As a matter of fact, 
it is great. But fewer and fewer kids are pursuing technical 
degrees within the United States. The end result is one that 
all the companies will suffer from, but particularly the small 
companies. A shortage of engineers will inflate the wage basis 
making it extremely difficult for small companies like ours to 
compete with large companies for a limited labor pool. Though 
it is contrary to the desire of most Americans, it is not 
difficult to understand why companies are outsourcing technical 
work. It is difficult to find the engineers to do the work.
    The concept, though, can be reversed for the benefit of 
companies, but roadblocks still exist. Thousands of foreign 
students come to the United States to obtain higher education. 
Many of those students would like to remain in the U.S. after 
earning their degrees, but are hampered by immigration policy. 
It will be extremely beneficial to all technical companies if 
immigration quotas were expanded for foreigners with technical 
degrees, particularly around the month of May. As an example, 
our company could recruit new foreign aerospace or aeronautical 
engineers from our own Regents' schools such as Wichita State 
and the University of Kansas.
    The answers to recruitment issues are not easy. As I 
indicated, modification of immigration policy would certainly 
help in the short term. For a long term solution, it is my hope 
that more young people can be encouraged to enter technical 
fields and pursue a technical career, and many examples of 
motivational techniques have been offered today. It is 
paramount that our technology base survives and assures our 
competitiveness in all fields.
    I thank you for having me here for the day. I will be happy 
to answer any questions when the time comes.
    Mr. Mica. Thank you.
    And we will first hear from our last witness waiting 
patiently, Mr. Finley Nevin, who is President of Global 
Engineering and Technology.
    Welcome, sir, and you are recognized.
    Mr. Nevin. Thank you, Mr. Chairman and I thank all the 
members of the subcommittee, especially Congressman Moran, for 
inviting me to be here today. I apologize for not having an 
outline or anything. I didn't do too well at that.
    My wife and I founded Global Engineering in 1991, to supply 
interior components, mainly cabinetry items to the local 
aircraft industry. We are now the--kind of the trickle-down 
effect of the--how the industry does here locally. If the local 
industries here do well, we do well. If they falter, we falter.
    We suffer many of the same pains that everybody else at the 
table has discussed so far: rising insurance costs that you 
have to debate whether to pass on to the employees or to keep 
offering it in order to be competitive, and draw the employment 
that we need to sustain growth.
    Many of the things that we have talked about here, the 
problems and issues that I have seen in my 30 years of being--
35 years of being in aircraft, center around a vast variety of 
things. One thing that is near and dear to my heart is the 
issue brought up earlier about the FAA. We participate in a STC 
program that we started almost 2 years ago for one of the local 
companies to get an STC for the aircraft. Through the problems 
with the manning of the local FAA, because of the short help, 
this project took entirely too long, slowed delivery and 
therefore affected jobs and everybody else.
    Insurance is an issue, as we heard, that everybody shares, 
and we are concerned with that. I am glad to be a part of this 
industry and watch the growth of it and see where we go. I 
don't have much to add past that. You have heard everything 
that I was going to talk about--thought about earlier, but I do 
appreciate being here.
    If I can answer any questions or anything, with what we do, 
I will be glad to do that.
    Mr. Mica. Thank you, Mr. Nevin. You are the only one that 
did it right. You summarized, and they all read their 
statements. So even though we tried to ignore you with no name 
plate, and took your working life away from you, you succeeded. 
Thank you.
    We will go into questions now and I am going to yield in 
reverse order to Mr. Tiahrt first.
    Mr. Tiahrt. Thank you, Mr. Chairman. I am noticing a common 
theme. It was in the first panel as well as this one. Health 
care costs are driving a lot of the burden that is on 
manufacturers, and it is something you really can't control, 
other than, Mr. Nevin, you called it insurance and I assume you 
meant health care insurance.
    Mr. Nevin. Health care. Workmen's comp, that is also 
increasing.
    Mr. Tiahrt. Which I put in a different category. We need to 
do lawsuit reform to keep your liability insurance costs down 
as well as health care reform to keep your health insurance 
costs down. So I think that common theme is important for us to 
make a mental note of because it is a huge problem. It is 15 
percent of our economy today.
    Health care is 15 percent of the economy. It is the fastest 
growing segment of our economy. That is good in the job 
perspective; it is bad from the cost perspective. It is one of 
the things that makes us less competitive.
    You mentioned, Mr. Nevin, as well as Mr. Hawley, and I 
think almost everybody, the FAA problems as far as getting--
being undermanned. Could you tell me how you--Mr. Hawley, let 
me start with you.
    Could you tell me how you interface with the FAA and what 
their funding shortfall--how those problems have affected you 
day-to-day.
    Mr. Hawley. It is very similar to what you heard earlier, 
except us being a small company, and I am an engineer by 
training and I still do a fair amount of engineering work. That 
is the benefit of a small company, wearing many, many different 
hats.
    I would say the biggest downfall is just the time factor. I 
mean, quite frankly, like I said, we have a great relationship 
with our local aircraft certification office. Nowadays you come 
in the door with a program, and in the old days pretty quickly, 
you know, you would get a reply letter with what the project 
number is.
    Nowadays standard order of operation is they give you a 
letter that tells you within 30 days, they'll tell you if they 
can do the project or not. Now, imagine trying to plan any kind 
of business operation around that to start with, an additional 
product, so it is--
    Mr. Tiahrt. Are you saying that it is feasible that you 
could come up with an innovative product, but because of their 
lack of funding, which is not--they are good, quality people. 
It is not anybody here's responsibility. They just can't get to 
it. You had a new product that could not make it to market 
because they couldn't certify it.
    Mr. Hawley. Absolutely. I think about it often, what life 
would be like now if I was starting over what we did 20 years 
ago, and I don't think we could pull it off because quite 
frankly, like all small companies, we were pretty ignorant on 
the subject and knew what we were doing, but in those days, you 
know, the FAA helped us along, guided us in the right 
direction, and now we have evolved over 20 years.
    If somebody is trying to come into the market now with an 
innovative product, you know, they better have a big wad of 
cash in their pocket to go hire the help because they won't be 
able to do it on their own like we did then. So it is quite 
feasible that people and even existing companies can run into a 
substantial roadblock and not get their product out there. 
Just--a lot of it just depends on what the visibility of your 
company is, what the visibility of the product is, and what the 
visibility of the issue is. So that is the distinct problem we 
have.
    Now, there is also--there was a lot of talk, particularly 
from Cessna, on delegation. Delegation is good and it is bad 
also. It is tough for small companies--there are lots of 
companies that have brought products to market and certified 
them that didn't have the technical basis and the FAA actually 
fulfilled that role.
    Early on we were that way. Now, we have delegations in our 
company and will continue to go that route, but it is kind of a 
two--a double-edged sword, depending on the size of the company 
and what you are trying to do. It does help us out on a day-to-
day basis. We can get a lot of things done. But still, even in 
a delegation process, you never quite know if the oversight is 
going to come in and put the hammer down on you or not. Will 
they accept what you--what you said was good and certifiable or 
will they throw it back at you?
    So it is--I don't know. I don't know quite what the answer 
is, other than the fact that they do need more manpower. Our 
local ACO staff virtually dropped, I would say, 50 percent in 
size from the last few years by staffing in another office, but 
yet nobody was brought in to fill those gaps. So it is just a 
timing thing, and it directly applies in the different projects 
in streaming them out .
    Thank you, Mr. Chairman. I know I have some other 
questions, but in deference to time, I know that Mr. Moran has 
to get on, so I am going to stop.
    Mr. Mica. I would yield now to Mr. Moran.
    Mr. Moran. Thank you.
    Mr. Chairman, Mr. Ehlers and Mr. Tiahrt would know this, 
but Mr. Hawley and Mr. Nevin come from my urban areas of my 
district, populations of between 40- and 50,000 in their 
communities. Mr. Mullins would come from a more typical-sized 
community, the First District of Kansas, 2,500 to 3,000 people.
    And I guess one of the things that I would--I think what I 
have heard today, and especially from you, Mr. Hawley, what you 
just said in response to Mr. Tiahrt is that small business has 
an even more extraordinary hurdle with certification, with 
regulatory issues because of the inability to have the 
expertise, the personnel, the ongoing relationship, I suppose, 
with the FAA. And in the process, as a result of that, I assume 
that that means it is less likely. You say about--let me finish 
that sentence. It is less likely to have entry into aviation 
manufacturing that we will not see as we saw here historically 
in Kansas, especially here in Wichita, the start-up of aviation 
companies because of the impediments, the hurtles. And we all 
can complain about how business keeps getting larger and 
larger, and yet I assume that that regulatory burden is one of 
the factors that makes that occur.
    Is that an accurate assessment?
    Mr. Hawley. Yes, it is.
    It is--I testified to that earlier. It is becoming more and 
more difficult because the regulations themselves continue to 
evolve. There is more burden from that, plus from our 
perspective as a small company, again, it is the delegation, 
like you said, pushing more and more of this requirement into 
our company; and we aren't a huge company by any means.
    We are capable of dealing with parts that I, myself--I am 
the resident designated engineering representative, and I can 
handle certain disciplines of it, but there are other 
disciplines that aren't elements within our programs that we 
can't possibly afford to have a full-time person, and we have 
to contract that out. And that kind of--that kind of almost 
demanded outsourcing becomes more and more expensive for us all 
the time. And I just have a difficult time imagining, you know, 
new companies coming into it.
    Quite frankly, every aviation company in Kansas, in one 
fashion or another, was a mom-and-pop operation somewhere along 
the line, and it is just not possible to do that.
    Mr. Moran. Mr. Mullins, the employment history at Lyons 
Manufacturing, is it up and down? Are you historically good or 
high or low levels, and what percentage of your employment is 
related to aviation manufacturing?
    Mr. Mullins. Of course, we are 100 percent aviation 
manufacturing. Definitely after 9/11 we sustained a 30 percent 
drop in our employment level. So the 40 range is more of a 
general area that we employ during peak times. Of course, 
during aviation--I mean, we are all prone to the history of the 
ups and downs, just like anybody else is, so--
    Mr. Moran. Let me ask a broader question. What concerns 
me--maybe this is Mr. Greer or Mr. Turner, but any of you, we 
all know what happened to the aviation industry post 9/11, and 
testimony today has been that the aviation industry is in good 
shape. Things are much improved than they were during that 
period of time. But what concerns me is that I don't think we 
made any changes in our policies. That we have not made any 
structural changes in the industry. It is just that the general 
economy improved and therefore, the testimony that you all 
provide today is extremely different than it would have been 
three years ago, but yet I don't know that we learned anything 
from 9/11.
    And my question is, are there things beyond what has 
already been said that we should learn today, and action that 
we should take so that when the difficult times return, the 
aviation industry is better capable of weathering the storm?
    Mr. Turner. I would like to--first of all, Congressman, I 
think that is a very perceptive point, and we have talked about 
several things that drive our costs which are not sensitive to 
the cycle, like health care, but I do believe we have all 
talked about--Janet Harrah talked about the fact that we have 
an aging workforce. We talked about technical training. We 
talked about--we talked about engineering, education, and now 
you brought up this point about the cycle. I think the fact is 
that we exist in an industry that is cyclical. We exist in an 
economy that is cyclical, and the longer term view is extremely 
important, I believe. The south central Kansas area is working 
very hard collaboratively, State, local, the industry, to 
create a technical training, a center of technical training 
excellence, which I think is essential for economic 
development. I believe economic development is driven by the 
technical training and education systems.
    I think there is a policy opportunity here because our 
industry will cycle again, and when it cycles again, we will 
have two choices. One is to operate like we always have, which 
is businesses layoff people or scale back. Government scrambles 
for what they should do with the down-turned economy, and we 
all come up with good ideas that are implemented about the time 
that the industry comes back and the cycle begins to rebound, 
and we no longer need it. So I think there is a policy 
opportunity here to get ahead of the cycle. We will have 
another down-turn. We don't know when it is. We have the 
opportunity if we will--if we will create a world-class 
technical training capability here in south-central Kansas for 
our cluster. When the downturn comes, we have the opportunity 
to switch policy and work together, government and industry, to 
retrain our people during the down-turn and have them available 
on the up-turn again.
    So that is not something that I--that I have heard proposed 
or heard talked about, but I think it is an opportunity to use, 
both public and private resources and a long-term view to be 
prepared for both the downside and the upside.
    Mr. Greer. I will add a couple points to that. I agree with 
everything he said, but the thrust of the matter is just that 
the up cycle always returns, and the best time to prepare for 
that is during the down cycle, and the things that Mr. Turner 
mentioned are good.
    Also, perhaps, making it a little easier for our customers 
to purchase capital equipment through tax policy would 
encourage at least a flow of product during those down-times. 
That might be a good idea.
    Mr. Moran. I thank you all for your testimony, and I thank 
the Chairman and Mr. Ehlers for coming to join Mr. Tiahrt and 
me in Kansas, and I thank Mr. Hawley and Mr. Mullins and Mr. 
Nevin for coming to Wichita today and presenting your 
testimony.
    I have a funeral to attend today, and I am going to depart, 
but I will make certain that I know what further questions and 
answers there were. Again, this is such an important issue to 
us, and I appreciate the testimony that I have heard today.
    Mr. Mica. Thank you, again, Mr. Moran, and thank you for 
your hospitality.
    We will now recognize Mr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman.
    And, Mr. Moran, before you leave, I just want you to know, 
I grew up--spent the first 14 years in a town of 800, then 
moved to a town of 250 for my high school years. I have a great 
appreciation for your district. I find some of the most 
innovative people in America living in these small communities 
because they have to make do. And you pointed out, as an 
engineer you had to do everything. A lot of people have to do 
that. It is a real strength for our country.
    Mr. Moran. I appreciate, Mr. Ehlers, you have that respect. 
I was also going to suggest particularly to Mr. Greer and Mr. 
Turner, they might network with Mr. Hawley and Mr. Nevin about 
potential contracts. We would love to see that business.
    Mr. Ehlers. All right. Thank you.
    On the regulatory delay issue, I have sort of a rule of 
thumb, if you have to wait for something you are probably 
dealing with the government and--because in the private 
sector--I have actually switched banks because I had to wait 
too long in line at the bank. I switched to another bank that 
kept the line shorter. The same thing at supermarkets.
    I have always valued time. I hate to stand in line. If I 
have to wait in line at the supermarket, I start going to 
another one. We don't have that choice with the government.
    Now, we have dealt with that in an unusual way with 
passports because some people wanted to travel and they applied 
for the passport too late to wait two months for a passport. We 
charge an extra fee so you can get expedited service. And in a 
day or two you can get a passport, if you pay the extra fee.
    I hesitate to recommend that we start that with the FAA 
because I am afraid the fee would get higher and higher, but 
frankly, given the situation as it is, it would be economically 
better for you to pay a fee and get it in a month rather than 
not pay a fee and have to wait 2 years. It is a problem we have 
to address, and I certainly don't want to take that route, but 
it is ridiculous that you have to wait on the government and 
lose money because we are not appropriating enough money for 
the FAA to do what they are supposed to do, and I will 
certainly be happy to join with any interested Congresspersons 
in trying to change that.
    Mr. Turner and Mr. Greer and, in fact, most of you talked 
about either need for more engineers or need for better 
education. I have devoted my life to that. It is extremely 
frustrating. I wish all of my colleagues in the Congress could 
have heard your testimony because most just don't realize the 
need. They hear about it, but they don't feel it the way you 
do. And so I urge you to, through your national associations, 
really impress the need to Congress.
    I have mentioned getting bills passed of doing much of what 
you want, but when it comes to the appropriations, the 
appropriators don't put the money into the programs, and we 
just have to hear more from you in Congress so that we do that.
    The other thing, Mr. Hawley, I was interested in your 
comments about is the lack of engineers. Believe it or not, we 
have a surplus of engineers in some areas that are not working, 
and maybe one of the quickest ways to meet your needs is 
through a retraining program.
    And I am fascinated with Mr. Turner's suggestion of during 
a recession, take advantage of that time to train engineers, 
perhaps even to switch them from civil engineering to 
mechanical engineering or in some way meet the needs of the 
market better. It is crazy to have a shortage of engineering 
and have unemployed engineers at the same time. So you have 
given me a lot of things to think about and I really appreciate 
the testimony.
    I really don't have any questions because your testimony is 
crystal clear and the message was the same from all of you, and 
I appreciate you coming here to say it. Thank you.
    With that, I will yield back.
    Mr. Mica. I thank you, Mr. Ehlers.
    Also, again, I want to express my appreciation to Mr. 
Tiahrt for hosting us here at the university, and I want to 
thank each of the witnesses on this panel and our previous 
panel for their testimony and participation, especially our 
small business participants. When you are the chief cook and 
bottle washer, taking time off to be with us is difficult, but 
it is especially important that we take the issue of 
competitiveness out here to the heart of aviation manufacturing 
and hear from you.
    The good news is, some of what we heard was positive as to 
where we are now. The challenge we face, of course, is keeping 
ahead of the curve, and then addressing all the issues that 
were raised here, health care, insurance, liability, 
certification, competing as the world grows flatter, as one of 
the witnesses testified.
    So we welcome your participation today, and Congress is 
involved in an ongoing process of changing the laws and our 
policies and programs hopefully to assist you so we can be 
successful together. So there being--as I mentioned, too, we 
couldn't have everybody testify in Wichita. We have dozens, 
hundreds of companies as we have heard and learned. We do 
welcome additional testimony from anybody who would like to 
submit it to the members here or to me as Chair. It will be 
made part of the official record, and we will include that in 
today's testimony. So the record will be open for a period of 2 
weeks.
    There being no other business to come before the House 
Aviation Subcommittee, I declare this hearing adjourned. Thank 
you.
    [Whereupon, at 12:30 p.m., the subcommittee was adjourned.]
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