[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




                  GROUNDED: HOW THE AIR TRANSPORTATION
                    CRISIS IS HURTING ENTREPRENEURS
                            AND THE ECONOMY

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

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             JUNE 26, 2008

                               __________


            Small Business Committee Document Number 110-103
Available via the GPO Website: http://www.access.gpo.gov/congress/house

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


HEATH SHULER, North Carolina         STEVE CHABOT, Ohio, Ranking Member
CHARLES GONZALEZ, Texas              ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington              SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona               TODD AKIN, Missouri
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas                 STEVE KING, Iowa
DAN LIPINSKI, Illinois               JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin                LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa                   DAVID DAVIS, Tennessee
YVETTE CLARKE, New York              MARY FALLIN, Oklahoma
BRAD ELLSWORTH, Indiana              VERN BUCHANAN, Florida
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii

                  Michael Day, Majority Staff Director
                 Adam Minehardt, Deputy Staff Director
                      Tim Slattery, Chief Counsel
               Kevin Fitzpatrick, Minority Staff Director

                                 ______

                         STANDING SUBCOMMITTEES

                    Subcommittee on Finance and Tax

                   MELISSA BEAN, Illinois, Chairwoman


RAUL GRIJALVA, Arizona               VERN BUCHANAN, Florida, Ranking
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana              STEVE KING, Iowa
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania

                                 ______

               Subcommittee on Contracting and Technology

                      BRUCE BRALEY, IOWA, Chairman


HENRY CUELLAR, Texas                 DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania             TODD AKIN, Missouri
                                     MARY FALLIN, Oklahoma

        .........................................................

                                  (ii)


























           Subcommittee on Regulations, Health Care and Trade

                   CHARLES GONZALEZ, Texas, Chairman


RICK LARSEN, Washington              LYNN WESTMORELAND, Georgia, 
DAN LIPINSKI, Illinois               Ranking
MELISSA BEAN, Illinois               BILL SHUSTER, Pennsylvania
GWEN MOORE, Wisconsin                STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          MARILYN MUSGRAVE, Colorado
JOE SESTAK, Pennsylvania             MARY FALLIN, Oklahoma
                                     VERN BUCHANAN, Florida

                                 ______

            Subcommittee on Rural and Urban Entrepreneurship

                 HEATH SHULER, North Carolina, Chairman


RICK LARSEN, Washington              JEFF FORTENBERRY, Nebraska, 
MICHAEL MICHAUD, Maine               Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana              DAVID DAVIS, Tennessee
HANK JOHNSON, Georgia

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, PENNSYLVANIA, Chairman


CHARLES GONZALEZ, Texas              MARY FALLIN, Oklahoma, Ranking
RAUL GRIJALVA, Arizona               LYNN WESTMORELAND, Georgia

                                 (iii)



















                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Chabot, Hon. Steve...............................................     2

                               WITNESSES

Dow, Mr. Roger, President and CEO, Travel Industry Association...     4
Ruden, Mr. Paul, Sr. Vice President, Legal & Industry Affairs, 
  American Society of Travel Agents..............................     6
Gallagher, Mr. Mike, President, CityPass, Napa, CA...............     8
Faberman, Mr. Edward P., Executive Director, Air Carrier 
  Association of America.........................................    10
Mitchell, Mr. Kevin, Chairman, Business Travel Coalition, Radnor, 
  PA.............................................................    12
Segerberg, Ms. Terry, CEO, Mesa Industries, Inc., Cincinnati, OH.    14

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    28
Chabot, Hon. Steve...............................................    30
Dow, Mr. Roger, President and CEO, Travel Industry Association...    31
Ruden, Mr. Paul, Sr. Vice President, Legal & Industry Affairs, 
  American Society of Travel Agents..............................    34
Gallagher, Mr. Mike, President, CityPass, Napa, CA...............    46
Faberman, Mr. Edward P., Executive Director, Air Carrier 
  Association of America.........................................    49
Mitchell, Mr. Kevin, Chairman, Business Travel Coalition, Radnor, 
  PA.............................................................    60
Segerberg, Ms. Terry, CEO, Mesa Industries, Inc., Cincinnati, OH.    67

                                  (v)




















 
 GROUNDED: HOW THE AIR TRANSPORTATION CRISIS IS HURTING ENTREPRENEURS 
                            AND THE ECONOMY

                              ----------                              


                        Thursday, June 26, 2008

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:10 a.m., in Room 
1539, Rayburn House Office Building, Hon. Nydia M. Velazquez 
[Chair of the Committee] Presiding.
    Present: Representatives Velazquez, Shuler, Larsen, 
Altmire, Ellsworth, Chabot, Akin, Buchanan.

           OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ

    Chairwoman Velazquez. Good morning, everyone. And to the 
witnesses here, I am sorry for being so--this is not our 
committee room, but this is Washington. So our committee room 
is under renovation and it was supposed to be finished, but it 
will take much longer. So I call this hearing of the House 
Small Business Committee to order.
    Commercial air travel has been a mainstay of the economy 
since the 1940s. As the industry has evolved, businesses in 
both small towns and big cities have gained access to markets 
previously thought unreachable. Today air flight continues as 
the mainstay of our country's trade and business travel. It not 
only drives the Nation's $740 billion tourism industry, but it 
also sustains the economy. Virtually every sector depends on 
the speed, reach and relevant convenience. Without airplanes, 
commerce as we know it will very simply cease to exist.
    But now in the face of grave industry challenges, air 
travel has come to be as much of a hindrance as it is a help. 
Today we are facing what can only be described as an air travel 
crisis. Last year, flight delays alone accounted for 20 percent 
of total air travel time and, according to the Travel Industry 
Association, proved to be far more than just an inconvenience 
to travelers. In fact, TIA estimates that delays dealt a $41 
billion blow to an already struggling U.S. Economy. It 
accounted for $12 million in lost productivity.
    It seems airport waiting areas have become virtual black 
holes for business travelers and it gets worse. These delays, 
when paired with soaring fare rates and exorbitant new 
passenger fees, are costing the economy an additional $26.5 
billion. With prices skyrocketing and convenience plummeting, 
millions of Americans are turning away from the airlines 
altogether.
    Just last year, travelers opted out of 41 million domestic 
flights. These avoided trips are costing the U.S. economy 
billions of dollars, the brunt of which has been borne by our 
entrepreneurs. Small firms make up 97 percent of the travel and 
tourism industries which drive a multi-billion dollar sector of 
the national economy and have been hard hit by declining air 
travel. Perhaps not surprisingly, close to one-third of the 
economy's $26.5 billion setback has been shouldered by the 
entrepreneur driven hospitality sector.
    The fallout of America's air travel crisis has reached 
beyond the travel and tourism sectors to threaten a myriad of 
other related businesses. In 2007, industries that relied on 
air travel suffered losses close to $10 billion. For these 
small business dominated sectors of the economy, the future 
effects will be twofold. On the one hand, tourists may decide 
to forego certain trips altogether. The other possibility is 
that travelers will simply scale back their travel 
expenditures, taking a chunk out of the entrepreneur driven 
hospitality industry. Already we are seeing hotels slash room 
rates in an attempt to attract these increasingly cost 
conscience travelers.
    But consumers are not the only party suffering from our 
broken air travel system. A lack of runway capacity and 
regulations has forced many small airlines into bankruptcy and 
as these businesses fail, passengers are faced with fewer or 
more expensive choices. This means that small firms in certain 
regions will have less access to diverse markets and clients.
    Entrepreneurs currently make up 97 percent of exporting 
businesses. In our increasingly global economy, the last thing 
we need to do is create new roadblocks for them.
    There is not one single solution to these problems and 
anyone who suggests otherwise is oversimplifying a very complex 
set of issues. Before attempting to tackle these challenges, 
there are a series of concerns we must address. Not least of 
all is a severely deteriorated and inefficient infrastructure. 
As a result of this, airports are unable to accommodate today's 
volumes of planes and passengers. If we are to it ease the 
congestion and curb delays, then we must first focus on 
improving and expanding airport infrastructure both on the 
ground and in the sky.
    America's airline travel system is broken. Massive delays 
and rising ticket prices are pushing the problem beyond the 
point of inconvenience. It is now a serious threat to both 
small businesses and our national economy.
    In today's hearing, we will discuss the current air travel 
system's effect on small businesses and explore potential 
solutions for what has truly become a crisis in our skies.
    I want to thank all the witnesses in advance for their 
testimony. The committee is pleased they could join us this 
morning and looks forward to their insights on these issues. 
With that, I now yield to the ranking member, Mr. Chabot, for 
his opening statement.

                OPENING STATEMENT OF MR. CHABOT

    Mr. Chabot. I thank the gentlelady for yielding and for 
holding this important hearing on the impact of rising air 
travel costs. I would also like to thank all of our witnesses 
who have taken the time out of their very busy schedules to 
provide testimony to the committee here today, and I want to 
extend a special welcome to a fellow Cincinnatian, Terry 
Segerberg, who I will introduce in a little while.
    Record high oil prices are causing airlines to downsize 
capacity, eliminate destinations and raise fares, even as 
demand for their services remains high. In 2000, passenger and 
cargo carriers spent $16 billion on jet fuel. That was back in 
2000. Last year they spent $41 billion and they are expected to 
pay $61 billion this year. So from 16 to 61 in the course of 8 
years. This rise in jet fuel will ground millions of travelers.
    The full impact of the service cuts and increased costs 
won't be felt until 2009 because most aren't slated to go into 
effect until this fall. By this time next year there could be 
as many as 20 percent fewer seats available. That would be like 
shutting down a carrier the size of American Airlines.
    Rising costs and reduced access of air services is 
impacting the entire economy. Small businesses consistently 
rank as one of the hardest hit sectors when it comes to 
fluctuating costs and remain particularly vulnerable to the 
continuous rise in the cost of air travel and cargo. At the 
same time, these small businesses are coping with a near 
recessionary economic environment coupled with an increase in 
the overall cost of doing business.
    In particular, small companies are being hit with rising 
energy costs and rising employee health insurance costs. 
Because these firms often have razor thin margins and very 
competitive pricing, passing on the cost increase to the 
customers could result in loss of sales. Over the long term, it 
could cost them their business itself. They could literally go 
out of business.
    The impact of high cost of jet fuel and air service for 
companies such as airlines and resorts and hotels is 
particularly significant. Unless action is taken by Congress, 
conventional oil supplies will remain tight in the years ahead. 
Fuel is currently the largest expense for airlines.
    By authorizing exploration and production on the Outer 
Continental Shelf, for example, and Alaska, including the 
Arctic National Wildlife Refuge, or ANWR, with reasonable 
environmental safeguards, we would increase domestic 
production. This would keep the cost of oil from rising as fast 
and make us less dependent on foreign oil. It would also give 
the Nation needed time to develop diversified fuel sources, 
including clean coal and nuclear energy, and develop and 
implement a balanced coherent national and global energy 
policy.
    A majority of Americans now support opening up areas to 
drilling. A recent Gallup poll shows that 57 percent of 
Americans support opening up these and other new territories to 
drilling, while a Wall Street Journal-NBC News poll conducted 
this month said it was up to 59 percent, and the most recent 
poll available from Fox News said it is 76 percent. That was as 
of just a couple of days ago. They say essentially drill now. 
And I think it is absolutely critical that we do that if we are 
going to benefit this industry which has been hit so hard 
because of the rising costs and everything, as I said, from 
health care costs to fuel costs, et cetera.
    So, Madam Chair, I look forward to working with you as 
always on this very important issue, and we want to thank all 
the panel members for providing their testimony that we are 
looking forward to here today, and I yield back the balance of 
my time.

    Chairwoman Velazquez. Thank you, Mr. Chabot. And it is my 
pleasure to welcome Mr. Roger Dow, who is the President and CEO 
of the Travel Industry Association. Prior to joining TIA, Mr. 
Dow was Senior Vice President of Global and Field Sales at 
Marriott International. TIA is the national umbrella 
organization representing all segments of the $740 billion U.S. 
travel and tourism industry.
    Welcome. And you have 5 minutes.

STATEMENT OF MR. ROGER DOW, PRESIDENT AND CEO, TRAVEL INDUSTRY 
                          ASSOCIATION

    Mr. Dow. Thank you, Chairwoman Velazquez and Ranking Member 
Chabot, and all the distinguished members of the committee. I 
appreciate the opportunity and the honor to testify before you 
this morning.
    The Chairwoman has described the Travel Industry 
Association. I will skip that and really get down to what the 
point is, that all businesses in the U.S. depend on reliable 
and efficient air travel to conduct their business, to stay 
connected to both their customers and their suppliers. Many 
economic studies show that access to an airport is one of the 
most important factors in creating an environment where small 
businesses can flourish.
    Entrepreneurs depend on reliable air service to raise 
capital, to make sales, to develop their supply chains. It is 
no accident that a significant technology corridor has 
developed right here in our hometown in Washington, right in 
the Dulles International Airport corridor, because the airports 
feed business and business feeds airports.
    I know that both the chairman and the ranking member 
appreciate the importance of airports, whether it be in greater 
New York airports or Cincinnati, to the vibrancy of your 
communities and to your businesses. The bottom-line is, though, 
all businesses of all types depend on air travel.
    The problem America faces today is not just about airlines, 
it is really about the whole air travel system, which is in 
steep decline. It is not a problem solely for the aviation 
community, but for businesses all across America.
    TIA represents the breadth of the travel community from 
travelers to hotels, to restaurants, airlines, theme parks, 
destinations, many others. While less than 1 percent of our 
membership is the airline aviation community, all members are 
really feeling the pinch of this deteriorating system.
    That is why we partnered with two of the Nation's premier 
political polling firms to do some research to understand 
travelers' concerns with the air travel process and what 
effect, if any, those concerns are having on their decisions to 
fly.
    While much attention has been on recent days in the media 
on high fuel prices and new fees, we believe the air travel 
problems are more fundamental and longstanding. A survey that 
we had did not focus on the price of fuel or on the recent cost 
increases. We looked at the systemic issues that have only been 
amplified by these rising costs and the cuts in capacity.
    The survey was conducted between May 6th and May 13th of 
this year by Peter D. Hart Research and by the Winston Group. 
They interviewed a random sample of 1,000 air travelers. These 
are Americans who take at least one ground trip per year during 
the past 12 months and the results are surprising. We found 
there is a deep frustration that led them to avoid an estimated 
41 million flights. We estimate that reflects a direct loss to 
the economy of $26 billion, 9 billion to the airlines, almost 6 
billion to hotels, 3 billion to restaurants, and 4 billion to 
tax revenues, both Federal, State and local.
    As you know, Senator Schumer and Congresswoman Maloney also 
issued a study there from the Joint Economic Committee and on 
the direct--indirect impact of this and they looked at wasted 
time, wasted fuel, lost productivity and they put up a number 
of $40 million. So when you combine our direct costs, loss and 
the indirect cost, we are talking about a $70 billion problem 
to the U.S. economy.
    Today's news said that we are not in a recession yet, but 
when we are talking about $70 billion, these kind of numbers, 
they are very serious to the impact of our economy.
    Our survey further revealed that businesses suffer from an 
unreliable and inefficient air system. Most important, frequent 
flyers said they are most dissatisfied with the system. The 
opportunity costs of lost--of not making that sales call, not 
going to a meeting, not making that site visit are 
incalculable. It is a frustrating and unreliable system, and it 
is really the sand in the gears of American entrepreneurship, 
and this is a very real and growing problem.
    The traveling public said that it is unlikely that they see 
this solved in the near term. More important, frequent flyers 
are more frustrated and doubt that it can be solved.
    One of the more surprising findings is that the frustration 
is not primarily directed at the airlines. Despite the 
avalanche of negative publicity the airlines have received, 
surveys shows that air travelers are most frustrated with the 
process, inefficient security system, flight delays due to our 
antiquated air traffic control system. This is important 
because the air traffic control system and security system are 
government functions that need to be focused on. The travelling 
public is very dissatisfied with both of these areas and hopes 
that Congress will act to seek improvement.
    Another interesting result is these are all voters. 90 
percent of these people are voters, and this issue is going to 
be percolate to be one of the key issues in upcoming elections.
    At TIA we are hearing this loud and clear. We don't have 
all the answers by any means. We do know that America needs an 
urgent and serious commitment to fixing this problem. I think 
we all need to work together to not have a second class system 
but to have a world class system.
    Attached to my testimony is an overview of the survey and 
our survey results, and I will be happy to answer questions 
later. Thank you.
    [The prepared statement of Mr. Dow may be found in the 
Appendix on page 31.]

    Mr. Chabot. Madam Chair?
    Chairwoman Velazquez. Yes.
    Mr. Chabot. I would ask unanimous consent to speak out of 
order for a moment.
    Chairwoman Velazquez. Sure.
    Mr. Chabot. Thank you. I just thought people might like to 
know that the United States Supreme Court just issued their 
decision on the D.C. gun ban or the law that does not allow 
Washington residents to have a gun in their home. And they 
struck it down. So I don't know if it was 5-4 or what the 
numbers were. But it was struck down by the U.S. Supreme Court. 
They just announced it.
    Thank you.
    Chairwoman Velazquez. Sure. We are going to wait a second 
here to fix the timer. Okay. Thank you.
    Our next witness is Mr. Paul Ruden. Mr. Ruden is Senior 
Vice President of Legal & Industry Affairs of the American 
Society of Travel Agents. With 20,000 plus members, the 
American Society of Travel Agents is the world's largest 
association of travel professionals.
    Welcome.

STATEMENT OF MR. PAUL M. RUDEN, SENIOR VICE PRESIDENT, LEGAL & 
      INDUSTRY AFFAIRS, AMERICAN SOCIETY OF TRAVEL AGENTS

    Mr. Ruden. Thank you, Madam Chairwoman, Ranking Member 
Chabot and distinguished members of the committee. We thank you 
for holding this hearing on a topic of great interest to small 
business consumers and the travel agents who serve them.
    All ASTA travel agency members from the small, traditional 
storefronts to the major on-line retailers, meet the travel 
counseling and planning needs of the full gamut of travelers 
from individuals through small companies, to the large managed 
travel accounts of our country's largest corporations.
    The subject matter of today's hearing is familiar to nearly 
every American. Everyone has a story to tell about disrupted 
travel plans. The disruptions that the airlines call irregular 
operations play no favorites. Tourists, business travelers, 
first-time flyers, frequent flyers, young and old, healthy and 
infirm are all affected at one time or another.
    The symptoms of a systemic crisis are clear. Last year was 
the worst year on record for flight disruptions. On-time 
performance during the first 4 months of 2008 was the second 
worst in 14 years that this data has been collected. The demand 
for air space and runway space simply exceeds the supply, and 
the imbalance is not going to get better very soon.
    Economics textbooks tell us that an excess of demand over 
supply produces a price increase, and so it does. But in the 
present context, the price increase is manifested in a 
multitude of ways. The air travel system and the vast tourism 
network that depends on it are beset with unprecedented fuel 
prices, airspace and airport congestion, consolidation, 
environmental issues and now also fare unbundling.
    Unbundling is the practice of separately pricing travel 
elements once thought to be an inherent part of the services 
covered by the air fare. In addition to fuel surcharges, we get 
almost daily announcements of new fees for baggage, charges for 
soft drinks and add-ons for aisle seats.
    While tarmac flight delays capture most of the headlines, 
they are only one result of the systemic problems the industry 
and the country face. The defeated expectations of travelers 
have economic implications far beyond the immediate 
inconvenience. These effects extend to tourist attractions, 
cruises, restaurants, hotels, rental car businesses and myriad 
other service firms in the travel supply chain, most of which 
are, as has been noted, small businesses. The travel supply 
chain is a very complex, networked regime of interacting 
parties who work to fulfill the travel goals of consumers while 
earning a reasonable profit.
    Every unplanned travel event, every irregular operation 
compels many parties in that supply chain to respond. The 
damage caused by flight delays, cancellations and diversions is 
difficult to quantify because while it cannot be predicted with 
precision, it affects virtually everything. Budgeting for it is 
almost impossible.
    The consequences of such disruptions include canceled 
meetings, unfilled hotel rooms, meals not served, transfers 
left unused, deals not consummated, tours not taken, catering 
not performed, conference schedules disrupted, and absent 
family members from once-in-a-lifetime events.
    In the background, additional uncompensated work must be 
done by travel agents and others in the supply chain to 
rearrange travel plans, reschedule meetings, lodging and so on.
    Small business travel agencies, like other small 
businesses, are acutely affected by these disruptions. The 
economic fallout of these unexpected yet very familiar events 
impacts everyone in random and unmanageable ways.
    In addition to the immediate economic and personal effects, 
the repetition of these types of events over time erodes 
consumer and business confidence in the air transportation 
system, resulting, as has been noted, in decisions to avoid 
traveling altogether. The impacts trickle down and they trickle 
up throughout the economy.
    Decisions to avoid travel are reinforced by the well-
documented failure of the airlines to respond to consumer needs 
for information and services when these unplanned yet 
foreseeable irregularities occur.
    As the 10th anniversary of the airlines' 1999 passenger 
service commitments approaches next year, most of the 12-point 
promises made then remain unmet. Efforts are underway to change 
that, but much remains to be done.
    The air transportation system that is a mainstay and 
principal stimulator of the American economy is indeed in very 
serious trouble. The Secretary of Transportation, Mary Peters, 
introduced earlier this year some new measures, which we 
support, that will deal with things like inadequate passenger 
protections and congestion. We support those. DOT is trying to 
require the airlines to publish new data on flight delays, 
which have been missing from the data that has been quoted to 
this committee and other committees of Congress many times to 
suggest that these problems of flight delays are not quite so 
serious and perhaps not even important.
    The short-term outlook, however, is not encouraging. These 
unbundling practices are coming at a time when they will 
confuse consumers even more and alienate them even further from 
the system on which they are dependent. We also now are seeing 
the reintroduction of minimum stay requirements, and these and 
other practices are going to spread and further erode the 
goodwill between consumers and the air travel system.
    I see that my time has expired. Thank you very much.
    [The prepared statement of Mr. Ruden may be found in the 
Appendix on page 34.]

    Chairwoman Velazquez. Thank you, Mr. Ruden.
    Our next witness is Mr. Mike Gallagher. Mr. Gallagher is 
the President of CityPass in Napa, California. Mr. Gallagher 
has over 36 years experience in tourism, marketing and the 
theme park business. Mr. Gallagher co-created CityPass. 
CityPass combines 5 or 6 of a city's top visitor attractions 
into a discounted pay-one-price ticket book.
    Welcome.

  STATEMENT OF MR. MIKE GALLAGHER, PRESIDENT, CITYPASS, NAPA, 
                           CALIFORNIA

    Mr. Gallagher. Thank you. Thank you, Chairwoman Velazquez 
and Ranking Member Chabot and other distinguished members. My 
name is Mike Gallagher. I am the co-CEO and founder of 
CityPass, which is a small business which has a natural reach 
offering foreign and domestic travelers the best attractions in 
America at one package price. And this is the first time I have 
been in--come to Congress. I flew yesterday 3,000 miles to do 
this, and I really appreciate you making me feel at home. I 
feel like I am in coach. And I am used to that as a small 
business owner. Anyway, thank you also for allowing me to 
testify. It is particularly on behalf of small business and the 
travel sector that are at risk for being impacted by America's 
deteriorating air travel system.
    I am particularly pleased to be here today because in 1997, 
when we started CityPass, we started with a Small Business 
Administration loan which got us going. So I want to tell you 
about that. About 12 years ago we came up with the idea for 
CityPass. As a startup business, the banks are just not 
interested in loaning us money. And so my business partner and 
I received and applied for a loan with the Jackson State--an 
SBA loan through Jackson State Bank in Jackson, Wyoming, where 
our operations were headquartered. And if it wasn't for the 
SBA, we would not have been able to start CityPass. So we are 
very grateful for that. But it is interesting because even 
though with the SBA loan, even though the Federal Government 
guarantees 80 percent of that loan, the bank still required 
both of us to put up our houses. And you can imagine it was an 
interesting discussion with both our wives to get them to do 
that. I appreciate it.
    All is well now because CityPass has been very successful. 
And within a few years we not only paid that loan off with 
interest, but we have grown to 11 cities. And most importantly, 
our wives are now very happy. So CityPass now serves 72 major 
North American attractions in 11 cities, including the 
chairwoman's hometown of New York City. Several other members 
are represented in our cities, including Atlanta, Boston, 
Philadelphia, Seattle and Chicago. We just started Houston 
about a month ago.
    CityPass has become a national brand for city vacations and 
for identifying top attractions in major cities. I appreciate 
the SBA loan. It helped us get started. And in a sense we are 
still in business with the SBA because every year we share 35 
percent of our profits with you in Federal taxes. When our 
profits increase, so do your revenues.
    So I am here today to speak up for the more than 95 
percent--I think you said 97 percent of the travel industry 
that makes up small businesses just like me, companies that are 
less than 100 employees. And there are hundreds of thousands of 
us in every nook and cranny in this great country of ours. 
These are small businesses that rely on travelers for some 
percent of their revenues.
    Let me explain the importance of that percent and 
particularly what happens when fewer people travel by air. With 
CityPass, for example, virtually all of our customers are 
tourists to a city. We estimate that over 50 percent are flying 
to their destination. Actions that make it difficult for people 
to fly or which affect the ability of travelers to fly have a 
very immediate and negative impact on our business.
    Before founding CityPass, I managed an outdoor attraction 
in northern California. As with many small businesses in the 
travel sector, we are significantly a fixed-cost business. Our 
cost to serve a thousand visitors in a day are basically the 
same if it is 800 or if it is 1,200 people that show up. At a 
thousand people, we can pay our staff and cover all our costs. 
Almost everything after a thousand visitors fall directly to 
the bottom line and is our profit. If more than 1,200 people 
come through the door, it is a great day. We are very 
profitable. But obviously if only 800 people visit us, we lose 
our shirts. We bleed red ink. We still have to pay the staff 
and we still have to pay all of our costs. But we don't have 
the money, so we quickly run out of money. We would be 
unprofitable and at the end if this continues we would go out 
of business. It was clear to us that it was those last few 
people that come into the entrance each day that made up our 
profit. It was the difference between success and failure.
    Most businesses in the travel industry serve both locals 
and tourists. The biggest source of our business was from the 
locals and from regional travelers, but it was apparent that 
200 to 400 visitors a day were long distance travelers. So even 
though they represented only 10 to 30 percent of our business, 
these long distance travelers who usually traveled by air were 
the critical difference between profit and loss, success or 
failure.
    CityPass depends on reliable, efficient air travel to bring 
travelers to the cities and attractions we serve. When air 
travel hassles rise to the level that Americans avoid taking a 
trip, that hurts our bottom line and that of thousands of small 
businesses that make up the travel industry. It also hurts the 
economies of the cities where CityPass is sold and where it 
also benefits from tourism.
    So this is the summer season. This is the harvest time. It 
is the busiest time because this is when vacations are taken by 
families. And if travel is down this summer because people 
don't want to fly, our profits will be down and this will make 
for a long, cold winter. It is a long, cold winter for the 
travel industry.
    So I want to thank you for letting me speak as a business 
owner. I appreciate representing other small businesses because 
they are everywhere in this country. And you know what? You can 
do something about this. What is great is the travel air system 
is run by the Federal Government. You guys oversee that. So it 
is a great opportunity to do something about it, and we 
appreciate you having this meeting to talk about it.
    [The prepared statement of Mr. Gallagher may be found in 
the Appendix on page 46.]

    Chairwoman Velazquez. Thank you, Mr. Gallagher.
    Our next witness is Mr. Edward Faberman. Mr. Faberman is 
the Executive Director of Air Carrier Association of America. 
He is also a partner in the law firm of Wiley Rein. Previously 
he was Assistant General Counsel and VP of Government Affairs 
of American Airlines. Before he served for 18 years at the FAA. 
Founded in February 1997, ACAA works to eliminate barriers that 
block meaningful competition by low fare carriers.
    Welcome.

 STATEMENT OF MR. EDWARD P. FABERMAN, EXECUTIVE DIRECTOR, AIR 
                 CARRIER ASSOCIATION OF AMERICA

    Mr. Faberman. Good morning, Chairwoman Velazquez and 
Ranking Member Chabot and distinguished members. I am pleased 
to be here today to talk about issues that are critical to the 
Nation's air carriers, communities throughout the country, 
businesses of all sizes and to the traveling public.
    Our low fare carrier members are dedicated to providing 
affordable air fare options to travelers in communities that 
receive significant economic benefits when those options are 
available. As to Mr. Gallagher's comment about being in coach, 
we will collect for the charge for the bottled water shortly.
    We thank this committee for holding the hearing and for 
highlighting the importance of a strong transportation system.
    As a result of air congestion, delays and elimination of 
service, we are at a point in time that if steps are not taken 
to promote competition and address rising costs, we may see the 
disappearance of travel options for millions of travelers. 
These are not new issues. Let me read you this short statement:
    There was strong indications that the airport and airway 
system was on the verge of saturation, especially between New 
York and Washington. Flight delays were far beyond mere 
annoyance and inconvenience.
    That statement was made in 1968 40 years ago. Deja vu all 
over again. Delays impact aviation and they are a threat to the 
economy and our future. We have gone through the TIA's recent 
study, and it does show frustration with passengers and 
travelers. We applaud them for making that study available.
    The airline industry is at a defining point in our history. 
We have seen several low cost carriers go out of business and 
file for bankruptcy. We have proposals that will increase 
consolidation, and airline costs are out of control. Every 
airport in New York is now closed to additional service and 
competition.
    While we address these issues, we must also take steps to 
make sure that competition and deregulation do not become only 
memories of a system that used to exist. Multiple studies in 
addition to the TIA studies and reports prepared by the Federal 
Government, local governments and airports and independent 
groups set forth the enormous benefits of low fare competition. 
In 1993, DOT invented the term "Southwest effect." As one 
article mentioned in 1999, the biggest economic boom you can 
bring to an area is to improve your transportation, and a 
cheaper price is important.
    We also note an Allegheny County Airport Authority study 
that showed when low fare service came to Pittsburgh, an 
additional--over 100,000 people visited the region in 2006. And 
that study says without low fare service and with the 
disappearance of options, passengers will either pay a lot 
higher fares, drive to distant airports, use other modes of 
transportation or just not travel. Akron-Canton Airport, Flynn 
Airport have all shown the benefits of new and low fare 
service.
    It is time for the Department of Transportation to take 
some important steps, and we urge this committee to make sure 
that they do that. They need to preserve competition. They need 
to make sure that airline deregulation is not just a memory. 
Therefore, we ask you to ensure that they do address air 
traffic delays. 40 years is enough. Take some steps, even if 
minor, to improve the system. Don't close an airport and say, 
well, we are going to fix this. Well, we were told that 40 
years ago. Let us make sure that competitors have some options 
to grow so that when you wake up in 2 months, 6 months, a year, 
you don't look at your travel agent's recommendations and find 
only one recommendation because there is only one option to 
fly.
    We also need to address fuel costs and some international 
issues. The Greater Miami Convention and Visitors Bureau 
yesterday advised me of major problems with the U.S.A. entry 
process. This committee has an opportunity to play an active 
role in improving the Nation's system, and we thank you for 
holding this hearing. We are anxious to work with you and 
consumers, and we need to make a system that makes flying 
easier and safer and continues to promote deregulation. And 
that is all important to us. And we are not suggesting that 
only one or two parts of it be done.
    We look forward to working with the entire committee to 
preserve a competitive travel industry that will continue to 
provide economic benefits for businesses and communities.
    [The prepared statement of Mr. Faberman may be found in the 
Appendix on page 49.]

    Chairwoman Velazquez. Thank you, Mr. Faberman.
    Our next witness is Mr. Kevin Mitchell. Mr. Mitchell is the 
Chairman and Founder of the Business Travel Coalition in 
Radnor, Pennsylvania. The mission of the Business Travel 
Coalition is to bring transparency to industry and government 
policies and practices relating to travel.
    Welcome.

  STATEMENT OF MR. KEVIN MITCHELL, CHAIRMAN, BUSINESS TRAVEL 
                COALITION, RADNOR, PENNSYLVANIA

    Mr. Mitchell. Thank you for inviting the Business Travel 
Coalition to appear before you on a subject of the gravest 
importance to our industry, communities and country.
    The U.S. aviation industry is in a full-blown crisis that 
if left unchecked will devastate entrepreneurs, small and mid-
sized communities, the economy and our American way of life. 
Robert Crandall, former Chairman of American Airlines, stated 
in today's Christian Science Monitor, quote, unless something 
is done to move toward some kind of fix we are going to see 
every one of our major airlines in bankruptcy.
    He continues, if that isn't enough of a crisis to alert 
everybody, then I don't know what it will take.
    With oil in a sustained $130 range, the consensus estimate 
among analysts is that the airline industry will have to shrink 
by 20 to 22 percent. Recent cuts in capacity for implementation 
this fall only amount to 12 to 13 percent. So it is likely that 
additional very difficult decisions will have to be made toward 
Labor Day to increase the overall reduction of the industry.
    This, together with the financial condition of the airlines 
and airport specific characteristics, has led BTC to identify 
150 airports that are at risk of losing commercial air 
services. Virtually all airlines will be out of cash by early 
2009 if oil stays in its current range. The conundrum that the 
airlines faces is that in each of the past 4 years they were 
only able to raise fares and fees by $2.7 billion on average. 
The top 10 carriers this year face a $25 billion increased oil 
bill or fuel bill. When you deduct the fuel hedges of 6 
billion, that is $19 billion additional. Well, that is a huge 
gap to meet between 2.7 and 19 billion.
    Even the high growth leader, Southwest Airlines, with the 
best hedging oil program and balance sheet in the industry, 
told a Merrill Lynch conference last week that at $135 a 
barrel, it would have to cut routes hundreds at a time. So you 
can imagine what that portends for the other larger legacy 
carriers with higher fuel and other costs. If as Goldman Sachs 
and others predict, oil reaches $150 a barrel by July 4th, then 
the industry will need to shrink further. At $200 a barrel, the 
industry would need a 40 percent reduction.
    A major concern is that there is no assurance that the 
industry can successfully downsize without collapse given the 
bunching up of several airlines whose equity will be wiped out 
in the same relative time frame assuming $130 oil.
    Now, failure of a single large airline with 15 percent 
market share would have huge local effects and substantial 
impact nationally. But multiple failures would be a catastrophe 
and as impactful and demoralizing to the Nation as a terrorist 
attack.
    There are steps Congress can take to help turn this dire 
situation around. The three most important steps I hope you and 
others will focus on in the near term are: One, policies that 
would crack down on excessive speculation and possible market 
manipulation in oil futures; two, moves to strengthen the U.S. 
dollar against foreign currencies; three, U.S. government 
pressure on OPEC to increase oil supplies. In addition to these 
general policies, BTC respectfully asks Congress to consider 
immediately suspending Federal taxes and fees on U.S. airlines 
until March of 2009 so long as oil prices remain above $100 and 
conditioned upon individual airlines opting in to a series of 
reforms.
    U.S. taxpayers should not be asked to yet again bail out 
the airline industry, broken on so many levels, without true 
reforms being agreed to. Yes, the national air transportation 
grid is as critical a national infrastructure as is the 
electrical grid, but additional taxpayer investments should not 
be considered without a return on taxpayer investment. BTC's 
proposal is that individual airlines be given the opportunity 
of opting into a tax suspension program if they commit to the 
following three reforms:
    First, passenger protections. Participating airlines would 
agree to be bound by passenger protections based upon recently 
enacted EU consumer protection laws and air transport that are 
very clearly written, serve as a global best practice, and have 
generated data that quantify their effectiveness. Such 
agreement would be codified in the airlines' contracts of 
carriage.
    Two, maintenance standards. Participating airlines would 
agree to provide the U.S. DOT in a legally binding agreement a 
commitment timetable, reporting mechanism and auditing process 
for establishing a single standard for aircraft maintenance and 
security, whether aircraft maintenance is accomplished in the 
United States or around the world, whether in-sourced or out-
sourced.
    And third and finally, participating airlines would commit 
to providing the U.S. DOT in a legally binding agreement a 
commitment timetable reporting mechanism and auditing process 
for implementing full content availability and a distribution 
channel of choice for travel agencies and corporate travel 
departments.
    Thank you for the opportunity to share my perspective with 
you today.
    [The prepared statement of Mr. Mitchell may be found in the 
Appendix on page 60.

    Chairwoman Velazquez. Thank you, Mr. Mitchell.
    And now I recognize the ranking member for the purpose of 
introducing our next witness.

    Mr. Chabot. I thank the chairwoman for recognizing us and I 
would like to announce our witness here from Cincinnati. As I 
mentioned, she is a fellow Cincinnatian. Terry Segerberg is the 
Chief Executive Officer and Chairwoman of the Board of 
Directors of Mesa Industries, and it is a small business 
located at Lunken Airport in Cincinnati, Ohio. Founded by 
Terry's father in 1967, Mesa manufactures and distributes items 
for the petroleum industry and the construction industry. Mesa 
employs approximately 75 people. The company is proud of the 
fact that the average employee remains with the company over 10 
years.
    Terry has been a very active member of the Cincinnati 
Chamber of Commerce. Mesa was the Chamber's Small Business 
Award of Excellence runner-up for 2008 this year. Terry was 
mayor of Hercules, California, from 1997 through 2001 and also 
served as a city council member from 1994 through 2001. She 
holds a Bachelor of Business Administration Degree in 
accounting from Armstrong College in Pasadena, California. And 
we welcome you here this morning and look forward to your 
testimony.

 STATEMENT OF MS. TERRY SEGERBERG, CEO, MESA INDUSTRIES, INC., 
                        CINCINNATI, OHIO

    Ms. Segerberg. Thank you. Good morning, Chairwoman 
Velazquez, Ranking Member Chabot, and distinguished members of 
the Committee on Small Business. And, gentlemen, thank you.
    I think if we are in the coach section, I am on the window 
with no window. I think that costs extra.
    You have given my family history beautifully. I am honored 
to be here and to represent my company. It is a nontraditional 
role for a female, as you can appreciate. My father founded the 
company in 1967 to support our family. And I have had the honor 
to go out on my own, come back after politics, and come back 
into the family business, and now I lead it as the CEO and 
Chairwoman.
    Mesa is currently composed of four different companies: 
Mesa Rubber Company, Gunite Supply and Equipment, Airplaco and 
Mesa Laminated Fabrics. With a diverse corporate mix of 
products and companies, that puts us both in the petroleum 
industry as well as in new construction and renovations. We 
operate out of three locations, Cincinnati, Houston and Los 
Angeles. Initially, our goal was quite simple, provide a 
product in an industry that we knew well so that our own family 
could support itself, clearly a true example of the American 
dream as ever could be.
    We don't get the press that the mega corporations get and 
we don't get the resources that they have either. What we do 
have is the integrity and desire to support our family and the 
families of our employees. Over the years, we have faced many 
challenges, yet we have managed to eke out a profit in every 
one of our 40-plus years. And those things in which we have 
control, we have successfully navigated Mesa.
    The demands of operating our business have grown 
significantly, especially since 2002 when we have essentially 
doubled our activities. Clearly to operate and manage such a 
diverse set of companies and products, communication and travel 
are integral parts our routines. For example, I have flown over 
a million miles in just the last few years, with a window. The 
average cost in the last 2 years for me to fly from Cincinnati 
to L.A. And back in 2 years has risen from $390 to $630. That 
is a 62 percent increase with the luxury of advanced planning.
    Clearly the airline industry has struggled to keep their 
costs down, and yet with the escalating cost of fuel they are 
out of cost saving options. The constantly increasing costs are 
being passed on to us passengers by reduced flight options, 
elimination of travel comfort items and windows, and now we 
must pay to travel with a suitcase.
    As a business owner, I fully understand their dilemma. In 
order for me to afford my airline ticket today, we must 
increase our sales and generate more profit. Not such an easy 
solution.
    Now when you multiply these increased costs by 20 to 
include my traveling staff, the impact is thousands and 
thousands of dollars each month. Conducting business over the 
phone and via the Internet is fine, but it is not a realistic 
solution for my business. It is not a solution for cutting 
travel costs. The complexities of many of our products require 
customization on a case-by-case basis, the nuances of which are 
magnified when you consider the cases where we are dealing with 
environmental protection systems for the petroleum industry 
itself.
    In order to manage my business, operating out of three 
States, travel is not a perk. It is a requirement. It is 
essential that the continuity of Mesa in our operations and our 
long-term stability that we have the flexibility to travel. 
Nonetheless, we have been forced to reduce our intracompany 
travel.
    Earlier this week, I had an employee tell me that he was 
feeling the pinch, too. It is not just the airline industry and 
it is not just Mesa. It is my employees. And when I said what 
kind of pinch are you feeling, he said I feel like my kids are 
robbed. I said what do you mean your kids are robbed. I wasn't 
quite sure what he meant. And he said we have to pinch and save 
money so much now, that we don't have any more family outings 
and we canceled our family vacation.
    Well, that is a pretty sad statement. I have had other 
employees talk about cutting costs and economizing in the 
grocery store, and perhaps the most frightening story I heard 
was one employee finally voiced up that this winter in Ohio he 
turned his heat off save money for gas. This spring, we 
instituted a gas card reward program for employees. We give 
four cards away a week just to help them because their pocket 
money is gone. We just doubled that to eight cards a week. And 
why do we do this? Our employees need relief and otherwise are 
out of options. We pride ourselves on the quality of our 
employees and the benefit programs that we offer and the living 
wages we pay.
    The other area hit hard by gasoline is our shipping costs, 
where we see gas surcharges that are now ranging from 26 to 51 
percent. And when something is shipped by air freight, it is 
exorbitant and often unimaginable. While in theory we can pass 
these actual costs on to our customers, the realities hit once 
again and we must remain competitive in our industries. Our 
vendors are facing the same increases and therefore our raw 
materials are going up and the freight to receive our products 
is going up. It is nearly a daily occurrence that we receive a 
letter from a vendor telling us about another price increase. 
We have limited reactions. We can raise our prices to maintain 
our margins and hope our customers will tolerate the increase, 
or we can lower our margins and hope we can survive these 
times.
    So where does that leave us? We see a bifurcated solution 
as the only viable course of action. As a nation, we have got 
to require higher yielding engines for our vehicles, we must 
utilize our oil resources that are fallow, and we have to come 
up with a realistic energy plan.
    It may appear that I have digressed a little, but in my 
opinion the core issue for the airlines is the same that I am 
facing as a small business owner; the cost of oil is simply too 
much.
    Thank you very much.
    [The prepared statement of Ms. Segerberg may be found in 
the Appendix on page 67.]

    Chairwoman Velazquez. Thank you, Ms. Segerberg.
    Mr. Dow, according to a recent study conducted by TIA, 41 
million trips were avoided in the previous year because of 
problems with the air travel system. That figure doesn't 
reflect the one trip that I avoided just this Monday when I 
decided not go to LaGuardia. And even today when I go home, 
probably I will go directly to Union Station. Were you able to 
identify the primary reasons why people are avoiding trips?
    Mr. Dow. Yes, we were, Madam Chairwoman. This study was one 
of the few times where a correlation was made between 
dissatisfaction and people's actions. And keep in mind we did 
the study before this big spike in oil and before many of the 
price increases. So when people said it is the hassle factor. 
People just said the whole process curb to curb is so 
challenging, they don't know whether to allow 15 minutes or 3 
hours to get through security, they don't know whether when 
they get through security whether their flight will be delayed 
because of air traffic control backup and they will be sitting 
there, and they don't know if they will make their destination. 
On close appointments, they cancel the trip because of saying I 
may not even get there in time for the meeting.
    So that is a factor and it is one of the few situations 
where we see the most frequent customer is the most 
dissatisfied. I cannot think of a business that I know of where 
your largest users are the people that are the most 
dissatisfied.
    Chairwoman Velazquez. Thank you. Mr. Ruden, the major 
airlines are imposing new fees on passengers and almost like 
every week there is something different. You say one bag, a 
second bag.
    What role do travel agents play in making sure that 
consumers understand these new fees and what challenges are you 
facing in educating consumers about all these changes?
    Mr. Ruden. I think the essential value that travel agents 
continue to bring to a marketplace in which everyone virtually 
has access to the Internet is their ability to counsel and 
advise people about budgeting for travel and about the 
uncertainties that we have all talked about here. And we expect 
and I think most travel agents, if not all travel agents, are 
acutely aware that their customers need to know this, that they 
want to know it, that they expect to be told. The problem is 
that the methods by which airlines communicate some of these 
changes are not well calculated to get the information into the 
hands of travel agents in a usable manner and in a timely 
manner and certainly not into the hands of the consuming 
public.
    I mentioned the confusion factor in my testimony, and it is 
a very real phenomenon. When people are uncertain, they tend to 
pull back and to avoid travel or to do other things that are 
not going to be healthy for the economy of the country. We are 
trying to address these issues to the airlines so they will 
understand that they can't just issue press releases and expect 
the public and travel agents to understand this. We try every 
day to compile lists for our members to make them aware of the 
new changes. But as you said, it is a daily phenomenon and it 
is very difficult to keep up. There are new things I am sure 
coming that we haven't even anticipated yet that they will be 
charging for. I don't think we are critical of them in one 
sense, but we also have to understand that they are in a 
desperate situation.
    Chairwoman Velazquez. Thank you.
    Mr. Gallagher, can you please talk to us about how has your 
business been affected by higher air fares in recent months? 
And are there any cities that you anticipate will be hit 
particularly hard by the rapid increases in these air fares?
    Mr. Gallagher. Well, a lot of what is going on is happening 
now. This research that just came out with Roger. So our 
business, 60 percent it of happens in June, July and August, 
which is coming up. So I can't tell right now exactly what is 
going to happen this summer. But anybody, we have got to 
believe, if you are a family and you are a leisure traveler, 
which is where our business is, you are just going to make 
changes. You are just not going to travel this summer by air 
anyway. And the research proves that out.
    So I can't tell you numbers wise until October, which I am 
happy to come back and tell you. But I hope it is good news 
when I come. But my fear is it is not good news and that the 
travel is going to be down in these cities and those cities 
that rely most on--like New York--on leisure travel will be the 
ones that are going to be hit the hardest.
    Chairwoman Velazquez. Thank you.
    Mr. Faberman, American Airlines recently announced that it 
is cutting many flights to LaGuardia New York. Will discount 
carriers be able to fill that void?
    Mr. Gallagher. Well, I think we have to ask Secretary 
Peters about that because, you know, tomorrow if a carrier 
cancels a flight, it doesn't necessarily mean that someone else 
can come in and start utilizing that flight. It is important 
that those requirements and restrictions be looked at very 
closely and that in addition to looking at the long term and as 
the Department of Transportation has proposed auction options, 
we need to look at some things that would immediately allow 
some new levels of competition.
    Chairwoman Velazquez. Thank you.
    Mr. Mitchell, the higher prices have been a major challenge 
to the airlines. This week several energy analysts testified 
before the Energy and Commerce Committee that limiting 
speculation will cut or could cut all prices significantly. Do 
you believe that speculation is contributing to the costs of 
jet fuel and the troubles of the airline industry and, if so, 
how?
    Mr. Mitchell. Well, I am not an expert in this area, nor do 
I have a whole lot of confidence in the experts that are out 
there because they have been wrong over time in so many ways 
and times. The hearing that was held last week, I think the 
experts that were of the view there was a speculative premium, 
put that premium between 25 and 50 percent of the current price 
of a barrel of oil. I think what is very important, and as the 
Congress is doing, is to actually get to the answer of whether 
this is a supply and demand imbalance or indeed there is 
excessive speculation and/or manipulation going on in the 
market. If it is an oil imbalance, then we should take that 
piece of information and understand that as a critical 
infrastructure at 130 or 120 or 140, the model doesn't work. We 
will not have a national transportation infrastructure at that 
cost of input.
    If it is a matter of speculation or manipulation, that 
needs absolute full attention, immediate attention, because it 
is not just crippling the airline industry, it is hurting every 
single American, and it is outrageous if it is happening.
    Chairwoman Velazquez. Thank you.
    Now I will recognize Mr. Chabot.
    Mr. Chabot. Thank you very much, Madam Chair. And first of 
all, Mr. Mitchell, you mentioned a couple of things that you 
thought we needed to do. You mentioned speculation. I tend to 
agree. I disagree with the administration on this, who has 
tried to pooh-pooh that whole speculative issue. I think that 
is one of the issues that is at play here. And I agree with the 
strength of the dollar being an issue and I do agree also that 
we ought to put pressure on OPEC. I agree with you on all those 
things.
    I would just add on to some of the things you mentioned and 
I also believe that we have got a short-term and a long-term 
problem relative to supply where we have essentially handcuffed 
ourselves in this country and said we are not going to go into 
ANWR, we are not going to go into the Outer Continental Shelf, 
and we know there are huge resources in both. So that is part 
of the picture. And I think that is related to the speculation 
because you have some "okay, ifs" that say even if we drill in 
ANWR now, if Congress passed legislation saying we could drill 
in ANWR now, we are not going to see that oil for 3 years or 5 
years or 10 years or whatever, and that certainly is true. We 
won't see that particular oil. That is why we should have 
passed this many years ago, which I consistently voted to do. 
But we can't go back and undo that. But what we could do, I 
think it would affect the speculative nature of the problem 
because it would show that we are serious, that we are going 
after that oil now, and think you would see that reflected.
    Because a barrel of oil went up from $58 to $135 in a 
year's time. You can't tell me that there aren't speculative 
factors involved in that. So I agree with all the points you 
made.
    I would go beyond that and say we need to go after supply 
that we have available to us and we need conservation and we 
need alternative renewable sources. It has to be a 
comprehensive plan.
    Does anybody want to comment on that?
    Mr. Mitchell. In defense of the speculators, they are able 
to leverage this concern that America can't solve its own 
problems anymore and that we are sitting idly by while the 
Chinese and Indian and other economies expand so rapidly.
    So I 100 percent agree with you that it is the psychology 
of the futures market that we need to attack, and that means 
looking like we are doing things, and doing things. You know, 
at least opening the debate on offshore drilling, talking about 
things like strengthening the dollar, opening up the oil 
reserves. These are things that the marketplace needs to know 
we are not going to sit around and just be victimized by them.
    Mr. Ruden. Mr. Chabot, if I might, Mr. Dow and I were 
talking about this very subject before the hearing.
    It is impossible--and I am no expert, either, but it is 
impossible for an intelligent person to get their mind and arms 
around the idea that this imbalance in supply and demand has 
moved from the condition it was in a year ago, when we had an 
imbalance, too, to the condition it is allegedly in today such 
as to produce a more than 100 percent increase in price of oil. 
It just doesn't make sense in basic economic terms.
    So this issue--again, I am not expert, but it seems to me 
this is one of the primary pressure points that could have 
short-term effects. And right now our industry, and I think the 
whole economy, needs some kind of short-term encouragement, 
some sign that something is going to change this pretty quickly 
before businesses simply say, I am not going to lose more 
money; I will just fold up right now and go away.
    Mr. Chabot. Ms. Segerberg, did you want to comment?
    Ms. Segerberg. Yes. Oddly, one of our biggest customer 
bases is the petroleum industry; and in the last 4 to 5 years 
the sales that we have done to China and India are something as 
crazy as the gas prices are today.
    What we are seeing is aboveground storage tanks in China, 
for example, that are probably larger than anywhere in the 
world. Each individual tank, it is frightening to know how much 
petroleum product is in some of these tanks, millions and 
millions of gallons.
    And I don't think I help the speculation, but all I know is 
our company is running as fast as we can to sell them products 
as they are building these new tanks. When those tanks are 
built, the oil that they plan on putting in these tanks isn't 
going to come here. They are going to get it.
    So I think we have future shortages yet that we can't 
anticipate just by looking at the design and activity that is 
happening both--and the same is happening in India. It is a 
couple of years behind, but we are there in those refineries 
talking to those engineers. We have never seen anything like 
what we are seeing the growth there, and that oil is going to 
come out of our pockets one way or another.
    Mr. Chabot. Mr. Dow, I think you were trying to--
    Mr. Dow. Yes, sir.
    I think you all hit it on the head. We have got to peel the 
onion in 100 different ways, and we have to get some 
significant commitment. There is no shortage of ideas. There is 
a shortage of leadership.
    This has been isolated to an airline issue only by the 
media, and it is not an airline issue. It is a travel industry 
issue, it is a small business issue, and an American freedom to 
travel issue. And if we don't elevate this to a critical crisis 
for America and take it beyond an airline fuel issue, we are 
going to have a problem.
    Mr. Faberman. That is why all the other airline 
associations and other groups have joined in supporting the 
PUMP Act that is out there. We think that is an important step.
    Also, a lot of the airlines are using more fuel-efficient 
aircraft that are using less fuel; and maybe one of the small--
if there is a word--"benefit" that goes with retiring aircraft 
is that some of the older aircraft will no longer be consuming 
fuel.
    Mr. Chabot. Thank you.
    Mr. Gallagher, let me ask you a different question, if I 
can. I think your concept and your business is very 
interesting, and you go to a number of cities. Cincinnati is 
not one of those cities right now, correct?
    Mr. Gallagher. That is correct.
    Mr. Chabot. Let me just mention some reasons why I think it 
should be, and I would like to talk to you about that.
    We have one of the best zoos, for example, in the country. 
We have the Cincinnati Reds, the first professional baseball 
team; Cincinnati Bengals. We have great, great symphony, Pops. 
We have got Kings Island; many really world-class museums; Tall 
Stacks, which is really unusual, where the riverboats literally 
come, and we have thousands and thousands of people come.
    Let me put in a plug also for the Delta Queen at this time, 
which is the last of her kind, that we need to save. I will 
continue to have that discussion with Mr. Oberstar whom we have 
battled on the floor, whom I have great respect for, but on the 
issue we just differ. In November, its exemption runs out; and 
that would be the end of the Delta Queen. And we can't let that 
happen, and I hope Congress doesn't.
    And I mentioned Kings island. We have fine restaurants. We 
have got fine hotels. We have got great arts opportunities. We 
have the second-largest Octoberfest in the world after Munich. 
And at that Octoberfest, among other things, we have had the 
largest, greatest number of people doing the chicken dance at 
the same time in the entire world as well; and we are proud of 
that, of course. And one of the largest fireworks displays at 
Riverfest that we have in the world.
    So it is a great place for families to come. It is very 
convenient. The population is from all over the place. So how 
could Cincinnati become one of the cities that you would--that 
your company would bring folks to?
    Mr. Gallagher. How this works is we are invited to a city 
by the Convention and Visitors Bureau. We don't ask anybody for 
any money, but we do need a promotional organization to help 
support bringing more people. So we look at the number of 
leisure travelers. We look at the attractions. We assess the 
deal.
    We haven't heard from Cincinnati for quite a while. They 
initially talked to us, but then there was Newport across the 
street there, and there was a conflict between those two 
bureaus, and so we backed away. Because you do need one 
promotional entity that is there to help promote this thing. 
And the real thing about CityPass is it helps extend length of 
stay and put more heads in beds is what it does.
    But could I take one moment? Here is something you can do. 
There is a Travel Promotion Act that many of you may know about 
that is on the table right now, and it is sponsored by a 
majority of the House and almost a majority of the Senate. That 
is something that you can do right away that will really help 
you and help Cincinnati and every one of these cities.
    We are the only country in the world that does not promote 
itself, the only one. France does it. Australia does it. Canada 
does it. Are we so arrogant to think that we don't have to do 
that? It is like a politician saying, I don't have to promote 
myself. I am just going to get re-elected.
    It doesn't happen that way. It is not going to take any 
taxpayers' money if we can get this passed. Some of you are 
already sponsoring it, which is great.
    It is a small deal, but having more people come to our 
country--Australians come here and spend on the average of 22 
and a half days. They visit multiple cities. I can sell them a 
bunch of CityPasses.
    Mr. Chabot. I will certainly have a discussion with our 
Convention and Visitors Bureau, and we would love to have 
Cincinnati included as one of the of locations you bring folks 
to. It is a great city.
    Mr. Gallagher. We will come take a look.
    Mr. Chabot. Thank you, and I thank the panel. It has been 
an excellent panel.
    Chairwoman Velazquez. Mr. Shuler.
    Mr. Shuler. Thank you, Madam Chair.
    Ms. Segerberg, I think you are exactly right. When you look 
at some of the growth of some of the other countries throughout 
this world--China, India, Japan--the dollar continues to fall. 
And it is kind of embarrassing.
    I had my children up this week. They are in Washington. And 
whether it has been in committees or on the House floor, I see 
the lack of maturity, quite frankly, in this House of Congress 
where Members are actually--parties are fighting against one 
another for their own political posturing or political gain of 
power when we are allowing other countries to surpass us. And 
until this House - until we change the dynamics of this 
Congress, on both sides of the aisle, we are only going to 
continue to fall further and further behind.
    I am on the Natural Resources Committee and whether we are 
talking about drilling in ANWR or we are talking about offshore 
drilling, we have got 68 million acres that are available for 
drilling today. That would be 81 percent of all estimated, oil 
and gas. We would actually produce, just on the 68 million 
acres, 4.8 million barrels of oil a day, 44.7 billion cubic 
feet of natural gas a day. That would double our capacity of 
petroleum, and it would increase just in oil production. It 
would increase 75 percent of our natural gas.
    But yet we stand on the House floor and people try to 
become Hollywood stars, if you will, because of C-SPAN; and 
they talk about this and talk about it. When we actually need 
to unite together as a body, the People's House, and say what 
can we do to better our country and to make sure that we remain 
at the top and we remain at the top for not only my children 
but for generations to come.
    So I think you are exactly right. When other countries are 
surpassing us because it has been--it has been this way for a 
long time. I am a new Member here, and so I think you are 
right.
    I do have a couple of questions.
    Ms. Segerberg. Could I respond briefly?
    If you need a lesson, I am old enough to give you one, 
which is, when I was elected to city council--I am a Republican 
in the San Francisco Bay area--I served on every transportation 
body there was available to me. It is because it was 
practicality and not what party I belonged to.
    So you are right. We all have to work together. It is the 
truth. We all work for one another, and we are all the 
citizens.
    The other place have to not overlook is Canada. The oil 
sands projects today is generating extraordinary amounts of oil 
and revenue for Canada, and we are their number one consumer. 
But it is the new technologies that they are using because 
years ago they thought it was impossible to extract that oil, 
and today they are doing it successfully.
    So there are also new technologies for those that are 
afraid of the environmental impacts. Clearly, we sell the 
product because we care about the environment, too. But there 
are new technologies that we should be looking at as well.
    Mr. Shuler. And also, just to clarify that, what country do 
we send more of our refined gasoline to? Canada. So I think we 
have about 3 million barrels a day of refined gasoline and 
diesel fuel that goes to Canada.
    One more question. Mr. Faberman, if you look at--how did 
the airlines calculate this? And I am going to tell you my 
story for the week of--everyone has that story. But you are 
charged $25 for a bag. So what does everyone then try to do? 
They want to take it on board with them to the overhead luggage 
space.
    We were here at the airport. Every single person carried on 
every bag they possibly could, to their limit. There wasn't 
enough space. They had to check 25 bags. We were delayed to get 
en route.
    So then we sat at the end of the tarmac, and they said 
because we are delayed out of the terminal, then we were 
delayed. I missed my flight, my connecting flight, so--which 
normally would take about, door to door, about 4 hours to get 
home. I could have driven 8 hours by that time.
    Why do the airlines--didn't they see that this was going to 
be a problem of everybody trying to--there wasn't enough 
overhead space before these $25 prices. Of course people are 
going to try to save money and take as much as they can on 
board. Did they not take that into consideration?
    Mr. Faberman. Unfortunately, I think it is an airport-by-
airport scenario; and people who will carry on bags at a 
National Airport or La Guardia Airport are a lot different than 
those who will try to carry on bags in Orlando or Las Vegas or 
other places. And I think the airlines are now beginning to 
look at that and see, at least before the planes are boarded, 
look at how much carry on bags are going to come on and try to 
see if there is a better way of perhaps putting some of those 
bags somewhere else.
    But, you know, we have a great airport, airline system in 
this country, with hundreds of airports; and, unfortunately, 
every single one of them is so dramatically different and 
carries different types of passengers.
    But you are right. National and La Guardia are particular 
issues for carry on bags.
    Mr. Shuler. Thank you, Madam Chair.
    Chairwoman Velazquez. Mr. Ellsworth.
    Mr. Ellsworth. Thank you, Madam Chair.
    I don't have too many questions. I would just like to 
associate my comments with Mr. Shuler, getting down to honest 
debate.
    Both sides of the aisle throw out facts and figures. And I 
know I have charged my staff with, you know, getting to the 
truth so when I go back home to Indiana that I can tell the 
folks back home what is real, how much oil is under that 68 
million acres. Are they drilling? Do they have the equipment? 
Do they not? We get inundated with talking points from both 
sides. That is confusing.
    And again, when I was in my former life, how many times you 
had to raise your right hand and promise to tell the truth, the 
whole truth, and nothing but the truth, so help you God. There 
are people who haven't taken that oath or forgot, and that is 
what we really have to get down to.
    Thank you, Ms. Segerberg. You said one of the most 
important things in what you are doing in your business and 
what is going to happen in the future and these other countries 
that are getting ready to buy that oil. And regardless of what 
we do right now, we have to look in the future, what is going 
down the road.
    And I didn't hear it mentioned here--I came in late--but 
also our future military needs. And I know we all want a strong 
defense, besides small business, but a lot of these military 
contractors are small businesses but on the large end that we 
protect our country. And what we are going to fuel our military 
jets, our military tankers if we don't have anything to put in 
the tanker. I guess it is a whole different story.
    But this honest debate on what our future holds. Because no 
matter how you look at that--do we drill ANWR, do we not, Outer 
Continental Shelf, all those options--there is a finite amount 
of oil on this planet.
    I look at the guzzler at the local convenience store. It 
looks like too much to drink. But if enough people start 
drinking out of it, it goes away; and by the end of the trip it 
is not there anymore.
    There is finite oil under this, and we have to move in a 
manner that we find the alternatives so that oil that we do 
have left--planes are only going to fly on certain things. So 
if we can find and run other things on different types of fuel 
it will leave that oil for the day we have to drill ANWR, we 
have to go into the Outer Continental Shelf, whatever it is. 
That we start picking and choosing where we are going to put 
these fuels and what we can do.
    Whether it is coal to liquids, nuclear, we have to look at 
all these tools in the tool chest so we can reduce in some 
areas to save it for the other. Because it is not unlimited no 
matter--it may be 50 years. But I would kind of like my 
grandkids to know what it is like to drive a car or fly a 
plane, and it is not that far away when you think about it.
    Not a lot of questions. I appreciate the testimony. It 
seems like every hearing I have been in, no matter--my hearings 
all go back to this subject. It is mission critical for us 
right now, and I know the American public want us to continue 
to discuss it in an open and honest way.
    Thank you all for your testimony. It has been very helpful.
    Thank you, Madam Chair. I yield back.
    Chairwoman Velazquez. Mr. Faberman, I would like to address 
the following question to you.
    The FAA states that the construction of new runways is 
critical to addressing the root of the flight delay problem, 
which is congestion at the airports. Delayed flights cost an 
already struggling airline industry as much as $19 billion, and 
jet fuel consumed as a result of delay costs more than $1.6 
billion. Do you agree that we need to build more runways and 
that this will reduce congestion?
    Mr. Faberman. Well, there are two types of congestion. 
There is, obviously, specific airport congestion; and there is 
airspace congestion. In certain parts of the country adding 
another runway at an airport and having dozens of additional 
aircraft go to an airspace system that is not equipped to move 
the traffic would create more problems.
    In the New York area, for example, delays and congestion at 
the three New York airports and Philadelphia are creating 
problems for airports like Westchester and Stewart and other 
Upstate New York airports. But in other parts of the country--
and we are soon going to see a new runway open in Chicago at 
O'Hare airport, certainly that will help congestion there and 
would allow some additional flight activity at that airport.
    Chairwoman Velazquez. But in the sense that if we have 
congestion in New York you have a ripple effect in the rest of 
the Nation, so how much is infrastructure contributing to these 
delays? That is my question.
    Mr. Faberman. Well, it contributes particularly on days 
where there are weather issues and days when aircraft may break 
down or some other problems may occur.
    Chairwoman Velazquez. And more and more we are seeing.
    Mr. Faberman. We are seeing that. Right. So I would say it 
has 30 percent impact on it.
    Chairwoman Velazquez. I will come back.
    Mr. Chabot.
    Mr. Chabot. Thank you.
    One thing that we did mention since we have gotten into 
energy here was nuclear, which we basically stopped building 
nuclear plants in this country about 20 years ago. We have over 
100 of them. We stopped building them back then.
    Countries like France has 80 percent of their electricity 
produced by nuclear. They are building them like gangbusters in 
China, India and Russia and all over the world, but we haven't 
done that in the United States.
    Now, obviously, we are not talking about nuclear-powered 
planes and cars and things like that. That is not the point. 
But the point is that many of our plants, if they are not 
powered by coal, well, it is natural gas and oil and other 
things. So all that is in competition. So that ought to be one 
of those things, I believe, that is out there.
    And, you know, we had a couple of comments. One of then was 
about the 68--when we talk about talking points, that was one 
of the talking points that we hear--and I think it was last 
week--was the 68 million acres that aren't being drilled out 
there so we don't need to go to ANWR because we have that out 
there. The fact is--
    Chairwoman Velazquez. If you allow me, if you yield.
    Mr.  Chabot. I would be happy to yield to the gentlelady.
    Chairwoman Velazquez. It is just that ANWR is apparently 
the answer for everything. And I guess that if we drill in 
ANWR, my allergies will go away. That is not going to happen.
    We need some short relief, and what we are saying is 
combine the 68 million acres with preservation and other energy 
policies. But the fact of the matter is that for the last 12 
years we didn't have an energy policy.
    Thank you for yielding.
    Mr. Chabot. Absolutely. And reclaiming my time, relative to 
preservation and conservation, we are for that, but it is one 
of those things where I think, as a Nation, we ought to do 
this. As the gentleman from Indiana mentioned, it ought to be 
in a bipartisan manner. We ought to work together on this one.
    And we need to do all of the above. We need to do 
conservation. We do need the alternative and renewable sources 
which the folks on the other side of the aisle have stressed 
but have also said we are not going to do ANWR. And I am not 
saying every person on the other side of the aisle saying that, 
but enough were that it stopped it. So we didn't do ANWR. We 
didn't do the Outer Continental Shelf.
    And the gentleman mentioned down there that we should have, 
you know, those available for the day when we need them. At $4 
a gallon, we are way past that day. I think that we have to go 
after those resources.
    And to get back to the 68 million acres that are out there 
that are out on lease, what happens is when people bid and 
purchase those leases for 5 years or 10 years, they have a 
certain amount of time to drill and explore and then it lapses 
and then it goes back and--but it doesn't mean that there is 
oil on all those. They purchase them with the hope that maybe 
there is oil there. And, over time, they do ultimately explore 
and drill if they discover oil.
    In ANWR, we know it is there. We don't know if it is 10 
billion barrels or if it is 16 billion barrels. But we know it 
is there, and we know there is a lot of it.
    We also know that this isn't a place where Americans go up 
and vacation. It is in a place where about 8 to 10 months of 
the year it is essentially frozen tundra.
    Now the photographs that you see from the more extreme 
environmentalists that have put that off limits over the years, 
they will show you the couple of months when there is some 
greenery up there. But most of the time it is a barren 
wasteland.
    And in the Outer Continental Shelf it is an area that we do 
need to have great care when we go out there. We certainly 
don't want to harm the environment. But it is an area where we 
can go out there without harming the environment.
    Look at all the oil wells we have down in the gulf. We had 
one of the worst hurricanes of all time sweep through that area 
and take out a number of oil wells, and there weren't 
environmental spills of any significance, and that was about 
the worst storm ever that went through there.
    So we do need to do it in an environmentally safe manner, 
and we can do that. But I think we are way beyond the time when 
we can afford to put this off limits. Even if we don't have 
that oil right now, I think because of the speculation that is 
inherent in the market I think you would see the oil costs come 
down dramatically and very quickly if Congress would just act 
and give us a vote and let us vote on this again.
    Because even though it did pass in the House, we couldn't 
get it through the Senate. As high as the costs are now, I 
think it would pass. But we can't have it pass if we can't have 
a vote on it; and, right now, we haven't had a vote in this 
Congress.
    I yield back.
    Chairwoman Velazquez. Thank you.
    Mr. Dow, I would like to ask--maybe Mr. Dow or Mr. Ruden 
would like to comment on this question; and it is the weak 
dollar should be attracting more tourists, more foreign 
travelers to come to our Nation. And what we have seen is that 
in 2007 compared to how we did in 2000 we actually had 2 
million less foreign visits tourists coming to our Nation. Why 
has the number of foreign travelers to the U.S. declined and 
how can we make travel to the U.S. more appealing?
    Mr. Dow. You are exactly right. We had 2 million fewer 
travelers, but, to aggravate the situation, the rest of the 
world was up 35 million during the exact same period. Not only 
we didn't get one of them, we lost 2 million when we were 
totally on sale.
    The problem is threefold. One, the difficulty in getting a 
visa. If you come from Brazil, it will take you 100 days to get 
your interview, and you have to bring your whole family for a 
5-minute interview, and we have lost half a million Brazilian 
travelers. And it goes on and on.
    Second is the perception and reality of the difficulty of 
getting through customs and border protection, and people 
feeling if you make one wrong statement you are going to be 
sent back or put in a room for 3 hours. And the foreign press 
is beating us like crazy on this, saying America doesn't want 
you.
    And the third thing, Mr. Gallagher spoke to, is we do not 
in any way share all the policies of change. We do not go out 
and tell people why we are doing these things, and we are just 
getting pushed. So we need to promote America. We have not said 
anything to bring people to America, and that is one of the 
huge things and why this Travel Promotion Act is so critical.
    Mr. Ruden. I think Mr. Dow said it pretty well.
    Mr. Gallagher. You see, in Australia, they have 
commercials. In the United States--and France. People assume 
the United States does that, and they don't. We don't. There is 
no welcoming campaign, no explaining our procedures, and this 
Travel Promotion Act would do that. So I put in another plug 
for that.
    Chairwoman Velazquez. Yes, Mr. Dow.
    Mr. Dow. Another very important factor is this is our, you 
might say, stealth public diplomacy. If we can get more people 
coming here instead of going elsewhere, when they come to 
America and they see the diversity of our country and they see 
our freedom, they go back home and say they are not so bad; 
they are really great. We should be pushing this as a great 
deal of our public diplomacy in the State Department, the 
Department of Defense. If we get more of this going on, we 
wouldn't have to have a lot of these dollars, because this is 
how American is seen. They are seeing all of us.
    Chairwoman Velazquez. Okay, gentlemen and lady, thank you 
so very much for being here today. This has been quite an 
insightful hearing.
    I ask unanimous consent that members will have 5 days to 
submit a statement and supporting materials for the record.
    Without objection, so ordered. This hearing is now 
adjourned.
    [Whereupon, at 11:33 a.m., the Committee was adjourned.]



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