[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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