[Senate Hearing 110-1109]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 110-1109

 
                ADMINISTRATION'S PROPOSAL TO REAUTHORIZE
                  THE FEDERAL AVIATION ADMINISTRATION
                              ( PART II )

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

                                HEARING

                               before the

       SUBCOMMITTEE ON AVIATION OPERATIONS, SAFETY, AND SECURITY

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 8, 2007

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation



                  U.S. GOVERNMENT PRINTING OFFICE
79-905                    WASHINGTON : 2013
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  


       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                   DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska, Vice Chairman
    Virginia                         JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
BYRON L. DORGAN, North Dakota        KAY BAILEY HUTCHISON, Texas
BARBARA BOXER, California            OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida                 GORDON H. SMITH, Oregon
MARIA CANTWELL, Washington           JOHN ENSIGN, Nevada
FRANK R. LAUTENBERG, New Jersey      JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas                 JIM DeMINT, South Carolina
THOMAS R. CARPER, Delaware           DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri           JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
              Margaret Spring, Democratic General Counsel
   Christine D. Kurth, Republican Staff Director and General Counsel
Kenneth R. Nahigian, Republican Deputy Staff Director and Chief Counsel
                                 ------                                

       SUBCOMMITTEE ON AVIATION OPERATIONS, SAFETY, AND SECURITY

JOHN D. ROCKEFELLER IV, West         TRENT LOTT, Mississippi, Ranking
    Virginia, Chairman               JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts         KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
BARBARA BOXER, California            GORDON H. SMITH, Oregon
BILL NELSON, Florida                 JOHN ENSIGN, Nevada
MARIA CANTWELL, Washington           JOHN E. SUNUNU, New Hampshire
FRANK R. LAUTENBERG, New Jersey      JIM DeMINT, South Carolina
MARK PRYOR, Arkansas                 DAVID VITTER, Louisiana
THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
CLAIRE McCASKILL, Missouri
AMY KLOBUCHAR, Minnesota


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 8, 2007....................................     1
Statement of Senator Inouye......................................    65
    Prepared statement...........................................    66
Statement of Senator Lautenberg..................................    68
    Prepared statement...........................................    70
Statement of Senator Lott........................................    64
Statement of Senator Pryor.......................................    66
Statement of Senator Rockefeller.................................     1
Statement of Senator Thune.......................................    70
    Prepared statement...........................................    73

                               Witnesses

Alterman, Stephen A., President, Cargo Airline Association.......     6
    Prepared statement...........................................     7
Barclay, A.A.E., Charles ``Chip'' M., President, American 
  Association of Airport Executives; on Behalf of the Airport 
  Legislative Alliance...........................................    20
    Prepared statement...........................................    22
Bolen, Edward M., President and CEO, National Business Aviation 
  Association....................................................    49
    Prepared statement...........................................    51
Forrey, Patrick, President, National Air Traffic Controllers 
  Association....................................................    10
    Prepared statement...........................................    14
Inhofe, Hon. James M., U.S. Senator from Oklahoma................     1
May, James C., President and CEO, Air Transport Association of 
  America, Inc...................................................    34
    Prepared statement...........................................    36

                                Appendix

Conners, Bill, Executive Director and COO, National Business 
  Travel Association, prepared statement.........................    77
Letter, dated March 7, 2007 to Hon. John D. Rockefeller IV from 
  David S. Stempler, President, Air Travelers Association........    78
Principato, Gregory O., President, Airports Council 
  International--North America, prepared statement...............    78
Response to written questions submitted by Hon. Thomas R. Carper 
  to:
    Charles ``Chip'' M. Barclay, A.A.E...........................    87
    James C. May.................................................    91
Response to written questions submitted by Hon. Daniel K. Inouye 
  to:
    Charles ``Chip'' M. Barclay, A.A.E...........................    86
    Edward M. Bolen..............................................    93
    Patrick Forrey...............................................    84
    James C. May.................................................    88
Response to written questions submitted by Hon. Frank R. 
  Lautenberg to James C. May.....................................    90
Response to written questions submitted by Hon. John Thune to:
    Stephen A. Alterman..........................................    84
    Charles ``Chip'' M. Barclay, A.A.E...........................    87
    Edward M. Bolen..............................................    95
    James C. May.................................................    91
Stevens, Hon. Ted, U.S. Senator from Alaska, prepared statement..    77


                      ADMINISTRATION'S PROPOSAL TO
                    REAUTHORIZE THE FEDERAL AVIATION
                        ADMINISTRATION (PART II)

                              ----------                              


                        THURSDAY, MARCH 8, 2007

                               U.S. Senate,
   Subcommittee on Aviation Operations, Safety and 
                                          Security,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:34 a.m. in 
room SR-253, Russell Senate Office Building. Hon. John D. 
Rockefeller IV, presiding.

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

    Senator Rockefeller. This hearing will come to order. And, 
we don't have, we don't have a lot of time, but we don't have a 
lot of members, but we have the two most important members.
    [Laughter.]
    Senator Rockefeller. Except when Danny and Trent come in.
    And so, we would welcome your testimony, Senator Inhofe.

          STATEMENT OF HON. SENATOR JAMES M. INHOFE, 
                   U.S. SENATOR FROM OKLAHOMA

    Senator Inhofe. Now?
    Senator Rockefeller. Yes.
    Senator Inhofe. Good, good.
    [Laughter.]
    Senator Inhofe. Thank you, Mr. Chairman, and Senator 
Stevens, I'm really glad you're here because I have a few 
references to Alaska that I'll make during the course of this 
presentation.
    And I appreciate your letting me go first, we have an Armed 
Services hearing that I'm supposed to be attending.
    Well, I do thank you for letting me share my thoughts with 
you on what they're referring to as the Next Generation Air 
Transportation System Financing Reform Act. It's been my 
experience over the years, that every time you raise taxes, you 
call it reform. And I think this is no exception.
    Now, as you know, certainly Senator Stevens knows, probably 
a little bit more than you do, Mr. Chairman, and I have a 
little bit of experience when it comes to----
    Senator Rockefeller. About taxes? I'm not so sure he does.
    [Laughter.]
    Senator Inhofe. Well, on the transportation--I was Chairman 
of the Environment and Public Works----
    Senator Rockefeller. Would you proceed as politely as you 
can with your testimony.
    [Laughter.]
    Senator Inhofe. I'm sorry? All right.
    Well, anyway, I'll skip that part then.
    [Laughter.]
    Senator Inhofe. But I do want you to know that I also have 
a background in aviation, a lot of people are not aware of 
that, I'm currently still a flight instructor, an active 
commercially, instrument-rated pilot. This is my 50th year of 
flying. And I would say to you, and some of my friends in 
general aviation, that--I would ask the question, how much do 
you think it cost to get a license when I got my license? 
Either one of you want to venture a guess?
    Senator Rockefeller. No.
    Senator Inhofe. All right--it was $32.00. It took 8 hours, 
$4 an hour, and that was for an instructor, an airplane and 
fuel. So, things have changed.
    Now, I'm not only interested in the proposal before you in 
my capacity as a United States Senator, but that is, in my 
State of Oklahoma, we're the home of a major airline's 
maintenance facility, and another major airline's reservation 
facility, and we have a very vibrant general aviation 
community.
    So, as a user of the system myself, I think I'm somewhat 
qualified to comment on the proposed changes. I believe this is 
the third time in my Congressional career that a user-fee 
system has been proposed to fix our aviation infrastructure, 
and I say ``fix'' in quotations.
    Each time I have strongly opposed it, and will do so again 
today. The United States has the safest and most efficient air 
transportation system in the world, moving more aircraft and 
more people than the rest of the world combined.
    About 10 years ago, I flew a small, general aviation 
airplane, an old beat-up Cessna 414 around the world, 
recreating the flight of Wiley Post. It was on the 60th 
anniversary of his flight around the world. And so I went 
through Canada, and Goose Bay and Greenland, and Iceland and 
over to Great Britain and Berlin, Moscow, across Siberia and 
then into the State of Alaska. And during that time, I learned 
what other systems were, and it made me appreciate our system. 
And, I can assure you, from firsthand experience, that our 
aviation system is second-to-none, and it's not broken.
    Congress is being asked to dismantle the time-tested 
aviation financing system for reasons that I'm not really sure. 
The need to keep improving our air traffic control system, to 
increase safety and expand capacity, is without question. But, 
I fail to understand how this proposed user-fee system will 
achieve that goal.
    User fees, in the form of excise taxes, are the appropriate 
and cost-efficient way for all aviation users to support the 
system, in my opinion. Despite what some believe, our aviation 
infrastructure is inherently governmental, and thus maintaining 
the historic level of General Fund contributions to the system 
is critical, and Congressional oversight is essential.
    I've seen credible analysis that indicates that the 
Administration's proposal will result in less money, not more 
money, for aviation. I think someone's going to testify to 
that, and I've seen that proposal.
    Furthermore, because the fees can be adjusted by an 
unaccountable board, it would be impossible to accurately 
predict what the fees would be for users of the system. So, 
when we talk about, ``What's this going to cost?'' There's no 
way to analyze that with the information we have right now.
    Congressional management and oversight of the FAA spending 
and programs is needed to protect the users. And again, as I 
read the proposals, these fees can be adjusted at the 
discretion of the Administrator and an outside board, without 
Congressional oversight.
    I've reviewed the Administration's cost-accounting study, 
and seriously questioned their results--in particular, the 360 
percent increase in fuel taxes for general aviation. I think 
it's totally unacceptable. And, I know what's behind it--it's 
this attitude that there are so few pilots out there, you can 
hit them with something like this, and they'll just have to pay 
it, because they don't have the political clout to do it.
    I'd like to see what would happen if you wanted to have a 
360 percent increase on automobile taxes. Then they'd get your 
attention.
    In 2006, the Aircraft Owners and Pilot's Association, the 
AOPA, did a survey of its members, and found that 88 percent of 
them--if they had to have this 70 cent increase--would either 
stop flying altogether, or dramatically reduce their flying. 
Now, that would have quite an effect on the revenue that would 
be derived from that.
    We nearly killed the general aviation industry, by 
uncontrolled tort claims, but thankfully, due to the work of 
this Subcommittee, and quite frankly, of me and of Senator 
Nancy Kassebaum, Congress passed in 1994, and President Clinton 
signed into law, the General Aviation Revitalization Act, that 
was an 18-year repose proposition. And that bill, alone Mr. 
Chairman, as you well know, changed us from a major importer to 
a major exporter of small aircraft and aircraft parts.
    General aviation now contributes over $100 billion annually 
to the economy, and accounts for 1.3 million high-skilled, 
high-wage jobs in professional services and manufacturing.
    Furthermore, it's one of the few U.S.-based industries that 
actually makes a positive contribution to our balance in trade, 
which didn't used to be the case. Why we'd consider destroying 
that is beyond my understanding. Make no mistake, if this 
proposal is adopted, there will be a dramatic, immediate, 
negative effect on general aviation, and on our economy.
    For 27 consecutive years, I've attended the Air Venture in 
Oshkosh, Wisconsin--this is the largest air gathering anywhere 
in the world, even has more people than the Paris Air Show, or 
the ones you and I have gone to many times, Senator Stevens. 
And contrary to some of the people's belief, general aviation 
is not compose of fat cats. If you go there, and you watch the 
people, and you see, these are people who are single issue 
people--I understand that, I'm among that community, I 
suppose--but these are people who are in a variety of levels of 
the economy, and you go and you see the enthusiasm these people 
have, it's very, very exciting. I wish more members would get 
up there and see what kind of people are involved in general 
aviation.
    General aviation is also critical to small business 
viability, and a critical transportation means for many of the 
Nation. In fact, 70 percent of all general aviation flight 
hours are for business. This includes, but is not limited to, 
farming, ranching, search and rescue, firefighting, law 
enforcement, news, traffic, weather and so forth--70 percent. 
As a former small businessman, I know that increased operating 
costs can not always be passed onto the customer, and certainly 
they can't in this case.
    Now, in addition to increased fuel taxes, the FAA Proposal 
will subject all users of the system to substantial increases 
in fees for aircraft registration, airmen certificates, medical 
certificates, certificates for flight school, and training 
centers, certificates for repair states and maintenance 
facilities and schools and all of that. Now, you know, so 
you're talking about a huge tax increase, in addition to that 
one that we can actually measure, and that would be a 360 
percent tax increase on just the fuel.
    Now, though I don't currently have the pleasure of serving 
on the Commerce Committee, I did serve on the relevant 
Committee in the House, and believe strongly that both 
Committees play a critical role in keeping our aviation system 
the best in the world. I merely ask you not to give up the 
right and responsibility to oversee that system, by abdicating 
that role to an unaccountable outside board. As I read the 
proposal, that's what it appears to be.
    As you draft your bill, I would urge you to consider that 
the current system and many of the proposed system upgrades are 
designed for commercial and airline operations. General 
aviation is only an incremental user in that system. Stifling 
general aviation by imposing a crippling tax increase may help 
with congestion, because there are a lot of people who are not 
going to be flying anymore.
    We know that we're talking about imposing a 360 percent 
increase on fuel, but we're also imposing a tax that we can't 
really measure at this time.
    I mean I--you know, I look at Senator Stevens up there, and 
remember when I was flying around the world, Senator Stevens, 
coming down from Fairbanks, Alaska, straight south on that 
river--tell him to listen.
    Senator Lott. Was that the Kenai?
    Senator Inhofe. Yes, there we go.
    Senator Stevens. Oh, that guy.
    Senator Inhofe. Senator Stevens, I was talking about, 
toward the end of my flight around the world, when I was coming 
down from Fairbanks, replicating the Wiley Post flight, I 
looked over there and I saw almost every little home has a 
little lake, a little pontoon--how are you going to go back and 
explain to these people that we're imposing a 360 percent 
increase in their taxes, and even more than that?
    A vibrant general aviation industry is an important part of 
our overall aviation innovation. General aviation has been, and 
continues to be, the incubator for cutting-edge aviation 
technology.
    I can remember--one of the planes that I own right now is 
one that is a composite--that was all done through 
experimenting in people's garages--but this picture right here 
of the airplanes I own, that happens to be an experimental. And 
that experimental is doing things right now, and people are now 
copying that--not just general aviation, but others, military 
and others--seen the technology that was born in somebody's 
garage.
    So, while some may be eager to point out that general 
aviation is not paying its fair share, I believe that an even-
handed examination of the facts demonstrates that's not true. 
Any changes to the current system needs to encourage and 
maintain general aviation, and not unnecessarily destroy it by 
imposing unreasonable and unfair taxes upon us.
    So, as you work on reauthorization, take the idea of user 
fees off the table, then the debate can occur on any changes 
and adjustments that may need to be made. And I would like to 
have, hope that you would take those fees off the table as we 
have in the past. I've worked with all of the sectors of the 
aviation community before, and while there may not always be 
agreement on all points, I do believe there is a way to reach 
consensus on a deal to benefit everyone.
    So, I thank you for listening to my views, and they come 
from the heart. I regretted it when John Glen retired from the 
Senate, because that kind of left me as the last one who really 
has a hands-on understanding of aviation, and I hope you look 
into what its real contributions are to our economy, and the 
American way of life, and freedom of choice.
    Thank you, Mr. Chairman.
    Senator Rockefeller. Thank you, Senator Inhofe, very much.
    And, our second panel consists of Mr. Steve Alterman, who 
is the President of the Cargo Airline Association; Mr. Pat 
Forrey, President of the National Air Traffic Controllers 
Association; Mr. Chip Barclay, President of the American 
Association of Airport Executives; Mr. Jim May, President and 
CEO of Air Transport Association of America; and also, Mr. Ed 
Bolen, President and CEO, National Business Aviation 
Association.
    Gentlemen, we welcome all of you. And, Mr. Alterman, why 
don't you start off, sir, since you're the first person I 
named?
    Mr. Alterman. Thank you very much.
    Senator Rockefeller. And I genuinely welcome everybody 
here. I hope this is going to be a short hearing, and I'm 
hopeful that what we will get from this hearing, since you are 
the people who kind of run your operations and your 
organizations, that we will begin to get some dialogue between 
you--about ways that we can work on FAA problems, financing 
problems. My only position on financing, and I think it's 
shared by Senator Lott, is that the status quo cannot stand. 
Other than that, we are open, waiting to hear what your 
suggestions are, in a communal way. So, this may end up in some 
kind of a Quaker meeting, I have no idea, in the meantime, Mr. 
Alterman----
    Senator Stevens. Could we put our opening statements in the 
record, please?
    Senator Rockefeller. I'm sorry, I apologize, Senator 
Stevens, for that. Absolutely. And I actually didn't want to 
have any opening statements, so we could go right to that, and 
I apologize. Please.

         STATEMENT OF STEPHEN A. ALTERMAN, PRESIDENT, 
                   CARGO AIRLINE ASSOCIATION

    Mr. Alterman. Mr. Chairman, members of the Committee, good 
morning. My name is Steve Alterman, I'm President of the Cargo 
Airline Association. Our Association represents those who 
operate all-cargo aircraft, and others with interest in the 
all-cargo supply chain, in the air cargo supply chain.
    We are an integral member of the air transportation 
community, but we are somewhat unique. We exist to serve our 
customers, and provide overnight service to virtually any place 
in the United States and around the world. That means we do a 
lot of flying at night, and off-peak hours. So, we do have a 
somewhat unique operation.
    We are one of the fastest-growing segments of the 
community. The FAA estimates that we will grow domestically, 
3.1 percent, and internationally, 6.3 percent over the next 
decade or so, and in order to provide the service that is 
demanded by our customers, we are absolutely dependent on our 
modern air traffic system that provides the flexibility for 
growth. We simply cannot afford to continue to manage traffic 
with the technology that was basically invented to fight World 
War II, and matured in the 1950s, that's radar. We must build a 
system using technology and procedures necessary to address the 
shortfalls in capacity, and this modernization of the current 
system must, therefore, be the major priority as we move 
forward.
    Moreover, modernization of the system exists for reasons 
other than simply addressing capacity. Operational procedures 
using satellite-based technology will yield more efficient 
operations, less noise, less fuel burn, reduction in aircraft 
emissions, and those cannot be overlooked, and neither can the 
potential safety enhancements that will result with the 
provision of better and more timely information to both pilots 
and controllers.
    Since air cargo is expected to continue to be a major 
growth element in the system, we have a significant stake in 
the modernization effort, and we strongly believe the effort to 
modernize must not be delayed, and Congress needs to move 
forward this year to ensure that the programs fundamental to a 
modernized system are both authorized and funded.
    Moving to the real subject of the hearing, and that's the 
proposal--the reauthorization of the FAA. The FAA did release 
its proposal on February 14, and while the FAA over the past 
months and year has made significant strides toward 
modernization especially in the area of identifying ADS-B 
technology as the building block, we're concerned that the 
proposed legislation doesn't really lay out a comprehensive, 
next-generation plan. Until the details of this plan are known, 
it's very difficult to assess the specific funding required. 
And yet, the proposal keys almost solely on funding.
    We think, to some extent, this puts the process backward, 
and we need to answer some questions before we go forward. The 
questions revolve around the precise nature and cost of the 
system, what cost savings would be realized, what are the 
benefits to users, and whether the system needs to be 
purchased, or perhaps, leased.
    With respect to the funding question--I think there are 
certain fundamental elements. First, the U.S. aviation system--
and I think all of us would agree--is a system that benefits 
all citizens and drives the Nation's economy. We absolutely 
need a robust, Federal, General Fund contribution, at least at 
historic levels. We're disappointed that the proposal does not 
grant that.
    Second, whatever funding mechanism you decide upon, it 
should be fair, and the obligations fairly allocated. As a 
basic principle, we do not believe that any industry segment 
should subsidize any other industry segment, but we should all 
pay for our use of the system.
    From the all-cargo perspective, we currently pay a 6.25 
percent air waybill tax, plus a 4.3 cent per gallon fuel tax, 
and that results in our paying of just over 100 percent of the, 
of our system use. We don't expect any relief for that portion 
that exceeds 100 percent, but neither should we be forced, or 
expected, to pay more than our current share that does 
represent 100 percent use.
    This result can be accomplished by simply retaining the 
current funding mechanism for the air transportation of cargo, 
or by ensuring that any new system applicable to us does not 
unfairly impact our industry segment. We also firmly believe 
that it is absolutely necessary to fund research and 
development, research and development becomes tomorrow's 
facilities and equipment--we can't skimp on that.
    With respect to the funding proposal, the FAA, we are not 
happy with it. We cannot support any proposal that gives 
unfettered authority to the FAA Administrator, with virtually 
no oversight, and no possibility for judicial review.
    We are also very concerned that it appears the user-fee 
system envisioned by the FAA, will require a complicated and 
costly new bureaucracy, simply to assess and collect the fees. 
The added costs of establishing and maintaining this 
bureaucracy is very difficult to justify, when there may be 
other, less costly ways of doing this.
    I might point out that we all get letters requesting 
charitable contributions every once in a while, and I always 
ask when I get that, what portion of money--if I contribute--
will actually go to the intended recipient, and what will go to 
administrative costs? I have the same problem with the FAA 
proposal. If we're going to--the funds are not unlimited, and 
those funds that go there, should go to modernization, not to 
fund another bureaucracy.
    Thank you very much. I would be glad to answer any 
questions.
    [The prepared statement of Mr. Alterman follows:]

         Prepared Statement of Stephen A. Alterman, President, 
                       Cargo Airline Association

    Good morning. My name is Steve Alterman and I am the President of 
the Cargo Airline Association, the nationwide organization representing 
the interests of the all-cargo air carrier industry, as well as other 
businesses and entities with a stake in the air cargo supply chain. (A 
list of current members is attached).

The All-Cargo Industry
    Although an integral part of the air transportation community, the 
all-cargo segment is unique, with operating characteristics different 
from other segments, resulting in substantially different air 
transportation system use and relatively less stress on system 
resources. Since our only mission is to provide our worldwide customers 
and shippers with end-to-end transportation services, a large 
percentage of our flights are during nighttime hours, thus allowing us 
to meet time-definite demands and to offer expedited delivery 
throughout the Nation and the world.\1\ We currently pay for slightly 
over 100 percent of our share of air traffic system use through a 
combination of a 6.25 percent air waybill tax and 4.3 cents per gallon 
fuel tax.\2\
---------------------------------------------------------------------------
    \1\ Such nighttime operations are clearly ``off-peak'' and result 
in an efficient use of system resources.
    \2\ See Air Cargo Airlines System Use Analysis, SH&E, 2006.
---------------------------------------------------------------------------
    The air cargo industry is one of the fastest growing segments of 
our commercial aviation marketplace, with growth rates of 3.1 percent 
domestically and 6.3 percent internationally expected over the next 
decade.\3\ In order to continue to provide the time-definite service 
that our shippers and the world economy demand, we are dependent on a 
modern air traffic management system that provides the flexibility for 
growth in the coming years. We simply cannot afford to continue to 
manage traffic with technology (radar) designed in the first instance 
to fight World War II. Rather, we must build a system using the 
technology and procedures necessary to address the shortfalls in 
capacity that will occur as future demand continues to grow. The 
modernization of our current system must therefore be the major 
priority in the ongoing FAA Reauthorization effort.
---------------------------------------------------------------------------
    \3\ U.S. Department of Transportation, Federal Aviation 
Administration, FAA Aerospace Forecasts, Fiscal Years 2006-2017.
---------------------------------------------------------------------------
    Modernization of the system is critical for reasons other than 
simply addressing future capacity. Operational procedures using 
satellite-based technology will yield more efficient operations, 
resulting in less noise and less fuel burn, thereby reducing aircraft 
engine emissions. These environmental benefits cannot be overlooked. 
Nor can the potential safety enhancements that will result with the 
provision of better and more timely information to both pilots and 
controllers.
    Since air cargo is expected to continue to be a major growth 
element in this system, we have a significant stake in the 
modernization effort now underway. We strongly believe the effort to 
modernize must not be delayed and Congress needs to move this year to 
ensure that the programs fundamental to a modernized system are both 
authorized and funded.

The Reauthorization Debate
    On February 14, 2007, the FAA released its long-awaited legislative 
plan for dealing with both the programmatic and financing elements of 
the Next Generation System. Unfortunately, this proposal provides more 
questions than answers, and the Cargo Airline Association cannot 
support the FAA proposal in its present form.
    While the FAA has, over the past few months, made significant 
strides toward modernization (especially in the area of making the 
decision to use ADS-B technology as the next generation surveillance 
tool), we are concerned that the proposed legislation does not contain 
a comprehensive Next Generation plan. Until the details of this plan 
are known, it is difficult to assess the funding required. Yet the FAA 
proposal focuses almost exclusively on the financing element and not on 
the details of the system. To some extent, therefore, we are putting 
the cart before the horse and need to step back to ensure that the 
right questions are being asked.
    These questions revolve around the precise nature and associated 
costs of the Next Generation system, what cost savings the FAA would 
realize from this modernization, the costs and benefits to the user 
community and whether the modernized system should be purchased or 
leased. Only after these issues are, at least preliminarily, addressed 
should there be a debate over how to fund the system, including whether 
the current system is adequate or whether a different system is 
necessary or appropriate.
    When funding questions are addressed, we believe the following 
principles and considerations should be paramount.
    First, the U.S. aviation system is a national asset that benefits 
all citizens and drives the nation's economy. The consequences of a 
sub-par system are constrained economic growth and diminished U.S. 
competitiveness in the world marketplace. Congress has historically 
recognized these facts by providing a General Fund contribution in 
excess of 20 percent of the FAA Budget. We are disappointed that the 
President's Budget and the FAA legislative proposal not only provide a 
smaller percentage of General Fund contribution for Fiscal Year 2008, 
but actually envision a decrease in funding for 2009 and 2010. With the 
need for significant infrastructure investments in the coming years, 
this Federal contribution should increase, not decrease.
    Second, whatever funding mechanism is ultimately decided upon, 
Congress should ensure that industry funding obligations are fairly 
allocated. As a basic principle, no industry segment should be forced 
to subsidize any other segment. From the all-cargo perspective, where 
under the current system cargo industry members pay a 6.25 percent air 
waybill tax plus a 4.3 cent per gallon fuel tax, studies indicate that 
our industry segment pays somewhat more than 100 percent of our system 
use. This is before taking into account that much of our use of the 
system is at off-peak times--meaning that not only do we place a 
relatively low burden on the system but, by spreading operations over 
24 hours, we also enhance the system's overall efficiency. While we do 
not expect any relief for that portion of our system use that exceeds 
100 percent, neither should we be expected to pay any more than our 
current share in order to make up for the shortfall in contributions 
from other industry segments. This equitable result can be accomplished 
by simply retaining the current funding mechanism for the air 
transportation of cargo or by ensuring that any new system applicable 
to us does not unfairly impact our industry segment.
    Third, we strongly believe that Congress should support the funding 
necessary for Research and Development in an amount adequate to develop 
the necessary ``out-year'' modernization products. As a practical 
matter, today's R&D provides tomorrow's Facilities and Equipment, and 
any funding gaps in this area will seriously impede the modernization 
effort. This issue is of special concern in light of the re-
prioritization of NASA R&D funding to concentrate on future space 
travel and ``de-prioritize'' short and mid-term aeronautics research. A 
specific area of R&D concern is the research necessary to address 
growing environmental concerns.
    Finally, and perhaps most importantly, we have serious concerns 
with the specific user fee proposal set forth in the FAA's February 14 
proposal. Even if it is determined that the current excise tax system 
must be completely overhauled, we cannot support a new structure that 
gives the FAA Administrator virtually unfettered authority to set the 
level and structure of fees at will, with little or no Congressional 
oversight and no provisions for judicial review. While the proposed 
Bill does list use-related factors that the Administrator might take 
into consideration in setting user fees, all of these elements are 
discretionary and need not be used. Such authority would clearly 
eliminate any incentive for the FAA to cut costs \4\ or restrain future 
cost increases since fees could always be raised to cover unnecessary 
agency spending.
---------------------------------------------------------------------------
    \4\ Indeed, without any detail in the proposed Bill, we have no 
idea of what expenses can be eliminated in a modernized system.
---------------------------------------------------------------------------
    Moreover, it appears that the user fee system envisioned by the FAA 
proposal will require a complicated and costly bureaucracy simply to 
assess and collect the fees. The added costs of establishing and 
maintaining this bureaucracy cannot be justified, especially when 
other, simpler, options may be available. At the least, these other 
options should be explored before committing to any proposed user fee 
scheme.
    The Cargo Airline Association and its member companies are 
committed to working with Congress, the FAA and colleagues in the 
aviation community to arrive at an equitable system that meets the 
needs of all aviation interests. While the proposed FAA Bill is a 
useful beginning of the debate, it must not be viewed as a viable final 
product.
    Thank you very much. 

    
    

    Senator Rockefeller. Interesting comparison. And I thank 
you very much, Mr. Alterman. Very, very much.
    Now, we turn to Mr. Pat Forrey, the President of the 
National Air Traffic Controllers Association. Welcome.

 STATEMENT OF PATRICK FORREY, PRESIDENT, NATIONAL AIR TRAFFIC 
                    CONTROLLERS ASSOCIATION

    Mr. Forrey. Chairman Rockefeller, Ranking Member Lott, Vice 
Chairman Stevens, on behalf of the 15,000 air traffic safety 
professionals that make up the National Air Traffic Controllers 
Association, I want to thank you for inviting me to testify 
here today.
    I know I was invited here to discuss the Administration's 
FAA reauthorization proposal, however, my workforce is having a 
troubled time, concentrating on user-fees and NextGen, due to 
the distraction associated with our ongoing labor disputes and 
contract disputes.
    NATCA has been shut out of the development of vital 
modernization equipment, which the GAO cites as a major reasons 
for billions of dollars of cost overruns. We have been shut out 
of the development of a new staffing plans, which fails to 
staff to traffic, and instead staffs to budget. And we are 
largely shut out of the Agency's reauthorization proposal, 
which includes an ill-advised user-fee system, and other 
precursors to privatization of the safest and most efficient 
air traffic control system in the world.
    But most frustrating to my membership and I is the fact 
that we were even shut out of any possibility of good-faith 
negotiations on our own contract last year. In July 2005, the 
FAA unilaterally imposed work rules on 11 NATCA bargaining 
units, consisting of many aviation-safety related 
professionals, including operations engineers, aviation safety 
engineers, aircraft certification engineers, test pilots, 
nurses, lawyers, drug abatement, and others.
    Although the FAA continually refers to a contract, the 
truth is that the safety-related professionals NATCA represents 
are not working under a contract, but working under imposed pay 
and work rules. Let me be clear, no labor law considers imposed 
work rules to be a contract. Morale among FAA employees is 
extremely low, retirements are far exceeding FAA's planning, 
fatigue among those employees remaining is a major concern, and 
these are all direct effects of the imposed work rules and pay 
system.
    In 2003, according to the FAA Administrator's Fact Book, 
there were 15,691 air traffic controllers. At the end of 2006, 
there were 14,206, and of the 14,000 working today, almost 
2,000 of them are trainees, and not fully certified.
    At the same time, by no means by coincidence, operational 
errors are on the rise at the FAA's busiest facilities, 
including Atlanta-Hartsfield, and Southern California TRACON. 
As an air traffic controller with the FAA for 23 years, I can 
assure you that those 1,485 controllers would make a 
significant difference in the level of safety in the sky--1,485 
controllers would eliminate the need for mandatory 6-day work-
weeks, forced overtime, the fatigue and the burnout felt by 
overstaffed, overworked controllers throughout the country.
    Without a concerted effort to attract experienced 
controllers and retain our current workforce, the ATC system 
will continue to lose controllers, and that will mean flight 
delays, runway incursions, increased chances of aviation 
disasters.
    Controllers are leaving the workforce at a rate of exactly 
three per day, since the start of this current fiscal year. At 
the current pace, the number of controller losses would be 
1,095 by the end of the year--that's 150 more, more than the 
FAA has projected.
    It's likely that those controllers are retirement-eligible, 
will choose to leave the system, unless something can be done 
to keep them, like returning to the negotiations table under 
fair conditions, and with the intentions of reaching a mutually 
agreeable contract.
    It's important to note that the FAA is not currently hiring 
air traffic controllers, they're hiring trainees. It takes an 
average of 3 years for a trainee to become fully certified. The 
staffing plan released by the FAA just yesterday is the 
Agency's latest smoke-and-mirrors screen.
    With traffic increased since 1998, and no significant 
deployment of new ATC equipment, I see no justification for a 
decrease in the controller staffing levels. When we lose 
veteran controllers, we are moving from the on-the-job 
instructors that assist the development of new hires. Trainees 
become controllers by plugging in and working air traffic 
alongside veteran, certified controllers. With the pool of 
instructors continually shrinking, the length of time it takes 
for trainees to become fully certified, and able to work 
traffic, will continue to increase.
    The gap--that gap from the day a veteran controller 
retires, to the day their replacement reaches full 
certification level, is where we have the most reason to worry 
about the Agency's continued ability to maintain the margin of 
safety in the system, by ensuring that redundancy. Our greatest 
challenge today is maintaining the margin of safety, knowing 
the level of redundancy has become whittled away to its bare 
minimum. We need more eyes watching the sky.
    The FAA's Air Traffic Organization has stated they are 
considering structured staffing to deal with shortages to train 
new hires. Unfortunately, this will mean air traffic facilities 
will be staffed with less-than-experienced controllers, only 
partially certified. Currently, FAA projections are that by 
2010, 40 percent of the air traffic control workforce will have 
less than 4 years of experience on the job. And that's without 
figuring in the 50 percent failure rate at facilities such as 
the New York TRACON, according to the FAA's Eastern Regional 
Administrator, Doug Murphy.
    I have often--with aviation contributing $640 billion a 
year to the American economy, representing 4.5 percent of the 
U.S. GDP and accounting for over 9 million jobs, it is 
increasingly important that inefficiencies be eliminated in the 
system.
    As Transportation Secretary Mary Peters recently said, ``If 
we continue along the current path, estimates are that by 2022, 
congestion in our skies will cost the Nation $22 billion each 
year in lost economic activity.'' Yet, the FAA has failed to 
plan for the retirements that are 26 years in the making.
    In fact, the Agency has recently admitted that the work 
rules imposed on this workforce is actually exacerbating the 
retirement wave, and the understaffing epidemic. The rampant 
understaffing of facilities across the country will mean 
increased delays, and unnecessarily increased risks.
    It is urgent that we get back to the table, because we are 
losing these controllers, at three a day. It is urgent we stop 
the bleeding, stop pushing out veteran controllers that are 
needed to help train the new ones, and work the airspace. It is 
urgent that we include language to fix the negotiation process, 
and FAA reauthorization, so that we have collective bargaining 
rights in the next round of negotiations. It is urgent we not 
wait for reauthorization to open up the current imposed 
contract, because the system can't handle the current tidal 
wave of retirements. The bleeding must be stopped, and it can 
be stopped by getting back to the table.
    It is urgent that we put the imposed work rules and pay 
system behind us, and be allowed to concentrate on the pressing 
need to modernize the system, and meet the demands of the 
future.
    At this time, I would like to ask that the Committee enter 
into the record a letter written by Congressman Jim Oberstar, 
Chairman of the House Transportation and Infrastructure 
Committee, and Congressman Jerry Costello, Chairman of the 
House Aviation Subcommittee, which articulates the need--the 
urgent need--to attach language to the Iraqi supplemental, to 
get us back to the table, and help stabilize air traffic 
control system.
    Senator Rockefeller. It is done.
    [The information previously referred to follows:]

       House Committee on Transportation and Infrastructure
                                   Subcommittee on Aviation
                                                      March 6, 2007
Hon. David R. Obey,
Chairman,
Committee on Appropriations,
Washington, DC.

Dear Chairman Obey:

    We understand that several members of your Committee are urging 
that the Emergency Supplemental Appropriations bill for FY 2007 include 
a provision to change the grossly unfair bargaining process between the 
Federal Aviation Administration (FAA) and its air traffic controllers, 
which has resulted in the unilateral imposition of pay and work rules 
on this critical safety workforce. We strongly support including such a 
provision in the Emergency Supplemental.
    On April 6, 2006, the FAA declared an impasse in its contract 
negotiations with the National Air Traffic Controllers Association 
(NATCA) and sent the dispute up to Congress under a provision that FAA 
argued gave it the right to unilaterally impose its contract terms if 
Congress did not act within 60 days. FAA imposed its last offer on the 
controllers in June 2006. This unilateral decision has had a harmful 
impact on the workforce, including an acceleration of retirements. 
According to NATCA, veteran controllers are currently retiring at a 
rate of more than three per day since the end of Fiscal Year 2006.
    FAA's interpretation of the law gives it an inherent, unfair 
advantage to impose its contract terms on its employees. Such a one-
sided process has been an impediment to good faith negotiations that 
could have led to a voluntary contract.
    Air traffic controllers are working under a contract they neither 
chose nor ratified. To restore collective bargaining for our Nation's 
nearly 15,000 controllers and to preserve safety, we strongly support 
including a provision in the Emergency Supplemental Appropriations bill 
for FY 2007 that would bring both sides back to the table and force 
binding arbitration.
    Thank you for your attention to this request.
            Sincerely,
                                         James L. Oberstar,
                                                          Chairman.
                                         Jerry F. Costello,
                                                          Chairman,
                                              Subcommittee on Aviation.
cc: Hon. Nancy Pelosi
   Hon. Steny H. Hoyer
   Hon. James E. Clyburn
   Hon. John P. Murtha

    Mr. Forrey. Once again, I thank you for this opportunity to 
testify, and look forward to answering any questions you may 
have.
    [The prepared statement of Mr. Forrey follows:]

           Prepared Statement of Patrick Forrey, President, 
              National Air Traffic Controllers Association

    There are tens of thousands of Federal Aviation Administration 
employees working without a contract including many employees 
represented by NATCA, PASS, and AFSCME, who are working without 
contracts for their respective bargaining units.\1\ In July 2005, the 
FAA unilaterally imposed work rules on 11 NATCA bargaining units 
consisting of many aviation safety professionals, including Operations 
Engineers, Aviation Safety Engineers, Aircraft Certification Engineers, 
Test Pilots, Nurses, Lawyers, Drug Abatement Inspectors, and others. On 
September 3, 2006, the FAA used that same tactic and imposed work rules 
and a two-tier pay scale on air traffic controllers. Currently the 
NATCA-represented aviation safety professionals do not have a contract 
with the FAA and air traffic controllers are working under imposed work 
and pay rules without a contract. Although the FAA continues to tell 
the big lie that there is a contract, that doesn't make it true.
---------------------------------------------------------------------------
    \1\ In fact, over the past 5 years, only one Union, the National 
Association of Air Traffic Specialists (NAATS), has reached a 
collective bargaining agreement with the FAA and shortly thereafter 
nearly all of the employees in its Flight Service Station (FSS) 
bargaining unit were separated from service or transferred to other 
parts of the Agency when their work was contracted out. FAA 
subsequently moved unsuccessfully to void the agreement for the 
remaining employees in Alaska when it petitioned the Federal Labor 
Relations Authority to decertify the NAATS FSS Alaska bargaining unit.
---------------------------------------------------------------------------
    It is axiomatic that in order to form a contract the parties must 
have a meeting of the minds. NATCA and the FAA did not and do not have 
a meeting of the minds over the terms and conditions of employment for 
the three Air Traffic Controller bargaining units. Instead the FAA 
unilaterally implemented its last proposal, forcing employees to work 
under imposed work and pay rules rather than a contract. The FAA did 
the same thing for in July 2005 for 11 non-Air Traffic Controller 
bargaining units. There is no contract for these bargaining units 
either. No labor law considers imposed work rules to be a contract. In 
fact, unilateral implementation is a form of economic warfare not 
unlike a strike or lockout in the private sector.\2\ 
---------------------------------------------------------------------------
    \2\ When an impasse in bargaining is reached, the duty to bargain 
is not terminated but only suspended. NLRB v. Tex-Tan, 318 F.2d 472 
(5th Cir. 1963). However, the fact of impasse enables the employer to 
make unilateral changes in working conditions that are ``not 
substantially different or greater than any which the employer . . . 
proposed during negotiations.'' Atlas Tack Corp., 226 NLRB 222, 227 
(1976), enfd. 559 F.2d 1201 (1st Cir. 1977).
    Impasse, in effect, temporarily suspends the usual rules of 
collective bargaining, by enabling the interjection of new terms and 
conditions into the employment relationship even though no agreement 
was reached through the proscribed collective bargaining process. As 
the Supreme Court in Charles D. Bonanno Linen Service v. NLRB, 
observed:
    ``As a recurring feature in the bargaining process, impasse is only 
a temporary deadlock or hiatus in negotiations `which in almost all 
cases is eventually broken, through either a change of mind or the 
application of economic force.' Furthermore, an impasse may be `brought 
about intentionally by one or both Parties as a device to further, 
rather than destroy, the bargaining process.' 454 U.S. 404, 412 
(1981).''
    In short, the impasse doctrine is designed, in part, to allow an 
employer to exert unilateral economic force by establishing new terms 
and conditions of employment as set out in the employer's bargaining 
proposals. However, the impasse is always viewed as a temporary 
circumstance, and the impasse doctrine allowing implementation of 
employer proposals is legitimated only as a method for breaking the 
impasse. The Parties, thus, remain obligated to continue their 
bargaining relationship and attempt to negotiate an agreement in good 
faith. The impasse doctrine, therefore, is not a device to allow any 
party to continue to act unilaterally or to engage in the disparagement 
of the collective bargaining process. NLRB v. Crompton-Highland Mills, 
337 U.S. 217, 224 (1949). In the instant dispute, even assuming 
arguendo that the Parties reached impasse, FAA has interpreted its 
unilateral implementation as a contract, rather than a means of 
pressuring NATCA into reaching a contract. It has, in the Supreme 
Court's language, disparaged the entire process of collective 
bargaining.
---------------------------------------------------------------------------
    Morale among FAA employees is extremely low. Retirements are far 
exceeding FAA's planning. Fatigue among those employees remaining is a 
major concern. A lack of trust between employees and their supervisors 
creates additional tension. Decisions based upon the desire to display 
authority rather than based upon safety needs or common sense have 
become pervasive. Thousands of grievances are awaiting disposition. The 
failure of FAA to reach agreement with the unions that represent its 
employees has caused urgent safety concerns.
    Congress must act now to alleviate these problems by requiring the 
FAA to return to the bargaining table with NATCA. The current law is 
unclear. Unless the process is changed and clarified, FAA will have no 
motivation to reach agreement, and it will, unfortunately, once again 
fail to reach agreement. Congress must act to send the FAA back to the 
table, provide a clear impasse procedure, similar to the process that 
has been consistently successful for the United States Postal Service 
for over 30 years, preserve the rights to ratification and agency head 
review, and provide jurisdiction for the Federal Courts to hear 
disputes and enforce the law.\3\ 
---------------------------------------------------------------------------
    \3\ Currently the Federal Courts do not have jurisdiction over 
these disputes. This is distinguished from the attempt to change the 
personnel regulations in the Department of Homeland Security. Under its 
statute (5 U.S.C.  9701(a) (Supp. II 2002), DHS was to create a new 
system through the issuance of regulation (70 FR 5272, Feb. 1, 2005 
codified at 5 C.F.R. Part 9701), making it subject to Federal Court 
jurisdiction under the Administrative Procedures Act. When the courts 
reviewed DHS' proposed regulations it found that the Department had 
exceeded its scope by effectively eliminating collective bargaining, 
among other things. Nat'l Treasury Employees Union v. Chertoff 
(Chertoff I), 385 F.Supp. 2d 1 (D.D.C. 2005) , and Nat'l Treasury 
Employees Union v. Chertoff (Chertoff II), 394 F.Supp.2d 137 (D.D.C. 
2005), enf'd 452 F.3d 839 (D.C. Cir. 2006).
    However, not unlike what has occurred in the negotiations between 
FAA and the Unions that represent its employees, the United States 
Court of Appeals for the District of Columbia Circuit wrote in 
enforcing the NTEU v. Chertoff cases, ``the regulations effectively 
eliminate all meaningful bargaining over fundamental working conditions 
(including even negotiations over procedural protections), thereby 
committing the bulk of decisions concerning conditions of employment to 
the Department's exclusive discretion. In no sense can such a limited 
scope of bargaining be viewed as consistent with the Act's mandate that 
DHS `ensure' collective bargaining rights for its employees.'' Id. at 
844. Similar to DHS, the FAA reserved to its own discretion all of the 
newly negotiable subjects under 49 U.S.C. 40122(a) in its last, best 
offer to NATCA, effectively nullifying the first section of the law, 
where negotiations are provided for, even though it relied upon the 
next section to unilaterally implement such discretion.
---------------------------------------------------------------------------
Statutory Background
    On November 15, 1995, Congress enacted Section 347 of the 1996 
Department of Transportation Appropriations Act,\4\ directing the FAA 
to develop and implement a new personnel management system, to address 
``the unique demands on the Agency's workforce.'' Section 347(b) 
specifically stated that Chapter 71 of Title 5 of the U.S. Code would 
not apply to the new personnel management system, except for the 
prohibition of the right to strike in  7116(b)(7).\5\
---------------------------------------------------------------------------
    \4\ Pub. L. 104-50,  347, 109 Stat. 460 (1995).
    \5\ Id. at  347(b).
---------------------------------------------------------------------------
    On March 28, 1996, the FAA issued a new Personnel Management System 
(PMS), organized in chapters addressing Staffing, Compensation, 
Performance Management, Training, Labor Relations, and Executive 
Systems. Chapter V, Labor Relations provided:

        Employee Rights

        The FAA, all FAA employees, and all labor organizations 
        representing FAA employees shall have the same rights, and be 
        subject to the same responsibilities and limitations, as are 
        available to all Federal agencies, employees, and labor 
        organizations under 5 U.S.C. Chapter 71.

    On March 29, 1996, Congress passed the House Joint Resolution 
170,\6\ which amended Section 347 of the 1996 DOT Appropriations Act, 
to require the applicability of Chapter 71 of Title 5, relating to 
labor-management relations, to the FAA's new PMS.
---------------------------------------------------------------------------
    \6\ Pub. L. 104-122, 110 Stat. 876 (1996).
---------------------------------------------------------------------------
    On October 9, 1996, Congress enacted the Air Traffic Management 
System Performance Improvement Act of 1996,\7\ (the 1996 FAA Act) to 
establish a procedure for ``developing and making changes to the 
personnel management system initially implemented by the Administrator 
. . . on April 1, 1996. . . . '' \8\ The FAA Act requires FAA to 
negotiate with its employees' exclusive collective bargaining 
representatives over any changes to the FAA PMS, and to engage in 
mediation if such negotiations do not produce an agreement. However, if 
negotiations end in an impasse, the 1996 FAA Act ``provide for the 
Administrator to transmit its proposals, along with the bargaining 
representative's objections, to Congress. Proposed changes to the PMS 
will not take effect until sixty days after the Agency's submission to 
Congress.'' \9\ At the same time Congress stipulated that all labor-
management agreements then in effect were to remain in effect until 
their expiration dates.\10\
---------------------------------------------------------------------------
    \7\ Pub L. 104-264, Title II, 110 Stat. 3227 (1996).
    \8\ 49 U.S.C.  40122(a).
    \9\ Id.
    \10\ 49 U.S.C.  40122(f).
---------------------------------------------------------------------------
    In 2000, Congress codified the provisions of House Joint Resolution 
170 by adding subsection (g)(2)(C) to 49 U.S.C. Section 40122 to 
specify that Chapter 71 of Title 5, ``relating to labor-management 
relations'' would apply to the FAA PMS.\11\ Yet, the statute still 
remains unclear as to how bargaining impasses are to be resolved.\12\ 
---------------------------------------------------------------------------
    \11\ Pub. L. 106-181, Title III,  307(a), 114 Stat. 124 (2000).
    \12\ When FAA and NATCA failed to reach agreements over terms and 
conditions of employment for 11 bargaining units, NATCA filed a formal 
Request for Assistance on July 8, 2003 with the FSIP (Case No. 03 FSIP 
144). PASS filed similar formal Requests for Assistance on various 
dates in July 2003 (Case Nos. 03 FSIP 149, 150, 151, and 157). The FAA 
filed statements of position with the Panel on September 22, 2003, 
asserting that the Air Traffic Management System Performance Act of 
1996 completely divested the Panel of any jurisdiction over the 
impasses. After soliciting legal positions from all of the parties, on 
January 9, 2004, the Panel declined to address the impasses ``because 
it is unclear whether the Panel has the authority to resolve the 
Parties' impasse[s]. . . . This determination to decline to assert 
jurisdiction is made without prejudice to the right of either party to 
file another request for assistance if the underlying threshold 
question is resolved in the appropriate forum consistent with the 
Union's interpretation of the applicable statutory provisions.''
    NATCA and PASS filed Civil Action No. 04-0138 in the United States 
District Court for the District of Columbia on January 30, 2004. The 
District Court ruled that it did not have jurisdiction to hear the 
underlying claim. Nat'l Air Traffic Controllers Assn. v. FSIP, 2005 WL 
418016 (D.D.C. 2005). The United States Court of Appeals for the 
District of Columbia Circuit agreed that it did not have jurisdiction 
to resolve the complaint on the merits. Instead it deferred to the 
Unfair Labor Practice processes within the Federal Labor Relations 
Authority's auspices. Nat'l Air Traffic Controllers Assn. v. FSIP, 437 
F.3d 1256 (D.C. Cir. 2006). Yet, the FLRA does not have any background 
in issues involving Title 49. This creates an inherent problem.
---------------------------------------------------------------------------
Air Traffic Controllers Dispute
    NATCA and FAA began negotiations for a successor to the 2003 two-
year extension to the Collective Bargaining Agreement in July of 2005. 
During those negotiations and NATCA did not reach agreement with FAA. 
In fact, FAA from the beginning of the process, until the end, failed 
to adjust its proposals on pay and several other issues, believing that 
if it failed to reach agreement, it would submit its final proposal to 
Congress, Congress would not act, and after 60 days it could 
unilaterally impose its last best offer on the employees. Rather than 
engaging in collective bargaining, the result was a fait accompli. FAA 
would engage in what is referred to as surface bargaining \13\ until it 
found an opportunity to end negotiations, submit its proposal to 
Congress, and unilaterally implement.
---------------------------------------------------------------------------
    \13\ The FLRA has not ruled on surface bargaining, however the 
National Labor Relations Board has significant case law on the subject. 
In Teamsters Local 515 v. NLRB, 906 F.2d 719 (D.C. Cir. 1990) the U.S. 
Court of Appeals for the D.C. Circuit reiterated some of the factors 
that the Board will consider in determining whether bad-faith 
bargaining had occurred. These include among others: unreasonable 
bargaining demands that are consistently and predictably unpalatable to 
the other party, unilateral changes in mandatory subjects of 
bargaining, and insistence to impasse on non-mandatory subjects of 
bargaining, all of which are present in the bargaining dispute between 
NATCA and FAA evidencing the Agency's design to frustrate a bargaining 
agreement.
---------------------------------------------------------------------------
    After 9 months of meeting, on April 5, 2006, the day FAA 
unilaterally declared impasse in negotiations, NATCA presented a new 
proposal for Pay, Article 108. FAA's Rick Duscharme inquired about 
whether this was NATCA's ``best and final offer,'' presumably meaning 
last, best offer. NATCA's Barry Krasner responded that he didn't want 
it to be considered that, that he didn't see a lot of movement, and 
wanted to see movement from the FAA. FAA's Joe Miniace responded that 
he would reject or accept the proposal after looking at it during 
lunch. Previously the shortest time period between a Union pay proposal 
and an FAA response was approximately 6 weeks: December 7, 2005 
(NATCA's second proposal on pay) to January 25, 2006 (FAA's third 
proposal on pay). On April 5, Miniance's statement that a response 
could be generated while reviewing the Union's proposal during lunch 
serves as a further indication that FAA's intention to declare impasse 
on April 5, regardless of the proposals was a fait accompli. The 
conversation that followed further emphasized the FAA's premeditation:

        Miniace. We're taking a very hard look at your proposal. I will 
        take exception with your number, as soon as our folks are 
        finished.

        Krasner. You're not finished. You don't know that you'll take 
        exceptions.

        Miniace. I think your clarifications make it even lower. I will 
        ensure it gets the due consideration it deserves during our 
        lunch, so we can plug in another number that you clarified 
        today that we had not figured in. We'll be able to do that.

        Krasner. That doesn't sound like, it sounds a little, we'll 
        give it due consideration it deserves during lunch. . . .

    As part of the pay proposal package, NATCA also tendered a new 
proposal on Article 106, Duration.
    On April 5, 2006, NATCA also provided a U-3 proposal on Article 36 
Pay Administration. FAA never responded to this proposal, yet declared 
impasse that same day. NATCA also provided FAA with formal requests for 
declarations of non-negotiability on several articles. FAA rejected 
Articles 116 Child Care Subsidy and 143 Student Loan Repayments ``on 
(their) merits.'' Regarding Article 150, Facility ATC Levels, FAA's Joe 
Miniace responded, ``We will respond to 150. We'll respond to all of 
them. I'm making no other statement on Article 150 for the record.''
    NATCA then presented a proposal on Article 38 Overtime and provided 
FAA with a formal request for a declaration of non-negotiability for 
that article since FAA had previously made unsolicited statements 
regarding the negotiability of portions of that proposal. NATCA 
provided proposals on Article 24 Annual Leave and Article 28 Holidays. 
FAA then presented a proposal on Article 106 Duration and the Parties 
broke for lunch.
    After lunch FAA presented a proposal on Article 108 Pay. FAA also 
made new proposals on Article 18 Controller-in-Charge, which NATCA has 
alleged to constitute bad faith bargaining, and Article 33 Position 
Rotation and Relief Periods. FAA termed both proposals as their ``best 
and final'' offers.
    FAA then proposed Article 28 Holidays and gave planned speeches 
regarding impasse.

        Ducharme. Let me address one issue--it's been a hell of a 
        process. Aside from the stuff in pay and upgrades and 
        demotions, I want to thank you and Bob for your efforts and 
        professionalism and I want to acknowledge the rest of the team. 
        Based on what we've exchanged today, I see no value in 
        reentering into mediation. I'm not the FAA Administrator, I 
        don't see it. It's our intention to forward all of our 
        outstanding articles to Congress as an impasse package. If 
        there are any articles that you think we can work, the door is 
        always open. If we can reach agreement on these articles, 
        great. It's not my call. I believe we're at impasse, based on 
        what we've seen today and I see no point in exchanging paper. I 
        wanted a voluntary agreement. I acknowledge your team, but I'm 
        disappointed that it didn't work out. I think we're done.

        Miniace. I want to acknowledge this team as well, ours as well 
        as yours. I don't think I've worked with a more professional 
        group ever. We knew this would be hard and difficult. We came 
        to a stall, went to mediation for 4 weeks. There's some 
        fundamental issues we just can't get over. Because of the 
        philosophical differences between the Union and the Agency--
        particularly on the long term goals of the Agency--they're 
        going to be issues that remain between us. Rick said our intent 
        is to take this through its process, which would be a 
        congressional process. You said your pay proposal would be your 
        congressional proposal. I think more mediation at this point is 
        not in the cards. But I, too, extend an offer that we will 
        continue to talk through any process if we can narrow the 
        issues and complete the issues during this period of time, I 
        think we'd be better people for it. The door is absolutely open 
        on that. On behalf of the FAA, I feel that the Agency is 
        declaring impasse.

No Impasse
    It is NATCA's position that since Federal Mediation and 
Conciliation Service Mediator Kurt Saunders did not certify impasse nor 
release the Parties, and since the Parties provided each other with new 
proposals on April 5, some within minutes of the FAA's unilateral 
declaration of impasse, the Parties were not at impasse on April 5, nor 
have they subsequently reached impasse. Furthermore, since the state of 
impasse requires that the Parties reach impasse over the entirety of 
the negotiations, the fact that there were ongoing discussions on April 
5 over nearly all of the outstanding subjects precludes the finding of 
impasse over those subjects where no proposals were exchanged on April 
5, and even those subjects where the Parties had not made any movement 
in some time.\14\
---------------------------------------------------------------------------
    \14\ Former NATCA President John Carr announced to the news media 
that negotiations had broken down several days prior to April 5, 
however that was due to the FAA wishing to terminate mediation at that 
time. It was also prior to NATCA developing its April 5 proposals. 
Moreover, since FAA provided new proposals on April 5, and NATCA had no 
opportunity to respond to those proposals before FAA unilaterally 
declared impasse, it is impossible to determine whether or not the 
Parties could have bridged the gap on those subjects.
---------------------------------------------------------------------------
    Impasse is a bilateral process, not just the cutting off of 
negotiations by one party.\15\ In the instant dispute, the FAA 
terminated negotiations immediately upon providing NATCA with 
substantively different proposals than had been provided previously on 
nearly every subject other than pay, which did not substantially change 
at any point during negotiations. Further, NATCA had, earlier in that 
day, provided FAA with substantively different proposals than had been 
offered previously.
---------------------------------------------------------------------------
    \15\ VA, VAMC and AFGE Local 85, 32 FLRA 855, 874 (1988) (ALJ 
Decision-Findings of Fact #13).
---------------------------------------------------------------------------
    Moreover, if there are subjects or proposals of questionable 
negotiability, it is not proper to proceed with impasse resolution 
procedures until the FLRA can determine the negotiability. In Commander 
Carswell AFB and AFGE,\16\ the Authority held that interest arbitrators 
and the FSIP may apply settled case law determinations of negotiability 
when a proposal's language is substantially similar to one previously 
found negotiable or non-negotiable. Further, the Authority held, when 
it is a matter of first impression, it is inappropriate for any other 
third party empowered to resolve the impasse to resolve the issue. That 
responsibility is within the exclusive jurisdiction of the FLRA. The 
Authority has consistently upheld Carswell even as a two member 
panel.\17\ The FLRA is currently only two members since President Bush 
has not nominated a Democrat to fill the third and final position.
---------------------------------------------------------------------------
    \16\ 31 FLRA 620 (1988).
    \17\ See: NTEU and U.S. Dept. of Homeland Security, Customs and 
Border Protection, 61 FLRA 729 (2006) and U.S. Department of the Air 
Force, Davis-Monthan Air Force Base, Tucson, Arizona and Local 2924, 
AFGE, 05 FSIP 104 (2005).
---------------------------------------------------------------------------
    Since the negotiability of the Union's proposals have not yet been 
determined by the Authority, the Parties never reached a state of 
impasse. The Authority has ruled that where the Union's proposal has 
been ruled to be negotiable, it only requires that the Parties' return 
to the table to negotiate over that proffer. It does not require the 
third-party impasse adjudicator or other impasse body to accept the 
Union's proposal, nor does it establish that the Parties are at 
impasse. In POPA v. FLRA,\18\ the Court of Appeals for the D.C. Circuit 
found that, ``The Agency's refusal to bargain cannot be construed as an 
impasse which the arbitrator could rightfully resolve. The Agency's 
refusal to bargain was premised not merely on a disagreement with the 
proposals, but on a threshold claim that the proposals were not 
negotiable. So long as these negotiability issues remained unresolved, 
coupled with the Parties' resulting failure to negotiate over the 
merits of the proposals, there could be no impasse on the merits. Thus, 
there was nothing to be considered by the interest arbitrator, for it 
is well-established that an interest arbitrator cannot resolve 
negotiability issues.''
---------------------------------------------------------------------------
    \18\ 26 F.3d 1148, (D.C. Cir. 1994).
---------------------------------------------------------------------------
The Agency Cannot Grant Itself Discretion Over Mandatory Subjects of 
        Bargaining
    NATCA has argued that FAA's proposal to grant itself discretion 
over wages, facility classification, and other matters, constitutes a 
waiver of NATCA's right to bargain over working conditions. The 
Authority has ruled that such waivers are permissive subjects of 
bargaining and both the Authority and Board are clear that neither the 
Employer nor the Union may bargain to impasse over permissive subjects 
or proposals.\19\ The U.S. Court of Appeals for the D.C. Circuit ruled 
on a similar matter for private sector negotiations in McClatchy 
Newspapers v. NLRB.\20\ Summarizing the Board's opinion the Circuit 
writes, ``In the Board's view this case was less about impasse than 
statutory waiver: an employer who proposes unlimited management 
discretion over wages is really proposing that the Union waive its 
statutory right to be consulted about wage changes. That is fine, the 
Board reasoned--if the Union agrees. But impasse, by definition a lack 
of agreement, could not substitute for consent.'' (emphasis added).\21\ 
As the Circuit wrote in McClatchy Newspapers, in the instant dispute, 
it seems ``somewhat anomalous to refer to the institution of a new wage 
regime as `implementation of terms' '' since here like in McClatchy 
Newspapers, the Employer's proposal has no terms.
---------------------------------------------------------------------------
    \19\ NATCA is not arguing that wages and the classification of 
facilities are permissive subjects. They are clearly mandatory subjects 
under 49 U.S.C. 40122(a). However, the waiver of the right to bargain 
is a permissive subject. Under the Statute, FAA can neither bargain to 
impasse over the permissive subject of waiver, nor implement total 
discretion over mandatory subjects, including wages.
    \20\ 321 NLRB 1386, 1391 (1996), enfd. 131 F.3d 1026 (D.C. Cir. 
1997), cert. denied 524 U.S. 937 (1998).
    \21\ Id. at 1028.
---------------------------------------------------------------------------
    The Circuit even went on to see value in the question of whether or 
not bargaining to impasse over this wholly discretionary matter 
(waiver) constitutes true impasse, but did not reach the question since 
it was not in the Board's holding.\22\ NATCA, however, does make the 
argument that the Parties were not at impasse, so it is incumbent upon 
the Authority to answer this question. In McClatchy Newspapers this is 
even further supported since certain clauses could not be implemented 
specifically because they are over permissive subjects. While not 
specifically applicable in the Federal sector under the 5 U.S.C. 71, 
the Board's treatment of the no-strike clause is entirely applicable to 
the overall concept argued by NATCA. ``The Board has held that because 
the right to strike is `fundamental,' it cannot be relinquished by 
employees except by consent--which implies a specific contractual 
waiver.'' \23\
---------------------------------------------------------------------------
    \22\ Id. at 1030.
    \23\ Id.
---------------------------------------------------------------------------
    McClatchy Newspapers clearly identifies the problem with the FAA's 
inappropriate unilateral implementation. The Circuit found 
circumstances identical to those in the instant dispute. ``Rather than 
merely pressuring the Union, implementation might well irreparably 
undermine its ability to bargain. Since the Union could not know what 
criteria, if any, petitioner was using to award salary increases, it 
could not bargain against those standards; instead, it faced a 
discretionary cloud.'' \24\ The Board's interpretation highlights FAA's 
predetermined strategy when it wrote, ``the present case represents a 
blueprint for how an employer might effectively undermine the 
bargaining process while at the same time claiming that it was not 
acting to circumvent its statutory bargaining obligations.'' (emphasis 
added).\25\
---------------------------------------------------------------------------
    \24\ Id. at 1032.
    \25\ Id.
---------------------------------------------------------------------------
    The Board's decision in Mail Contractors of America and Des Moines 
Area Local, American Postal Workers Union,\26\ reinforces NATCA's 
position. In adopting the ALJ's decision, the Board agreed that ``an 
employer may not compel a Union to grant it unlimited discretion on 
important mandatory subjects of bargaining even after bargaining to 
overall impasse. In addition, to allow an employer to do so 
unjustifiably affects the balance of power between labor and management 
and thereby undermines an important goal of the Act of encouraging the 
parties to reach a collective-bargaining agreement. This is so because, 
as this case shows, there are occasions when an employer may desire 
unlimited discretion on a mandatory subject of bargaining and may seek 
in bargaining to persuade a Union to relinquish its right to bargain 
over the matter. In order to do so a Union may seek concessions from 
the employer on other conditions of employment. But if an employer can 
relegate to itself this discretion a Union's bargaining strength is 
diminished and the likelihood of reaching an agreement is decreased. . 
. . Certainly the Act, which was enacted for the purpose of 
`encouraging the practice and procedure of collective bargaining,' 
forbids such a result.'' \27\
---------------------------------------------------------------------------
    \26\ 347 NLRB No. 88 (Aug. 31, 2006).
    \27\ Id. ALJ decision at 7.
---------------------------------------------------------------------------
    As NATCA has argued FAA's goal was not to reach agreement; it 
intended to reach impasse and unilaterally implement a vested right of 
full discretion over pay, facility classification, and other matters to 
itself with no duty to bargain, something abhorrent to the Statute 
itself. As in Mail Contractors of America, it would not be unreasonable 
to believe that the Union would have sought other concessions (i.e., 
retaining the status quo ante pay bands and work rules) and agreed to 
the Agency's discretion on future annual raises and increases to the 
bands. However, the Agency instead had no desire to reach agreement. 
Its intention was to grant itself full discretion through a 
manipulation in the process, while not conceding on any particular 
issue. The Agency's actions are antithetical to the definition of 
collective bargaining as well as the Statute.

Ratification Required To Form Contract
    NATCA's position has always been that it has a right to ratify the 
contract once a complete agreement has been reached or the appropriate 
impasse procedure has been determined by the FLRA and has been 
concluded by the appropriate body. On May 12, 2005, the date the 
Parties agreed to the ground rules for negotiations, NATCA provided 
notice to the FAA regarding its Constitutional requirement to ratify as 
a precondition to a binding final agreement between the Parties. 
Specifically, the letter from Barry Krasner, NATCA Chief Negotiator, to 
Melvin Harris, then FAA Chief Negotiator, stated:

        Although not specifically addressed in the Parties' Memorandum 
        of Agreement Concerning Ground Rules Governing the Conduct of 
        Negotiations of a successor collective bargaining agreement, 
        dated, May 12, 2005, the Union provides the following notice to 
        the Agency. The ratification of a tentatively agreed upon 
        contract by NATCA's membership is a precondition to a final and 
        binding agreement between the Parties. In the event the 
        membership rejects the tentative contract, NATCA will notify 
        the Agency that the membership has failed to ratify the 
        contract. The Agency is obligated to resume negotiations with 
        NATCA. NATCA will be willing to meet and resume negotiations in 
        order to complete our contract negotiations should a 
        ratification of a tentative contract fail. The Agency's right 
        to Agency Head Review is only triggered by execution of 
        agreement, a condition not effective until ratification is 
        complete.

    Furthermore, the Parties have had a past practice for all other 
collective bargaining over term contracts that NATCA's Constitution and 
Standing Rules require ratification by the membership. The Parties have 
never deviated from that practice.
    In the instant dispute FAA provided NATCA with a final offer on 
April 5, 2006, and immediately and unilaterally declared impasse 
without NATCA having the opportunity to respond to the proposals. 
Simultaneous with its declaration of impasse and in evidence of its 
predetermined posture to not reach agreement, FAA improperly submitted 
its proposals to Congress. NATCA has filed Unfair Labor Practice 
Charges over the improper submission to Congress, but the FLRA does not 
have expertise regarding Title 49 of the United States Code, so it is 
unclear how it will resolve the issue, if at all. Since NATCA disagrees 
with the FAA's use of Congress as the appropriate impasse procedure, 
NATCA cannot submit the FAA's imposed agreement for ratification or 
risk acquiescence to the FAA's improper impasse procedure. Only after a 
clear and final impasse procedure is completed would a full and 
complete collective bargaining agreement be ripe for a ratification 
vote by NATCA's membership.
    In SSA and AFGE Council 220,\28\ the Authority adopted the ALJ's 
decision that provided that the Union's right to ratification need not 
be expressed in ground rules as long as, as in the instant dispute, the 
Union provides the Agency with notice of the ratification as a 
precondition to a final and complete agreement between the Parties and 
does not waive its right to ratification. In the instant dispute 
NATCA's past practice has been to require ratification as a 
precondition to a complete agreement and NATCA provided FAA with a 
letter to that effect the same date as the ground rules were agreed to.
---------------------------------------------------------------------------
    \28\ 46 FLRA 1404, 1415 (1993) (ALJ Decision).

    Senator Rockefeller. Thank you very much, Mr. Forrey. Thank 
you.
    Now, we have Mr. Chip Barclay, and we welcome you, sir. And 
you are the President of the American Association of Airport 
Executives, on behalf of the American Association of Airport 
Executives, and the Airport Legislative Alliance.

       STATEMENT OF CHARLES ``CHIP'' M. BARCLAY, A.A.E.,

           PRESIDENT, AMERICAN ASSOCIATION OF AIRPORT

   EXECUTIVES; ON BEHALF OF THE AIRPORT LEGISLATIVE ALLIANCE

    Mr. Barclay. Thank you, Mr. Chairman.
    Senator Rockefeller. That's a large title.
    Mr. Barclay. Mr. Chairman and members of the Committee, 
it's always a privilege to testify before the Commerce 
Committee, and I thank you for that opportunity.
    I'd like to just make three very brief points in addition 
to what's in our written testimony.
    The first is that our members are concerned about their 
ability to meet future demand in this system with adequate 
airport capacity. One of their particular challenges is the 7-
10 year time-frame it takes to go from planning to 
implementation of any major project at airports. Some even take 
longer than that. So, we are planning right now and are in 
various stages of projects to meet capacity needs far into the 
future.
    And regardless of the challenges that we, or anyone faces, 
the fact is what's coming at our system is growth in passengers 
that's going to be equal to one-third of what we currently have 
of people flying today being added to the system. It's the 
equivalent of adding the population of the United States to the 
system within 8 years from now. And, those of you traveling 
through airports at crowded times know that the capacity isn't 
currently there to handle that kind of passenger growth. But we 
absolutely have to handle it because of the impacts it will 
have on aviation gridlock and our economy in general, if we 
don't.
    So, we're here seeking the Committee's help in order to 
meet those capacity needs, at airports in particular, but on 
behalf of the entire industry for the ATC system as well.
    The second point is that the existing dollars for financing 
major capital development at airports have been absolutely 
ravaged by construction inflation costs. This is not the 
consumer inflation that's been moderate, that most of us are 
familiar with. Construction inflation in the last 3 years has 
increased 26.5 percent. It's over 8 percent a year recently, 
and I know a number of members of the Committee know this 
firsthand.
    And, as a result of that and the need to meet these growing 
demands of the system, we are recommending to the Committee 
significant increases over what the Administration plan calls 
for both airport improvement program funds and for the limit on 
Passenger Facility Charges. Specifically, we're recommending 
$3.8 billion for AIP with annual increases and a $7.50 cap on 
the Passenger Facility Charge with indexing for future 
inflation costs out into the future. That would be up from the 
$4.50 cap that was set back in the year 2000.
    Both of these fees are needed in the system. We do have a 
network of airports--smaller airports rely more on AIP for 
their funding, large airports more on PFCs. But this is the 
right way to look, we think, at airports is as a system. 
Virtually all of the passengers who depart at a small airport 
have the end of their destination at a large airport somewhere 
in the system. Many of the people getting on airplanes at large 
airports are bound for small airports. So, we need to look on 
this as a network and we've found in the past that when you 
have a bottleneck anywhere in that network, it quickly cascades 
pain, delay and problems throughout the entire airport system.
    So, looking at both of those fees as part of a needed 
system that helps all there, we think, is the right way to view 
the system.
    And the final point I'd like to make is that we don't agree 
with the Administration's funding proposal to both cut AIP 
dramatically and use a very narrow form of funding for future 
airport development costs. Our argument would be for the 
Committee to continue with its historic view of aviation, user 
fees, and the Trust Fund. This Committee authored the bill in 
1969 that was set up to collect fees from users and have them 
go first to capital needs in the system both air traffic 
control and airport improvements, in order to meet future 
demand--and second, if there were funds remaining, to go to FAA 
operations, which prior to that time had been 100 percent 
funded by the General Fund.
    The Administration's plan would--in our view--turn that 
around, and put FAA operations and the desire to make a smaller 
General Fund contribution first. Capital needs of both air 
traffic control and airports come second, and we would not 
recommend that to the Committee.
    Finally, I'd like to say that we would like to work with 
the Committee on stronger, small community air service 
provisions which--I know the panel knows very well.
    Thank you, Mr. Chairman, I look forward to working with the 
Committee and the staff.
    [The prepared statement of Mr. Barclay follows:]

 Prepared Statement of Charles ``Chip'' M. Barclay, A.A.E., President, 
 American Association of Airport Executives; on Behalf of the Airport 
                          Legislative Alliance

    Chairman Rockefeller, Ranking Member Lott and members of the Senate 
Commerce Subcommittee on Aviation Operations, Safety and Security, 
thank you for inviting me to appear before your subcommittee to discuss 
the Administration's proposal to reauthorize the Federal Aviation 
Administration (FAA). I am testifying today on behalf of the American 
Association of Airport Executives (AAAE) and the Airport Legislative 
Alliance (ALA).
    AAAE represents the thousands of men and women who manage primary, 
commercial service, reliever and general aviation airports throughout 
the county. The ALA, representing America's airport system, is 
comprised of airports of all sizes from across the country that have 
come together to address Federal legislative and regulatory matters on 
behalf of the industry. A roster of ALA members is included at the end 
of my testimony.
    As we begin the debate on the next FAA reauthorization bill, I 
would like to thank the members of this subcommittee who played a key 
role in the last two FAA reauthorization bills: H.R. 1000, the Wendell 
H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-
21) and H.R. 2115, Vision 100--Century of Aviation Authorization Act. 
During consideration of those two bills, lawmakers agreed to increase 
the cap on Passenger Facility Charges (PFCs) from $3.00 to $4.50 and 
steadily increase AIP funding from approximately $2.5 billion in Fiscal 
Year 2000 (FY00) to $3.7 billion in FY07.
    The aviation system has faced many challenges since Congress passed 
AIR-21 7 years ago. Despite the temporary downturn that occurred after 
September 11th, passenger levels, flight delays, airport capital needs 
and construction costs continue to rise. To help airports keep pace 
with increasing capacity and financial demands, we urge you to increase 
the PFC cap to $7.50 and increase AIP funding to $3.8 billion in FY08. 
By continuing the trend of increasing funding for airport capital 
development projects established in AIR-21 and Vision 100, this 
subcommittee can help to improve safety, increase capacity and reduce 
delays at airports around the country.
    In addition to increasing funding for airport capital development 
projects, another top priority for AAAE and the ALA is to help small 
communities that are struggling to retain and attract new commercial 
air service. During consideration of AIR-21 and Vision 100, this 
subcommittee extended a helping hand to small communities suffering 
from infrequent air service and high airfares. We look forward to 
working with you to build on those successful efforts during 
consideration of the next FAA reauthorization bill.

Increasing Demand, Delays and Airport Capital Needs
    Increasing Demand: About a year ago, the FAA released its Aerospace 
Forecast for 2006 to 2017. The forecast indicated that the number of 
passengers flying in the United States was about 6 percent higher in 
2005 than it was before the terrorist attacks on 9/11 and 7.1 percent 
higher than 2004. The FAA is also predicting that passenger 
enplanements will increase from approximately 739 million in 2005 to 
more than one billion passengers in 2015 at an average annual increase 
of 3.1 percent.



    Former Secretary of Transportation Noman Y. Mineta, commented on 
these projections and the need to increase capacity when he spoke at 
the FAA Forecast Conference on February 28, 2006. ``And looking at this 
year's aviation forecast, it is clear that we had better prepare to 
expand capacity if we are going to keep from being snowed under by 
gridlock and congestion,'' Mineta said.
    The demand for air cargo is also growing. The FAA is predicting 
that total Revenue Ton Miles--or the measurement of moving one ton of 
cargo one mile--will increase from 39.2 billion in 2005 to 71.7 billion 
in 2017. This is an average of 5.2 percent per year. To handle that 
increased load, the number of cargo aircraft is expected to increase 
from just over 1,021 in 2005 to 1,345 in 2017, which is an increase of 
31.7 percent.
    More regional jets and Very Lights Jets (VLJs) will be filling the 
skies, too. The FAA is predicting that the number of regional jets will 
increase from 1,758 to 2,819 by 2017, an average annual increase of 4 
percent per year. When Nicholas A. Sabatini, the Associate 
Administrator for Aviation Safety at the FAA, testified before the 
Senate Commerce Committee in September, he mentioned that 5,000 VLJs 
will likely be operating by 2017.
    Increasing Delays: Flight delays are also on the rise. According to 
the Bureau of Transportation Statistics (BTS), 22.6 percent of all 
flights between January and December of 2006 arrived at their gates 15 
minutes or more after their scheduled arrival time. That's a 2.1 
percent increase from 2005, and it's nearly as high as the record 
delays that occurred in 2000 when 23.86 percent of all flights arrived 
at their gates behind schedule.
    BTS also tracks the number of flights that leave their gates on-
time. Between January and December 2006, almost 20 percent of all 
flights left their gates 15 minutes or more after their scheduled 
departure time. That's more than a 2 percent increase from the previous 
year and it's even higher than the delays that occurred in 2000 when 
19.9 percent of all flights left their gates late. In other words, 
delays measured in both arrivals and departures are close to or have 
actually exceeded the 2000 levels when one in four flights was delayed 
canceled or diverted.



    Increasing Airport Capital Needs: As the number of passengers and 
aircraft in the aviation system increase, airport capital needs 
continue to rise. In 2004, the FAA issued a report entitled, ``Capacity 
Needs in the National Airspace System.'' The report examined which of 
the busiest 35 airports in the FAA's Operational Evolution Plan will be 
able to meet future demand. It indicates that plans to increase 
capacity at 15 airports ``are not enough to keep up with projected 
levels of demand'' by 2013. By 2020, ``18 airports are identified as 
likely needing additional capacity.'' Given the time it takes to bring 
airport infrastructure projects to completion, it is critical that we 
act now to address this situation.
    Late last year, the FAA also released its National Plan of 
Integrated Airport Systems (NPIAS) for 2007 to 2011. The report 
indicates that there will be $41.2 billion of AIP4-eligible projects 
during the next 5 years--or approximately $8.24 billion per year. This 
is 4 percent higher than the $39.5 billion that FAA estimated for AIP-
eligible construction projects for 2005 to 2009. Additionally, in its 
letter of transmittal of the draft bill, referring to the 4 percent 
increase over the previous report, the Administration states, ``we 
believe that this figure is understated.''
    The NPIAS identifies 3,431 airports that are eligible to receive 
AIP grants. According to the report, 27 percent of the planned 
development is to bring airports up to current design standards, and 21 
percent is for capacity-related projects. Another 17 percent of the 
planned development is for replacing or rehabilitating airport 
facilities such as pavement and lighting systems.
    Airports rely on a number of sources for airport capital 
development projects. The overwhelming majority of funds come from 
airport bonds, AIP and PFCs. However, the FAA acknowledges in the 
report that ``the NPIAS includes only planned development that is 
eligible to receive Federal grants under the AIP. . . . It does not 
include development eligible under the Passenger Facility Charge 
program but ineligible under the Federal grant program, such as gates 
and related areas.''
    The Airport Capital Development Needs Survey, prepared by Airports 
Council International--North America (ACI-NA), also indicates that 
there are significant airport capital needs. The survey determined that 
airports will need $87.5 billion between 2005 and 2009--or 
approximately $14.3 billion per year. Unlike the NPIAS, however, the 
Airport Capital Development Needs Survey includes projects that are 
AIP-eligible and those that airports intend to fund with other revenue 
including PFCs and airport bonds.



    The Airport Capital Development Needs Survey reveals that there is 
a sizable gap between airport needs and the revenue that is available 
for capital development projects. On average airports issued about $5.2 
billion in new bonds per year during the past 5 years. That amount 
coupled with the $3.5 billion that Congress recently approved for AIP 
in FY07 and the $2.6 billion that the FAA expects will be generated 
from PFCs this year totals about $11.3 billion. The total of primary 
funding sources, which does not include the local match or other 
airport revenue, is about $3 billion short of the $14.3 billion mark.



    ACI-NA is in the process of updating its Airport Capital 
Development Needs survey. The results are expected to show a 
significant increase in airport capital needs between 2007 and 2011 due 
to increasing capital requirements and rising construction costs. 
According to the Means Construction Cost Indexes, the average 
construction costs for 30 major U.S. cities jumped 26.5 percent in the 
past 3 years. So the gap cited above could be even higher unless 
Congress takes action.

The Solution: Provide Airports with the Resources They Need to 
        Accommodate Increasing Demand and Skyrocketing Construction 
        Costs
    FAA and the Department of Transportation (DOT) should be commended 
for highlighting the need for a Next Generation Air Transportation 
System (NextGen). Although there may be strong disagreement on how best 
to pay for transforming the national air transportation system, there 
is wide agreement on the need to move from a ground-based to a 
satellite-based navigation system. This is another airport priority, 
and I am pleased that AAAE is working closely with other aviation 
stakeholders to develop a plan on how to implement NextGen and avoid 
congestion in the aviation system.
    As I mentioned previously, the passenger level is expected to 
increase from 739 million to 1 billion 7 years from now. That is the 
equivalent of adding the entire population of the U.S. on to an already 
delayed, already constrained system. While many are understandably 
focusing on the need to implement a satellite-based navigation system 
to reduce congestion in the skies, we should not lose sight of the need 
to increase capacity and reduce congestion on the ground.
    In an effort to be build the infrastructure necessary to 
accommodate increasing demand and to offset the impacts of skyrocketing 
construction costs, airport executives are urging Congress to raise the 
cap on PFCs, increase AIP funding and reduce the costs of airport 
bonds.
    Increase the PFC Cap: The Aviation Safety and Capacity and 
Expansion Act of 1990 included a provision that has allowed airports to 
impose a local fee of up to $3 on passengers boarding aircraft at their 
facilities. AIR-21, which Congress passed in 2000, included a provision 
that allowed airports to increase that amount to $4.50. Money generated 
from PFCs augments AIP funding and other sources of revenue that 
airports use for a variety of purposes including building new runways, 
taxiways and terminals as well as paying for debt service.
    Last year, airports collected about $2.4 billion from PFCs. 
Unfortunately, however, the value of PFCs has eroded over time due to 
inflation and increased construction costs. When you factor in the 
Consumer Price Index, a $3.00 PFC in 1990 is expected to be worth only 
about $1.86 in 2007, and a $4.50 PFC in 2000 is expected to be worth 
about $3.10.
    The picture gets even worse when you examine the increasing 
construction costs, which provides you with a more accurate picture of 
the costs associated with airport construction projects. In that case a 
$3.00 PFC in 1990 is expected to be worth only about $1.73 in 2007, and 
a $4.50 PFC in 2000 is expected to be worth only $2.86 in 2007. Unless 
corrective action is taken, the value of PFCs will erode even more by 
2010 when a $3.00 PFC is expected to be worth only $1.55, and a $4.50 
PFC is expected to be worth only $2.56.



    Conversely, a $3 PFC in 1990 would need to be adjusted to $4.77 in 
2007 to offset the impact of inflation, and a $4.50 PFC in 2000 would 
be need to be set at approximately $6.58. If adjusted for increasing 
construction costs, a $3 PFC would need to be set at $5.21 in 2007, and 
a $4.50 PFC would be $7.20.
    Airport executives commend the Administration for calling for a PFC 
increase. Its proposal to increase the cap to $6.00 is an encouraging 
step in the right direction. According to the FAA, raising the cap by 
an additional $1.50 could allow airports to generate an additional $1.2 
billion per year. That would help close at least some of the gap 
between airport capital needs and the amount of revenue that is 
currently available for airport capital development projects. But it is 
not enough.
    It is not enough to close the funding gap especially when the 
Administration is simultaneously proposing to cut AIP spending by 
almost $1 billion from the authorized level. And it is not enough to 
keep up with inflation or increasing construction costs. By 2010--the 
final year in the Administration's FAA reauthorization proposal--a 
$4.50 PFC would need to be raised to $7.14 to keep up with expected 
inflation and to $8.03 to keep up with the anticipated increase in 
construction costs.



    Airport executives are asking Congress to take the next step and 
raise the PFC cap to at least $7.50. That would be enough to offset the 
expected impact of inflation over the next 3 years and the projected 
increased construction costs in 2008. To prevent further erosion of 
PFCs, we also ask Congress to include a provision in the next FAA 
reauthorization bill that would index PFCs to account for increasing 
construction costs.
    Increase AIP Funding: In addition to raising the PFC cap, airport 
executives ask that Congress increase AIP funding. AIP is an important 
source of funding for all sizes of airports. According to the FAA, AIP 
funding counted for 51 percent of capital expenditures for small hub 
airports in FY03, 94 percent for non-hub airports and 89 percent for 
nonprimary commercial service airports. Large and medium hub airports 
also depend on AIP funding--particularly money distributed through the 
Letter of Intent Program (both entitlement and discretionary funds) to 
help pay for large capacity projects.
    Given the increasing demand, inflation and construction costs, 
airport executives are dismayed that the Administration is requesting 
only $2.75 billion for AIP in FY08. This is approximately $1 billion 
less than the amount Congress authorized in FY07 and $765 million less 
than the appropriated level. The Administration is proposing to 
increase AIP to $2.9 in FY09 and $3.05 in FY10. However, even the 
highest proposed level would be $150 million less than the amount that 
Congress authorized for AIP 6 years ago. We cannot afford to take such 
an enormous step backward in terms of critical AIP funding.
    We urge this Congress to reject the Administration's proposal to 
drastically cut AIP funding and roll back the progress made in AIR-21 
and Vision 100. Instead we urge you to continue to increase AIP funding 
as Congress did in the previous two FAA reauthorization bills. At the 
very least, we urge you to increase AIP funding so that the program 
will keep up with increased construction costs. Doing so would 
translate into $3.8 billion for AIP in FY08, $4 billion in FY09, $4.1 
billion in FY10, and $4.3 billion in FY11.



    Reclassify Airport Bonds: The largest source of funding for capital 
development projects at airports is generated from airport bonds. Large 
airports particularly rely on the bond market to finance capital 
development projects at their facilities. In 2006, airports used 
approximately $3.9 billion in new bonds to finance capital development 
projects at their facilities. Over the past 5 years, airports issued an 
annual average of $5.2 billion in new bonds.
    Unfortunately, Federal tax law unfairly classifies more than 60 
percent of airport bonds as private activity bonds even though they are 
used to finance runways, taxiways and other critical facilities that 
benefit the public. Since private activity bonds are subject to the 
Alternative Minimum Tax (AMT), airport bond issuers are usually charged 
higher interest rates on their borrowing. Depending on market 
conditions, AMT requires issuers to pay investors anywhere from 10 to 
30 basis points (0.10 percent to 0.30 percent) higher interest costs on 
long-term fixed rate bonds. This can significantly increase overall 
project costs.
    In addition to being subject to the AMT, private activity bonds 
that airports use to finance critical capital development projects 
cannot be advance refunded. Unlike homeowners who have the opportunity 
to refinance their home mortgages, airports typically are unable to 
refinance their debt and take advantage of lower interest rates for at 
least 10 years after issuing their bonds. By contrast, most 
governmental bonds can be advance refunded one time.
    In general, airports are owned and operated by state and local 
governments, and airports serve a vital public purpose. We encourage 
Congress to include a provision in the next FAA reauthorization bill 
that would reclassify those private activity bonds that airports use to 
finance AIP- and PFC-eligible projects as public purpose. This would 
save airports in financing costs by allowing them to take advantage of 
lower interest rates and advance refund the bonds they use for AIP- and 
PFC-eligible projects. It would also free resources for additional 
projects.

AIP and PFC Modifications
    The Administration is proposing major reforms for the AIP and PFC 
programs. It is clear from the Administration's reauthorization 
proposal that FAA staff dedicated a lot of time and energy toward 
coming up with a plan to simplify and improve both of these programs. 
We support many of the concepts outlined in the Administration's plan 
such as increasing the cap on PFCs. We may disagree with some of the 
Administration's specific proposals, and we may recommend modifying a 
few others. But we share the same goal of empowering local airports and 
truly appreciate FAA's efforts.
    PFC Pilot Program for Large Airports: The Administration's FAA 
reauthorization proposal would create a new pilot program that would 
allow up to 10 medium or large hub airports to charge a $7.00 PFC if 
they agree to operate and maintain terminal area navigational 
equipment, such as instrument landing systems and approach lighting 
systems. Again, airports strongly believe that the PFC cap should be 
raised to at least $7.50. Some large and medium hub airports might be 
willing to participate in such a pilot program if it allowed them to 
increase their PFC by an additional dollar above the $7.50 level and if 
they received adequate liability protection.
    PFC Streamlining: Airports support the Administration's proposal to 
streamline the PFC application process. The FAA points out in its 
section-by-section analysis of the bill that ``current law requires an 
application and approval of each PFC project (or amendment to a 
project) that sometimes involves prolonged reviews and delays.'' We 
agree with the FAA's assessment and strongly support its proposal to 
streamline the PFC process, which currently takes several months to 
complete.
    Airports work closely with our airline partners to reach consensus 
on PFC-funded projects and will continue to do so if Congress endorses 
the Administration's streamlining proposal. For instance, airports 
would continue to provide a reasonable notice and comment period for 
carriers operating at their facilities. However, airports would be 
allowed to impose a new PFC earlier in the process and avoid months in 
unnecessary delays. Should a carrier file an objection, DOT would have 
the authority to terminate the airport's authority to collect PFCs for 
the new project if the agency concurred with the objection.
    AIP/PFC Flexibility: The Administration's proposal would also allow 
small airports to use AIP funds for more purposes. For instance, it 
would allow nonprimary airports to use AIP funds for mobile fuel truck 
containment systems and allow them to use entitlements for revenue-
producing aeronautical support facilities such as new fuel farms and 
hanger buildings. Small airports welcome the increased AIP flexibility, 
and airport executives are interested in learning more about how the 
Administration's proposal to expand PFC flexibility would impact their 
facilities.
    The Federal Match for AIP Projects: A number of airport executives 
have expressed opposition to the Administration's proposal to reduce 
the Federal share for certain airport projects. For instance, the 
Administration is calling for reducing the government's maximum share 
for airfield pavement and rehabilitation projects for runways and 
taxiways at large and medium hub airports from 75 percent to 50 
percent. Decreasing the Federal share would significantly increase the 
local cost of runway and taxiway projects at busy airports at a time 
when we should be trying to provide airports with more money to pay for 
critical infrastructure projects--not less.
    As many members of this subcommittee know, Vision 100 included a 
helpful provision that increased the Federal share for small hub and 
smaller airports from 90 percent to 95 percent through FY07. The 
Administration's FAA reauthorization proposal would allow that 
provision to expire and return the Federal share to a maximum of 90 
percent for many small airports. Small communities around the country 
often find it difficult to come up with a 5 percent percent local 
matching share. Increasing their required contribution to 10 percent 
might prevent certain small airports from moving forward with planned 
construction projects.
    Airport executives oppose both proposals to reduce the Federal 
share for airport projects. We would also argue that neither reduction 
is necessary if Congress rejects the Administration's proposal to cut 
AIP funding by almost $1 billion from the current authorized level.
    AIP Funding for Small Airports: The Administration is also 
proposing to eliminate the Small Airport Fund, which is supported by 
turnbacks from large and medium hubs, and replace it with a new Small 
Airport Set-Aside. This new Small Airport Set-Aside would provide funds 
for projects at small hub, nonhub, nonprimary commercial service, 
reliever and general aviation airports. The proposal calls for 20 
percent of discretionary funds to be used for this new set-aside. We 
question the wisdom of replacing the Small Airport Fund, which links 
small and large airports together on AIP and PFC issues, with a new 
Small Airport Set-Aside. Moreover, it appears that affected airports 
would receive less money under the Administration's plan and 
consequently would not be ``held harmless'' by the proposed change.
    Nonprimary Apportionment: The Administration's proposal also calls 
eliminating the maximum $150,000 apportionment for nonprimary 
commercial service, general aviation and reliever airports and 
replacing it with ``tiered funding levels based on airport size and 
aviation activity.'' The new entitlements would allow some of the 
larger nonprimary airports to receive up $400,000. On the surface, this 
approach seems to make sense, and a number of general aviation airports 
have expressed support for tiered funding levels. However, we would 
reserve judgment until we learn more about how this proposal would 
impact all nonprimary airports.
    Land Acquired for Noise Compatibility Purposes: The 
Administration's proposal would make a grant assurance change regarding 
the sale of land that an airport initially acquired for a noise 
compatibility purpose but not longer needs. Current law requires that 
the proceeds proportional to the Federal Government's share of the land 
acquisition be returned to the Aviation Trust Fund. The reauthorization 
proposal would allow DOT to reinvest the government's share of the 
proceeds in another project at that airport or another airport. 
However, airport executives are concerned that the Administration's 
proposal does not resolve the question about what happens if an airport 
leases land initially acquired for a noise compatibility purpose. We 
would like to work with this subcommittee to address that omission.

Funding of FAA Programs
    Provide A Stable Funding Stream for AIP: It is critical that enough 
money goes into the Aviation Trust Fund to pay airport construction 
projects. The Administration's FAA reauthorization proposal would 
dramatically change how the AIP program is funded. Funding for airport 
improvements would still come from the Airport and Airway Trust Fund. 
However, money going into the Trust Fund would come from an increase in 
commercial and general aviation fuel taxes and revenue generated from 
international departure and arrival taxes.
    The Administration is proposing to increase the general aviation 
taxes from about 20 cents per gallon to 70 cents per gallon. Of that 
amount, 13.6 cents per gallon would be used to fund AIP, RE&D and the 
Essential Air Service (EAS) Program. The remaining amount would be used 
to finance general aviation's share of the air traffic control system. 
The proposal also calls for raising the commercial fuel tax from 4.3 
cents per gallon to 13.6 cents per gallon and reducing the 
international arrival and departure tax from $14.50 to $6.39. All the 
revenue from these two taxes would be used for AIP, RE&D and the EAS.
    Airport executives understand the need for a rational and stable 
financing system for the FAA. However, airport executives would 
strongly oppose changing the current financing system in such a way 
that resulted in less money for airports to maintain safe and secure 
facilities and prepare for increasing demand. Airport executives want a 
stable and predictable funding stream for AIP, too. Frankly, they are 
not convinced that relying on a tripling of general aviation taxes to 
help pay for airport improvements would provide enough revenue or a 
stable source of funds.
    Under the Administration's proposal, the 7.5 percent domestic 
passenger ticket tax and the domestic flight segment fee, which 
currently fund about 70 percent of the Aviation Trust Fund, would be 
eliminated. Asking domestic passengers to help pay for capital 
development projects at airports through the AIP program has been a key 
component of the Aviation Trust Fund since this committee helped to 
create it more than 30 years ago. Many airport executives would 
strongly oppose eliminating that funding source because they argue that 
domestic passengers should continue to directly contribute to the 
Aviation Trust Fund just like international passengers, commercial 
aviation and general aviation.
    The Administration is recommending that commercial and general 
aviation fuel tax increases go into effect in 2008 and be adjusted for 
inflation beginning in 2010. However, it is unclear whether the FAA has 
determined the price elasticity of its fuel tax proposal or precisely 
how the agency would make up any potential shortfall if the fuel taxes 
generated less revenue than expected. Moreover, it is uncertain whether 
Congress would be willing to increase AIP funding or even reject the 
Administration's proposal to cut AIP funding if doing so translated 
into even higher gas taxes on general aviation.
    Strengthen Budget Protections: Whether Congress decides to keep the 
current excise tax system in place or call for some new user fees, it 
is critical that the next FAA reauthorization bill include budget 
points of order to protect AIP funding. AIR-21 included an airport 
executive-supported provision that requires all receipts and interest 
credited to the Aviation Trust Fund to be spent on aviation. It also 
makes it difficult for Congress to appropriate less than the full 
amount authorized for AIP.
    Those budget points of order have worked reasonably well over the 
past several years, and we encourage you to strengthen or maintain them 
in the next FAA reauthorization bill. Absent these protections, we are 
concerned that we would return to the days before 2000 when the gap 
between the amount authorized for AIP and the amount appropriated was 
routinely quite large.
    General Fund Contribution: The Administration's FAA reauthorization 
proposal calls for not more than $2.6 billion in taxpayer revenue to 
pay for aviation in FY08--or about 18.6 percent. That funding level 
would decline to $2.5 billion in FY09 and FY10. During the past 20 
years, the General Fund contribution has been as high as 48 percent and 
has averaged about 27 percent. In recent years, however, the General 
Fund contribution has steadily declined. We strongly believe that 
Congress should increase the General Fund contribution to 25 percent.

Improve Service to Small Communities
    Although overall passenger levels are continuing to rise, many 
small communities around country are struggling to retain and attract 
new commercial air service. In 2005, the Government Accountability 
Office reported that service to large- medium- and small-hubs has 
largely rebounded since 9/11. However, non-hub airports had 17 percent 
less service in July 2005 than they did in July 2000.
    In May 2006, the DOT Inspector General also reported that scheduled 
flights at small communities for the first 3 months of 2006 were 17 
percent lower than the number of flights scheduled in the same period 
in 2000. At non-hubs, the number of flights was down 29 percent from 
the first 3 months of 2006 when compared to the same period of 2000.
    Members of this subcommittee have repeatedly pointed out that many 
small communities have suffered since the airline industry was 
deregulated almost 30 years ago. Congress, the Administration and all 
of us in the aviation industry should work together to find ways to 
address this problem and to ensure that people who live in rural areas 
have access to the aviation system.
    Increase Funding for the Small Community Air Service Development 
Program: It is disappointing that the Administration's FAA 
reauthorization proposal does not include any funds for the Small 
Community Air Service Development Program. Small airports around the 
country are grateful that this subcommittee helped to create what is 
now known as the Small Community Air Service Development Program in 
AIR-21. Since its inception this program has helped small communities 
that suffer from insufficient air service or unreasonably high fares.
    Over the past 4 years DOT has awarded 150 grants, which have 
typically ranged from $20,000 to nearly $1.6 million. Last year, the 
department received 75 proposals from communities in 37 states 
requesting more than $32 million ``to support new and ongoing air 
service development projects.'' However, the demand for Federal 
assistance far exceeded the approximately $10 million that Congress 
approved for the program in the FY06. In August, DOT announced that it 
had awarded grants that will benefit 28 communities in 22 states.
    Considering the number of communities that apply for funds from 
this program and the continuing pressures on small communities, we urge 
this subcommittee to consider making a greater investment in the Small 
Community Air Service Development Program. Specifically, we urge you to 
authorize $50 million for the Small Community Air Service Development 
Program per year--$15 million more than Congress authorized for the 
program per year in Vision 100.
    Maintain the Essential Air Service Program: We also encourage 
Congress to maintain adequate funding for the EAS program and to take 
steps to improve the program as this subcommittee tried to do in Vision 
100. Unfortunately, the Administration's FAA reauthorization would 
limit funding for the EAS Program to just $50 million per year--$60 
million less than the amount Congress approved for FY07.
    The plan would also cut communities out of the program by limiting 
service to those: (1) that currently participate in the EAS program; 
(2) that are more than 70 miles from a large- or medium-hub airport; 
and (3) where the per passenger subsidy does not exceed $200 if the 
community is less than 210 miles from a large- or medium-hub airport.
    Invest in the FAA's Contract Tower Cost Share Program: Another 
program that has improved service and safety at airports in small 
communities is the FAA's Contract Tower Program. This program has been 
in place since 1982 and currently provides for the cost-effective 
operation of air traffic control towers at 233 smaller airports in 46 
states. Without the Contract Tower Program many simply would not have 
any air traffic control services at their facilities.
    With help from this subcommittee, AIR-21 included a provision that 
created the Contract Tower Cost Share Program, which currently allows 
26 airports in 22 states that fall slightly below the eligibility 
criteria to participate in the program if they provide local funds. We 
recommend that this subcommittee authorize $8.5 million for the 
Contract Tower Cost Share Program in FY08 and increase the amount by 
$500,000 per year. Doing so would keep the existing towers operating 
and allow additional airports to participate in the program.

Other Recommendations
    Require FAA to Continue to Pay for Space the Agency Uses at 
Airports: Airport executives strongly believe that the FAA should 
continue to pay for the space that the agency uses at their facilities 
just like other airport tenants. Airports do not object to providing 
land to the FAA for Air Traffic Control facilities without cost. 
However, they believe that the FAA should continue to pay reasonable 
rates for space that the agency occupies in airport-owned facilities. 
For smaller airports, the potential loss of rental revenue--even at 
below market rates--could have a significant impact on their financial 
situation. We encourage Congress to include a provision in the next FAA 
reauthorization bill that would require the FAA to continue to pay for 
the space that the agency uses at airports. This would provide a 
permanent fix on this issue, which has been addressed annually in the 
DOT appropriations bill.

Conclusion
    Chairman Rockefeller, Ranking Member Lott and members of the Senate 
Commerce Subcommittee on Aviation Operations, Safety, and Security, 
thank you for inviting me to appear before your committee to discuss 
the Administration's FAA reauthorization proposal. This subcommittee 
has a strong track record of increasing funding for airport capital 
development projects. We urge you to continue to help airports keep 
pace with increasing passenger demand and skyrocketing construction 
costs by raising the cap on PFCs and increasing funding for AIP. These 
actions would help to improve safety, increase capacity and reduce 
delays at airports around the country.

2007 Airport Legislative Alliance Members
Large Hubs
        Baltimore/Washington International Thurgood Marshall Airport
        Chicago Department of Aviation
        Cincinnati/Northern Kentucky International Airport
        Dallas/Fort Worth International Airport
        Denver International Airport
        Detroit Metropolitan Wayne County Airport
        Hartsfield-Jackson Atlanta Int'l Airport
        Massachusetts Port Authority
        Metropolitan Washington Airports Authority
        Miami International Airport
        Philadelphia International Airport
        Phoenix Sky Harbor International Airport
        Salt Lake City International Airport
        San Diego International Airport
        San Francisco International Airport
        Seattle-Tacoma International Airport
        The Port Authority of New York and New Jersey
Medium Hubs
        Albuquerque International Sunport
        General Mitchell International Airport
        John Wayne Airport
        Kansas City International Airport
        Lambert St. Louis International Airport
        Louisville International Airport
        Manchester--Boston Regional Airport
        Memphis International Airport
        Norman Y. Mineta San Jose International Airport
        Pittsburgh International Airport
        Port Columbus International Airport
        Portland International Airport
        Reno-Tahoe International Airport
        Rhode Island Airport Corp.
        Tucson International Airport
Small Hubs
        Atlantic City International Airport
        Bangor International Airport
        Baton Rouge Metropolitan Airport
        Billings Logan International Airport
        Birmingham International Airport
        Dayton International Airport
        Des Moines International Airport
        Fresno Yosemite International Airport
        Gerald R. Ford International Airport
        Greenville Spartanburg International Airport
        Harrisburg International Airport
        Huntsville International Airport
        Jackson-Evers International Airport
        Lexington Blue-Grass Airport
        Long Beach/Daugherty Field Airport
        Metropolitan Knoxville Airport Authority
        N.W. Arkansas Regional Airport Authority
        Newport News/Williamsburg International Airport
        Quad City International Airport
        Santa Barbara Municipal Airport
        Sarasota Bradenton International Airport
        South Bend Regional Airport
        Springfield/Branson National Airport
        Tallahassee Regional Airport
        Tulsa International Airport
        Will Rogers World Airport
Non-Hubs/General Aviation
        Abilene Regional Airport
        Addison Airport
        Asheville Regional Airport Authority
        Aspen/Pitkin County Airport
        Bert Mooney Airport
        Bismarck Municipal Airport
        Capital City Airport (MI)
        Centennial Airport
        Charlottesville-Albemarle Airport Authority
        Chattanooga Metro Airport
        Cherry Capital Airport
        Delaware County Airport Authority
        Dothan Regional Airport
        Durango LaPlata County Airport
        Elmira-Corning Regional Airport
        Evansville Regional Airport
        Fernandina Beach Municipal Airport
        Fort Wayne International Airport
        Friedman Memorial Airport Authority
        Gallatin Field Airport
        Glacier Park International Airport
        Glynco Jetport
        Greater Peoria Regional Airport
        Greenbrier Valley Airport
        Hector International Airport
        Inyokern Airport
        Kalamazoo Battle Creek International Airport
        Killeen-Fort Hood Regional Airport
        Kissimmee Gateway Airport
        Klamath Falls Airport
        Laredo International Airport
        Laughlin/Bullhead Int'l Airport
        Mahlon Sweet Field
        Marana Regional Airport
        McAllen-Miller International Airport
        Melbourne International Airport
        MidAmerica St. Louis Airport
        Monterey Peninsula Airport District
        Morristown Municipal Airport
        Nantucket Memorial Airport
        Napa County Airport
        Nut Tree Airport
        Provo Municipal Airport
        Redding Municipal Airport
        Roanoke Regional Airport
        Salina Municipal Airport
        San Bernardino County/Needles Airport
        San Luis Obispo County Regional Airport
        Santa Maria Public Airport
        Snohomish County Airport/Paine Field
        Southern Illinois Airport Authority
        Southwest Oregon Regional Airport
        Springfield Airport Authority
        Toledo Express Airport
        Tri-Cities Airport
        Tri-Cities Regional Airport, TN/VA
        Valdosta Regional Airport
        W.K. Kellogg Airport
        Wilkes-Barre/Scranton International Airport
        Williams Gateway Airport
        Wilmington International Airport

    Senator Rockefeller. Thank you very much, ``Chip'' Barclay, 
for that excellent presentation.
    And we now, Ed, you're next on my list, but you're at the 
end of the table, so you're going to have to wait one, is that 
all right?
    [Laughter.]
    Senator Rockefeller. Mr. Jim May, who is President and 
Chief Executive Officer, Air Transport Association of America, 
we welcome you.

         STATEMENT OF JAMES C. MAY, PRESIDENT AND CEO, 
           AIR TRANSPORT ASSOCIATION OF AMERICA, INC.

    Mr. May. Thank you, Mr. Chairman and members of the 
Committee.
    I'm pleased to be here today on behalf of more than a half 
million passenger and cargo airline employees, three-quarters 
of a billion airline passengers who fly every year, and the 
millions who ship goods daily to all parts of the world.
    I'll talk about two main topics, one, the need to modernize 
the air traffic control system, and implement that much-talked 
about next generation air traffic control system. And second, 
the need--in our view--to modernize FAA's funding structure, 
and return--return--to the core principles Congress included 
when it enacted the Airport and Airway Trust Fund in 1970, 
which are user-pay and cost-based financing.
    This Committee can restore the balance and fairness to FAA 
funding so airline passengers will no longer have to subsidize 
other system users, who clearly pay less than the costs they 
impose on the system.
    The current system is based on a 1950s architecture, and 
it's really short-changing our future. It's using outdated, 
ground-based systems, finite point-to-point routings, vast 
inefficiencies, and it really can't be scaled to meet the kind 
of growth that we see in the future.
    When the Trust Fund was created in 1970, there were about 
2,500 commercial aircraft in the system, and about 1,800 
corporate aircraft using that system. Today there are 8,000 
commercial aircraft, and 17,000 corporate aircraft, and I'm not 
talking about the little GA guys.
    The demand projections for the future are truly startling. 
Chip just mentioned, the FAA projects that a billion passengers 
will be in planes by 2015. The instrument flight rule ops, the 
most significant source of demand on the ATC system, are 
projected to move from 45,000 a day right now, to 61,000 a day 
in another 10 years. There are going to be an additional 10,000 
corporate planes, and very light jets that come into the 
system.
    Three weeks ago, Secretary Peters said, ``The current 
aviation system simply can't handle future increases without 
major delays, making system transformation necessary.'' Russ 
Chew, the former COO of the Air Traffic Organization, said, 
``We project that if traffic grows as expected, by 2014, delays 
in the United States will increase 62 percent over 2004 
levels.'' Both are right. And quite frankly, we're disappointed 
that the Administration's bill failed to include a complete 
NextGen roadmap for what needs to be done.
    We're disappointed, because satellite-based air traffic 
control systems will provide the means to reduce delays and 
congestion. Air traffic control modernization is neither novel, 
or revolutionary. Technology does exist, it's in use by the 
military, it's being accomplished elsewhere in the world, from 
Fiji to Canada, the United Kingdom and India, next-generation 
systems are being put in place today.
    The United States--Alaska's Capstone Program, ADS-B trials 
in the Gulf of Mexico, Required Navigation Performance, RNP, 
procedures in Atlanta, Dallas-Ft. Worth, give us a wonderful 
preview of what those technologies can deliver. And all of us 
will benefit from increased safety, capacity, and even improved 
environmental performance. And every one of these benefits can 
be achieved, they are being achieved elsewhere in the world, 
but I think to help us do that, we need a modern funding 
system, we need to return to our roots.
    In the seventies, Congress based the funding structure on 
two bedrock principles--one, user-based financing, and two, 
cost-based financing. These same principles, have been endorsed 
by multiple bipartisan commissions, the GAO and are in place 
supporting ATC systems throughout the world.
    Unfortunately, here, the principle of equitable funding, I 
think, has been forsaken. It isn't deliberate, but a reflection 
on the changing dynamics of the aviation marketplace, and the 
extraordinary growth of a very successful segment, corporate 
aviation. There's no correlation today between the revenue 
collected and services consumed. Airlines pay for 94 percent of 
Trust Fund revenues, but only use 68 percent of system 
services. The result is that our passengers are subsidizing 
other users of the system.
    Secretary Peters said it this way, ``There is a fundamental 
disconnect between the existing tax structure, and the FAA's 
workload.'' On the theory that a picture is worth 1,000 words, 
the first snapshot is the traffic in the system, just 
yesterday. These corporate aircraft are the white on there, and 
they're anything but incidental users.*
---------------------------------------------------------------------------
    \*\ Charts are located in Mr. Mays Prepared Statement.
---------------------------------------------------------------------------
    The second graph is the FAA's just-released cost allocation 
study. It shows that fractionals, charters, air taxi and 
corporate jets account for roughly 16 percent of ATO costs, 
although they only pay in 6 percent.
    Here's a specific example. A Cessna Citation 10 corporate 
jet, flying from New York to Los Angeles would contribute an 
estimated $306 to the Trust Fund. Same route, same air space, 
comparable demands on ATP, a Boeing 757 would pay an estimated 
$2,600.
    Mr. Chairman and members of this Committee, you have the 
opportunity to correct this breathtaking disparity, establish 
an equitable funding mechanism which halts the blatant 
subsidization of corporate aircraft by commercial passengers, 
and restores a stable funding stream to the FAA for its 
modernization efforts.
    Let me close with three or four thoughts--we don't advocate 
charging piston-power GA, the community that Senator Inhofe was 
referring to this morning--any more than they're currently 
paying into the system, I think they ought to be exempt. We 
must accommodate small and rural communities, I'm actually old 
enough to remember the Farm Team on this Committee, and I know 
the Committee has a very distinct interest in smaller, rural 
communities. We are not calling for privatization of ATC, this 
is not that kind of a user-fee, it is a usage tax that is going 
to be enacted, at the end of the day, by the Senate Finance, 
and House Ways and Means Committees.
    And, finally, Congress must establish meaningful cost 
controls, and ensure that the FAA is not given a blank check. 
We have some very serious issues with the Administration bill, 
as proposed.
    Thanks for your time, I'll be happy to answer questions 
when the time comes.
    [The prepared statement of Mr. May follows:]

        Prepared Statement of James C. May, President and CEO, 
               Air Transport Association of America, Inc.

    Congress, in the coming months, has the singular opportunity to lay 
the foundation for a truly 21st century air traffic control (ATC) 
system that will safely, efficiently and equitably meet the growing 
needs of system users; and thereby benefit those who rely on air 
transportation, the communities that airlines serve, the innumerable 
industries that depend on air service and our Nation's economy.
    All who are interested in the future of civil aviation in our 
Nation are witnessing a historic convergence of factors that will shape 
aviation for decades to come--the closely approaching deadline to enact 
reauthorization legislation for the Federal Aviation Administration 
(FAA), the undisputed imperative to modernize the ATC system, and the 
well-recognized need to return to an ATC funding mechanism that matches 
the costs that users impose on the system with the fees that they pay 
for ATC services. The inescapable reality is that the ever-growing 
demand of passengers and shippers for air transportation cannot 
continue to be met by an ATC system that was introduced in the mid-20th 
century and that relies on a decades-old funding scheme that has 
strayed far from its original intent.
    The stakes are enormous; the public-interest considerations are 
clear; and the need for prompt, decisive action is undeniable.

I. Overview
    The benefits of a modernized and equitably funded ATC system will 
be considerable and will be widely distributed throughout our society:

   Safety: Will provide more precise information about aircraft 
        locations, both in the air and on the ground, and will enable 
        aircraft to constantly know one another's locations.

   Passengers and shippers: Will ensure needed growth in 
        capacity to satisfy customers' expanding demands for air 
        service.

   ATC system users: Will enable the ATC system to continue to 
        accommodate all users--general aviation, corporate aviation, 
        airlines and the military--and to do so more efficiently than 
        today; careful project justification will assure stakeholders 
        that modernization projects are necessary and their costs are 
        contained.

   FAA: Will assure a stable, predictable revenue stream, 
        thereby enabling the orderly and efficient transformation of 
        the ATC system.

   Equity: Will assure that each user pays its fair share but 
        no more, unlike today where airlines pay for 94 percent of 
        Airport and Airway Trust Fund (AATF) revenues but only use 68 
        percent of ATC system services.

   Environment: Will reduce aircraft emissions through fuel 
        conservation that more efficient flight paths and separation 
        standards will achieve.

   Communities: Will promote air service to communities, large 
        and small, and the economic benefits that flow from being 
        linked to the air transportation system.

   U.S. economy: Will assure that our economy continues to 
        benefit from air transportation's ability to move people and 
        goods quickly and economically.

II. What We're Not Saying
    Rhetoric sometimes does not coincide with reality in the ongoing 
debate about FAA reauthorization legislation. We want to make a few 
preliminary points to set the record straight:

   We are not saying that piston-powered general aviation 
        aircraft should pay the same as turbine-powered aircraft. 
        Piston-powered general aviation aircraft generally fly at 
        different altitudes than turbine-powered aircraft and therefore 
        often impose no or few demands on ATC system resources. Any 
        funding mechanism should reflect that difference, just as it 
        can reflect the difference between daytime and nighttime 
        operations.

   We are not saying that small communities should be left to 
        fend for themselves. Small communities have unique air service 
        needs. Reauthorization legislation should recognize those needs 
        in its funding and Essential Air Service Program provisions.

   We are not saying that Congress should end its role of 
        guiding the direction of the air traffic control system. We are 
        not trying to strip Congress of its role of overseeing ATC 
        funding decisions. On the contrary, we are upholding Congress' 
        historic view that funding should be cost based.

   We are not saying that the air traffic control system should 
        be privatized. The ATC system must be modernized and its 
        funding mechanism reformed but the FAA should continue to be 
        the supplier of air traffic control services. Modernization and 
        reform should not be equated with privatization.

   We are not saying that airlines should control who has 
        access to the Nation's airspace. Instead, we are saying that 
        unless the system is modernized and a sound funding mechanism 
        for it is created, capacity constraints will increasingly limit 
        the access of all users--general aviation, corporate aviation, 
        airlines and the military.

III. The Indispensable Role of the Airline Industry in the U.S. Economy
    The U.S. airline industry is not simply an important sector of the 
national economy; its services fuel our entire economy. Air 
transportation is an indispensable element of America's infrastructure 
and our Nation's economic well-being. Individuals, businesses and 
communities depend on the national air transportation system. U.S. 
airlines transport over two million passengers on a typical day and 
directly employ 550,000 persons to do so; they provide just-in-time 
cargo services; they are the backbone of the travel and tourism 
industry, which annually generates $1.3 trillion in economic activity 
in the United States; and airlines link communities throughout our 
Nation and to the world.
    Moreover, the airline industry is the foundation of the commercial 
aviation sector, which is comprised of airlines, airports, 
manufacturers and associated vendors. U.S. commercial aviation 
ultimately drives $1.2 trillion in U.S. economic activity and 11.4 
million U.S. jobs. By any measure, the U.S. airline industry is a 
valuable national asset and its continued economic health should be a 
matter of national concern.
    We also recognize how critical air service is to the small 
communities of our Nation. For that reason, we firmly support the 
continuation of a strong Essential Air Service Program. Any 
reauthorization needs to include such a continuation.
    This key element of our Nation's infrastructure cannot sustain its 
vital role of transporting people and goods if the government 
infrastructure that it depends upon, the ATC system, becomes an 
impediment. Air transportation risks becoming a wasting national asset 
if three of its most distinguishing characteristics--speed, 
dependability and efficiency--are encumbered by an increasingly 
obsolescent ATC system.

IV. Today's Air Traffic Control System Is Shortchanging Our Future
    The current system is based on 1950s architecture. It was cutting 
edge during the era of Ozzie and Harriet but not today. Although the 
ATC system in the past has served users well, this outdated 
infrastructure cannot meet the operational needs of 21st century civil 
aviation. It will not be able to serve the needs of passengers and 
shippers, private pilots, and corporate aircraft, or accommodate the 
ongoing introduction of unmanned aerial vehicles.
    The current ATC system relies on a series of ground-based 
platforms. Navigational aids, radar and controllers are all 
terrestrial. They are linked to form a very complex network system that 
supports airways, through which aircraft fly. The system was designed 
to create point-to-point routings, which by their very nature are 
finite. Its components reflect that paradigm.
    Airways, unfortunately, increasingly resemble many highways: they 
have become saturated. What we have come to realize is that the ground-
based system that supports point-to-point airways cannot produce 
substantial new capacity. We have no choice but to introduce new 
technology to generate needed capacity.
    Obsolescent ATC technology and the operating procedures that are 
tied to them mean that many aircraft routings--for airline, corporate 
and general aviation aircraft--are inefficient and will become 
increasingly so as we move further into the new century. Because of 
these inherent technological limitations, today's ATC system cannot--
and never will be able to--take full advantage of available technology 
or integrate and fully exploit emerging technology. Potential capacity 
enhancements and efficiency improvements, so critical to meeting 
growing air traffic demand and responding to environmental concerns, 
will remain unrealized unless the ATC system is promptly and thoroughly 
transformed.



    Imperiling needed improvements is the fact that the ATC system's 
funding mechanism is a relic of 1970. Such an artifact has no place in 
the 21st century. It was created when corporate and general aviation 
aircraft were insignificant users of the system. This is no longer so. 
Today corporate and general aviation consumes 26 percent of the 
system's services but contributes only 6 percent of Trust Fund 
revenues. As Secretary of Transportation Peters said recently, ``Under 
the current tax structure, it is clear that taxes paid by different 
user categories do not generally reflect the costs those users impose 
on the system.'' \1\ Corporate aircraft will use an even greater 
proportion in the future as thousands more business aircraft and very 
light jets (VLJs) are introduced. Funding for a modernized ATC system 
must reflect that changed--and changing--reality.
---------------------------------------------------------------------------
    \1\ Feb. 14, 2007, letter of Secretary Peters transmitting the 
proposed Next Generation Air Transportation System Financing Reform Act 
of 2007 to the Senate at p. 3.



V. What Delays Cost Today
    Airlines schedule their flights based on demand; i.e., when people 
want to fly and when cargo needs to be delivered. Airlines don't create 
that demand, customers do. Aviation infrastructure must respond to what 
consumers want.
    The Department of Transportation has estimated that in 2005 the 
cost of delays to U.S. airline passengers was $9.4 billion. The cost to 
airlines is also tremendous. Every minute of flight delay experienced 
in 2005 imposed an estimated $62 in direct costs on airlines. The 94.1 
million cumulative delay minutes in 2005 therefore generated $5.9 
billion in costs to the airline industry and a total projected cost to 
the U.S. economy of $15.3 billion. Expressed differently, 2005 delays 
cost $484 per second.
    ATC system capacity must be dramatically expanded--and soon. Flight 
delays, as noted above, are bad today and they will get worse. The 
current system cannot handle what is coming. ATC system users, and the 
ultimate beneficiaries of aviation services--travelers, shippers, 
businesses and communities--need an air traffic control system that can 
make the most of contemporary and new technology.

VI. The Need for Immediate Action
    Secretary of Transportation Peters only 3 weeks ago said, ``The 
current aviation system simply cannot handle future traffic increases 
without major delays, making system transformation necessary.'' \2\ The 
Secretary's assessment is indisputable. The nation's airways will 
become more and more congested as increasing demand, particularly from 
rapidly rising numbers of corporate and VLJ aircraft, overwhelms 
existing capacity.
---------------------------------------------------------------------------
    \2\ Feb. 14, 2007, letter transmitting the proposed Next Generation 
Air Transportation System Financing Reform Act of 2007 to the Senate at 
p. 1.
---------------------------------------------------------------------------
    The best estimates inform us that, without prompt and thorough 
modernization, the ATC system will progressively asphyxiate. More and 
more airports and more and more airspace will become congested, 
increasingly choking civil aviation in our country. Gridlock will 
become a common word in aviation parlance.
    Numbers starkly tell the story. The FAA projects that one billion 
passengers will be enplaned in 2015, up from nearly 750 million 
enplanements in 2006. That projection reflects an unabated demand for 
air transportation--no ``breathing spell'' is forecast. The FAA also 
predicts that 10,000 corporate aircraft, including traditional business 
jets, turboprops and VLJs, will be added to the fleet between 2007 and 
2017. This will significantly shift the proportion of air carrier to 
business aircraft using ATC services. It will also generate 
extraordinary new demands for those services. Instrument flight rule 
operations--the most significant source of demand on the ATC system--
are projected to rise by 36 percent, from roughly 45,000 per day to 
over 61,000 per day, in the next decade. That new burden will be on top 
of an ATC system that today is displaying unmistakable evidence of 
strain. To place this in some perspective, that strain is evident on 
days when at any given time, on average, only 6,000 aircraft are flying 
in the ATC system.



    The existing ATC system cannot absorb that anticipated demand. It 
suffers from fundamental structural limitations, principally 
attributable to the system's reliance on ground-based navigation, radar 
and communications facilities. The result is that the current system is 
not scalable; the system cannot be expanded to meet upcoming demand. It 
is not the system to meet the future growth of civil aviation--airline, 
corporate or general aviation.
    The ominous consequence of all of this is that delays are forecast 
in 2014 to increase by 62 percent over 2004 levels. That level of 
delays will be intolerable. Such an increase will have profound 
repercussions on airlines, ATC operations and airline customers, and 
will ripple across our economy. The effect on the total U.S. economy is 
likely to be immense. The Joint Planning and Development Office has 
estimated that the cost of failing to meet future airspace demand could 
approach $40 billion annually by 2020.\3\
---------------------------------------------------------------------------
    \3\ GAO, Next Generation Air Transportation System at p. 16 (GAO 
Report No. 07-25, Nov. 13, 2006).



    The nature and extent of these anticipated delays need to be 
understood. An increase in delays of that magnitude will mean that 
airspace and airports that have not experienced chronic delays will 
routinely experience them in the future. It will not simply be that 
afflicted airports will get worse, the affliction will spread.
    Schedule reliability will be the immediate casualty of such a surge 
in delays. Not only will flights be delayed, connections will be missed 
and chronically delayed flights will be canceled. Service 
unpredictability at a level not previously experienced could 
materialize. Passengers and shippers and those who rely on the 
transportation of those people and products will suffer, and their 
suffering will worsen month by month, year by year. Industries and 
communities dependent on civil aviation, whether for scheduled airline 
service or general aviation operations, will be similarly affected.
    While customers will not accept such a result, neither will 
airlines or the FAA. Both airlines and the FAA will reconfigure their 
operations to respond to worsening ATC system performance. It will 
certainly not be business as usual if gridlock begins to cascade 
through the system. Sooner or later, access to airline services and ATC 
services will be limited in some way or ways. If flight schedule 
reliability deteriorates, airlines will stretch out their schedules and 
flight connection times. That, of course, will make airline operations 
less efficient and more costly. It also will diminish the 
attractiveness of air transportation and some customers will look for 
substitute means of transportation, thereby exposing airlines to 
further financial distress. Were ATC operational performance to worsen, 
the FAA would predictably explore measures to ration demand on the 
system. We have experienced that before with the High Density Airport 
Rule and its progeny, and in the aftermath of the PATCO strike during 
the first half of the 1980s. We do not want to repeat that experience.
    If the government does not embark on the necessary transformation 
of the ATC system, it risks becoming the regulator of inconvenience. 
That is not the role that any of us wants it to assume.

VII. The Solution--Technology and Fair Funding Will Prevent Gridlock
    A satellite-based air traffic control system will provide the means 
to reduce delays and congestion that otherwise will occur. The benefits 
of a technologically up-to-date ATC system that is equitably funded 
will be extensive and will be widely distributed throughout the user 
community.

A. A Modern Air Traffic Control System: We Can Do It
    Air traffic control system modernization is neither novel nor 
revolutionary. It is being accomplished elsewhere in the world. We can 
do the same.
    ATC service providers in other nations have recognized the need to 
replace antiquated ground-based systems. They have taken steps to 
transform those systems to satellite-based, digital air traffic 
management systems that ensure safety, generate added efficiency and 
produce additional airspace and airport capacity. Large and small 
countries have done so. For example, Fiji introduced a GPS-based air 
navigation system over a decade ago. Australia, Canada, China, France, 
Germany, India, Switzerland and the United Kingdom are implementing 
next-generation ATC systems.
    The Alaska Capstone Program, Required Navigation Performance (RNP) 
terminal arrival and departure routings at Atlanta and Dallas/Ft. 
Worth, and RNP instrument approach procedures at airports that have 
challenging approaches, such as Juneau, Palm Springs and Reagan 
National in Washington, have given us a preview of what more extensive 
application of new technologies can deliver for system users in this 
country. A broadly modernized air traffic control system will enable 
all types of aircraft to take full advantage of Area Navigation 
Procedures (RNAV), RNP and Automatic Dependent Surveillance-Broadcast 
(ADS-B). This will make flying safer and far more efficient.

1. The Safety Benefits
    Increases in system capacity are understandably cited in 
discussions about the benefits of ATC system modernization. 
Improvements in safety, however, are what should first and foremost 
command our attention. Some of those improvements have already been 
accomplished; others are plainly attainable. A sharp drop in aircraft 
accidents in Alaska has occurred since the Capstone Program, which 
relies on ADS-B, was introduced earlier in this decade. Widespread use 
of ADS-B in the future will enable aircraft locations to be more 
precisely identified. This will be very helpful while aircraft are 
airborne but will also be useful in ongoing efforts to reduce runway 
incursions while on the ground.

2. The Capacity Benefits
    Capacity improvement is another core reason for ATC system 
modernization. New technology will enable aircraft to be unshackled 
from the ground-based, point-to-point navigation systems and associated 
analog communications systems under which they have operated for over 
three-quarters of a century. New technology will also enable the more 
precise spacing of aircraft. The ability to fly outside of existing 
point-to-point airways and improved precision will enable aircraft to 
operate more efficiently in airspace, whether it is en route or 
terminal area. That new-found efficiency will translate into added 
capacity. It also means, as noted above, the ability to use satellite-
based instrument approach procedures at some runways that today have 
limited or no availability in instrument meteorological conditions--
another important capacity enhancement.
    The wider use of digital communications, which will be an integral 
element of the modernization effort, will relieve congested voice 
communications channels, increasing the capacity to transmit quickly 
and accurately air traffic control information. This will mean a more 
orderly transmission of critical information, which will benefit both 
pilots and controllers, especially during peak workload periods. 
Furthermore, wider use of digital communications will diminish the 
possible blocking of voice communications between pilots and 
controllers in high-volume situations that can occur today, which is an 
increasing safety concern.

3. The Environmental Benefits
    In addition, routing efficiency improvements will yield significant 
environmental benefits. Experts estimate that modernization of U.S. 
airspace management could result in 12-15 percent improved 
environmental performance. We have already seen such benefits. For 
example, the introduction of more precise RNP arrival and departure 
procedures in the Atlanta terminal area is projected to eliminate 483 
million tons of CO2 annually.
    All of these benefits can be achieved; they are being achieved 
elsewhere in the world. To build a modernized ATC system, however, we 
need a modern funding system.

B. Funding--The Need to Return to Our Roots
    Much of the funding predicament that we face today is because the 
user-pay principle that Congress embraced decades ago has been 
abandoned. When it comes to funding the ATC system, therefore, we need 
to return to our roots.
    When Congress in 1970 enacted the Airport and Airway Trust Fund, 
the funding structure was based on two bedrock principles: user-pays 
financing and cost-based financing. Back then, airlines were the 
principal users of the system. They, as a result, were responsible for 
much of the ATC system costs. Funding of the Trust Fund was 
consequently mostly through the ticket tax. That made sense nearly four 
decades ago. It reflected a relationship between use and payments. That 
relationship is what Congress intended when it enacted the 1970 
legislation.

1. Corporate aviation has grown dramatically
    Congress in 1970 created a cost-based funding mechanism that 
mirrored the composition of air transportation. Times have changed. 
When the Trust Fund was created, there were 2,500 commercial aircraft 
and only 1,800 corporate aircraft using the system. Today there are 
8,000 commercial aircraft and 17,000 corporate planes. But airline 
passengers still pay 94 percent of all aviation taxes/fees while 
corporate fliers pay just 6 percent. The Trust Fund has not evolved to 
reflect this change in who is using the ATC system. As a result, 
travelers who fly on commercial airlines subsidize those who fly on 
corporate planes. The chart below shows this dramatic shift in the 
makeup of system users.



    Furthermore, business aircraft frequently fly during peak travel 
hours and often use the same airspace as the Nation's airlines; many 
times they are consuming the premium services of the ATC system. The 
magnitude of that demand is substantial. For example, on an average day 
there are 238 IFR operations at Teterboro Airport. This compares with 
an average of 301 IFR operations by Continental Airlines at nearby 
Newark Airport. These corporate users are not merely putting incidental 
demands on the system, as the depiction below graphically demonstrates.



    The business aviation industry is projected to grow even larger 
over the next decade with the introduction of next-generation aircraft 
called very light jets (VLJs) that in many instances will be able to 
fly at the same altitudes as airline aircraft. Not surprisingly, 
according to FAA data, business aviation is the fastest growing segment 
of the aviation industry. Indeed, there have been well-publicized 
reports of investors' plans to order vast numbers of VLJs to create new 
air-taxi services. This will be pure commercial usage of the ATC 
system. In no way will it resemble the recreational pilot flying from a 
general aviation airport on a Saturday afternoon.
    As the depiction below clearly indicates, VLJ operations are 
forecast to be more concentrated than is commonly understood. They will 
not simply be operating between low-activity airports, or in low-
activity terminal airspace or underutilized en route airspace. VLJs and 
their brethren, corporate aircraft, will consume increasingly scarce 
ATC system resources.



2. The principle of equitable funding has been forsaken
    When the Trust Fund was established in 1970, the airline industry 
was regulated and ticket prices were set by the government. In general, 
those government-set ticket prices reflected the cost of operation. As 
a result, generating revenue through a tax on ticket prices made 
sense--it ensured that Trust Fund revenues were linked to the cost of 
operating the air transportation system. Congress recognized at that 
time that this cost-based financing principle was equitable because

        ``a ticket tax is geared to charge an equitable tax related to 
        the distance traveled and the cost per mile of air operation, 
        since ticket prices for short flights are more per mile than 
        long-line flights and the tax is proportional to the price of 
        the ticket.'' \4\
---------------------------------------------------------------------------
    \4\ Report of Committee on Ways and Means, reprinted in 1970 
U.S.C.C.A.N. 3084.

    Today, ticket prices are based on market competition and have 
absolutely no correlation to the cost of services. As a result, the 
largest source of Trust Fund revenue has absolutely no link to the cost 
of maintaining and upgrading the aviation system. The symmetry on which 
the Trust Fund was based has evaporated.

3. A ``fundamental disconnect between the existing tax structure and 
        the FAA's workload''
    There is no correlation today between revenue collected and 
services consumed. Airlines pay for 94 percent of Trust Fund revenues 
but only use 68 percent of ATC system services. The result of this 
inequity is that airlines, and ultimately their customers, are heavily 
subsidizing other users of the system. As Secretary of Transportation 
Peters has very forthrightly said, a ``fundamental disconnect between 
the existing tax structure and the FAA's workload. . . .'' \5\
---------------------------------------------------------------------------
    \5\ Feb. 14, 2007, letter of Secretary Peters transmitting the 
proposed Next Generation Air Transportation System Financing Reform Act 
of 2007 to the Senate at p. 3.
---------------------------------------------------------------------------
    By way of illustration, a Cessna Citation X corporate jet aircraft 
would contribute an estimated $306 to the Trust Fund when it flies from 
New York to Los Angeles. An airline's Boeing 757-200 aircraft flying 
the same route would contribute an estimated $2,660 to the Trust Fund. 
Both are high-performance aircraft; both fly at the same altitude, in 
the same airspace; and both place comparable demands on the air traffic 
control system. Yet, there is an eight-to-one difference in payment for 
ATC services.



    This breathtaking disparity does not tell the whole story. Over 
time, the foundation of the Trust Fund has badly eroded. Today's 
funding structure does not assure sufficient future revenues, even for 
the current ATC system. The worrying trend this decade has been the 
continuing draw down of the Trust Fund. That, obviously, is 
unsustainable. In fact, the Government Accountability Office has 
pointed out that past trends and future projections indicate that the 
``revenue collected under the current funding system has fallen and 
will continue to fall relative to FAA workload and costs. . . .'' \6\
---------------------------------------------------------------------------
    \6\ GAO, Aviation Finance--Observations on Potential FAA Funding 
Options at p. 11 (GAO Report No. 06-973, Sept. 2006).



    Moreover, today's funding structure does not assure a stable 
revenue stream. That is because the average ticket price is lower today 
than it was at the beginning of this decade or, adjusted for inflation, 
than it was in 1970 at the outset of the Trust Fund. Revenue stability 
and, therefore, predictability will be essential to the successful 
modernization of the ATC system. The Trust Fund as presently 
constituted simply does not assure the wherewithal to sustain the 
system in the future.
    Again, ATC system service providers elsewhere have confronted this 
issue and satisfactorily responded to it. They have found this to be a 
straightforward issue. ATC systems throughout the world have 
implemented cost-based funding arrangements to ensure an adequate, 
stable revenue stream to fund their modernization efforts. This has 
occurred in Australia, Canada, France, Germany, New Zealand and the 
United Kingdom.
    In the United States, several independent commissions and studies 
have examined how best to meet FAA financing needs. Their common and 
long-standing conclusion has been that reform is urgently necessary. 
For example, before the last Trust Fund reauthorization in 1997, 
Congress established the 21-member National Civil Aviation Review 
Commission that former Transportation Secretary Norman Mineta chaired. 
The Mineta Commission unanimously recommended that FAA revenues be more 
closely linked to the cost of providing services. As it stated:

        ``The Commission recommends that the FAA adopt a cost-based 
        revenue stream to support its air traffic system activities 
        including capital investments. At the same time, funding for 
        aviation security, safety, and government use of the air 
        traffic system should be provided by the Federal Government's 
        General Fund.'' \7\
---------------------------------------------------------------------------
    \7\ National Civil Aviation Review Commission Report at p. I-2 
(1997).

    Four years before that report, the National Commission to Ensure a 
Strong Competitive Airline Industry, which former Virginia Governor 
Gerald L. Baliles chaired, concluded that the existing Federal budget 
process ``provides neither a stable, predictable source of revenue nor 
the ability to leverage that revenue. . . .'' \8\
---------------------------------------------------------------------------
    \8\ Change, Challenge and Competition at p. 8 (1993).
---------------------------------------------------------------------------
    More recently, the Government Accountability Office has said that 
``[a]viation experts and stakeholders agree that the incomplete 
implementation of these recommendations and additional factors could 
limit FAA's ability to fully address long-standing NAS [National 
Airspace System] modernization problems.'' \9\
---------------------------------------------------------------------------
    \9\ GAO, National Airspace System--Transformation Will Require 
Cultural Change, Balanced Funding Priorities and Use of All Available 
Management Tools at p. 16 (GAO Report No. 06-154, Oct. 14, 2005).
---------------------------------------------------------------------------
    For well over a decade, independent authorities have told us that 
the funding of FAA air traffic services must be changed to reflect 
contemporary reality. The necessary path has been described to us, many 
times. We need to follow it.

C. Funding--The Financial Benefits of Returning to Our Roots
    A user-pay/cost-based funding arrangement would produce three 
principal benefits:

   Lower costs; increased efficiency: A recent Government 
        Accountability Office report noted that the current financing 
        system does not create any incentive to control costs and 
        improve efficiency because use and cost are unrelated. Right 
        now, consumers of FAA ATC services have little or no motivation 
        to rationalize their consumption of those services. User 
        consumption of services and user payment for services are no 
        longer linked. Reestablishing that link will rationalize 
        decision-making about use of the system and, in turn, economize 
        the way the government provides services. The result will be 
        more efficient use and provision of FAA services.

   Revenue stability: The Trust Fund's uncommitted balances 
        have fallen by more than 70 percent over the past 5 years.\10\ 
        That is a disturbing development and calls into question the 
        ability of the Fund to support ATC modernization. A return to 
        cost-based financing would generate a stable revenue stream to 
        fund modernization.
---------------------------------------------------------------------------
    \10\ GAO, Aviation Finance--Observations on Potential FAA Funding 
Options at p. 1 (GAO Report No. 06-973, Sept. 2006).

   Equity: Under the current funding system, two aircraft 
        operators can pay very different amounts even if they use the 
        same services and impose the same costs on the FAA. This is 
        unjustifiable. Charging aircraft operators based on their use 
        of the system would create a more equitable funding system and 
        ensure that all users are paying their fair share.

D. Funding--The Need for Effective Oversight
    The principle of equitable funding is not synonymous with writing a 
blank check. Any change in the financing of the ATC system should only 
occur if basic oversight issues are addressed. Some of these are knotty 
but they can and must be resolved.
    Congress' role in policy decisions about funding should not be 
supplanted. We regard that as a given. Indeed, we look forward to 
Congress exercising that role.
    Stakeholders, however, must have a central role in decisions 
affecting the funding and deployment of ATC system improvements. Their 
decisionmaking role must reflect their contribution to that funding. We 
recognize the sensitivity of this issue. But we firmly believe that a 
usage-fee funding arrangement cannot be allowed to become an open 
spigot. Cost containment will be vital to successful system 
modernization. Modernization projects must be carefully justified, user 
vetted, and held to a budget.

VIII. Administration's Proposed FAA Reauthorization Legislation
    The Administration's legislative package contains a usage-fee 
proposal that is a welcome first step in reforming the funding of the 
FAA. Nonetheless, as noted below, more needs to be done.
    The proposed user fee/tax system is based on the FAA Air Traffic 
Organization cost allocation study. That study clearly recognized that 
airlines and their passengers grossly overpay today. It concluded that 
``high performance commercial'' users (i.e., turbine aircraft operated 
in scheduled service, as on-demand charters or under fractional 
ownership) generated only 73 percent of system costs, although these 
same users today contribute 94 percent of the revenue that goes to the 
Trust Fund. The graph and table on page [46] summarize the FAA's cost 
allocation. This is a very important recognition of the actual costs 
that users impose on the system.
    Unfortunately, one matter that the administration's legislation 
falls short on is the key issue of airport funding. Airlines pay over 
$14 billion annually in airport charges and fees--through landing fees, 
rates and charges, Passenger Facility Charges, and the Airport 
Improvement Program. We therefore are vitally interested in how in the 
future airports will be funded and how capacity improvement projects 
will be approved, especially those funded through the PFC program. The 
administration's airport-related proposals, however, would not provide 
airlines a meaningful role in these critical decisions and would 
virtually eliminate FAA oversight. Airlines and airports need to have a 
close, collaborative relationship in determining what capacity projects 
are initiated, project scope and cost, ongoing operations and 
maintenance costs, and how these various costs are paid for. 
Disappointingly, the administration's legislation does not recognize 
these necessary principles.
    Our reactions to several of the propositions in the 
administration's proposed legislation are described below.

   User fee authority ( 201): We support a cost-based approach 
        to funding FAA services and the creation of associated 
        borrowing authority but more needs to be done to make the 
        administration's proposal conform to such an approach.

     On the positive side, the administration's proposal 
            moves to correct the unfairness of the current funding 
            system through the introduction of a cost-based funding 
            system. Permissible fee factors are identified, although a 
            formula is not specified and thus remains up to the FAA to 
            establish. The bonding authority included in the proposal 
            will facilitate the needed modernization of the air traffic 
            control system, although the short repayment period could 
            put substantial upward pressure on user fees.

     On the negative side, the proposal is silent about how 
            to assure that costs are appropriately contained. This is a 
            very basic issue that needs to be resolved. Furthermore, no 
            judicial review of FAA user-fee determinations would be 
            permitted. This is a significant shortcoming. In addition, 
            recognizing weight as a permissible factor in determining 
            some user fees, which the proposal would, is unjustified. 
            Weight is not a legitimate proxy for the costs that an 
            aircraft imposes on the system. The authority to impose 
            fees for operations in terminal airspace for large hub 
            airports ignores the significant costs that corporate 
            aircraft that do not operate at those airports impose in 
            that airspace.

   Air Transport System Advisory Board ( 401): The industry 
        supports the creation of a board that can have meaningful 
        decisionmaking authority about key ATO issues, particularly 
        those involving user fees and bonding. Unfortunately, the 
        administration's proposal does not give stakeholders a 
        meaningful voice; the Board would merely be advisory and have 
        no real authority. We realize that this is a contentious issue 
        but it must be directly confronted and resolved. If you pay, 
        you must have a real voice in how your money is spent.

   Passenger Facility Charges ( 301): Although described as a 
        reform of PFC authority, the administration's proposal could 
        impose an additional $2 billion in taxes on passengers while 
        reducing airlines' voice in and the role of the FAA in the 
        approval of PFC projects. Such changes are unjustified.

   Airport Improvement Program ( 302 et seq.): Although the 
        administration's proposal would modernize parts of the AIP and 
        would recognize the greater financial ability of large and 
        medium hub airports to fund airport improvements, the proposal 
        includes $1 billion in subsidies for noncommercial airports, 
        most of which would come from airlines and their passengers. 
        Given that the proposal makes no attempt to apply the ``pay for 
        what you use'' principle to this program, the more than 
        tripling increase of our jet fuel tax from 4.3 cents to 13.0 
        cents a gallon would be unacceptable.

   Airport Privatization Program ( 806): This proposal would 
        increase to 15 the number of airports that could be included in 
        the privatization program but would eliminate the requirement 
        of carrier approval of such privatizations. We oppose that 
        provision because of the possibility that the elimination of 
        approval authority could result in transactions that 
        financially disadvantage airport users, including airlines.

   Facilities and Services Realignment and Consolidation 
        Commission--``FAA BRAC'' ( 409): Under this proposal, a BRAC-
        like process for the realignment and consolidation of FAA 
        facilities and services would be implemented. Effective 
        containment of FAA Air Traffic Organization costs will depend 
        in part on such consolidations. Given the controversy that 
        facility consolidations can create, the administration's 
        proposal is a sensible approach.

   LaGuardia Airport Operating Authorization Allocations ( 
        503): The airline industry has opposed the imposition of new 
        costs at LaGuardia. The preponderant view in the industry is 
        that the operational cap coupled with a reinstatement of the 
        secondary market allowed under the previous buy-sell rule, 
        although perhaps needing some improvement, is sufficient to 
        manage congestion and provide for equitable allocation of 
        access to the airport. The industry opposes any scheme under 
        which the airport operator would be allowed to generate excess 
        revenue and divert that revenue to projects that do nothing to 
        address congestion or expand capacity at the airport.

   Market-Based Mechanism Pilot Program at Congested Airports 
        ( 504): We oppose this proposal because the focus should be on 
        improving capacity at high-volume airports rather than saddling 
        passengers and shippers with far costlier service at the 
        airports that they want to use.

   FAA War-Risk Insurance Program Extension ( 701, 702): The 
        industry supports the unchanged extension of both the FAA war-
        risk insurance program, and the third-party liability cap and 
        punitive damage prohibition. We oppose the administration's 
        proposal to eliminate FAA ``first dollar'' coverage for such 
        insurance.

    We look forward to working with the Committee on these and other 
issues concerning FAA reauthorization legislation.

IX. Conclusion
    We need a truly 21st century air traffic control system that will 
safely, efficiently and equitably meet the growing needs of civil 
aviation and our national economy. And it needs to be funded the right 
way so that the revenue that is needed to keep our Nation's air 
commerce vibrant and responsive to consumer needs can be provided 
fairly and predictably. We cannot permit inertia or parochial 
considerations to delay achieving that important transformation.

    Senator Rockefeller. Thank you very much, Jim May, for that 
excellent testimony.
    And now we turn to Mr. Ed Bolen, who is President and Chief 
Executive Officer of the National Business Aviation 
Association. Good morning.

   STATEMENT OF EDWARD M. BOLEN, PRESIDENT AND CEO, NATIONAL 
                 BUSINESS AVIATION ASSOCIATION

    Mr. Bolen. Thank you, Mr. Chairman.
    The National Business Aviation Association represents about 
8,000 companies in the United States that are involved in 
business aviation. And, as the members of this Committee know, 
``business aviation'' is a FAA-defined term. It is ``the use of 
any general aviation aircraft, piston or turbine, for a 
business purpose.''
    According to the Aircraft Owners and Pilot's Association, 
over 50 percent of all single-engine piston aircraft in the 
United States are used for a business purpose. By the time you 
go to a piston twin, that percentage of business usage goes up 
over 80 percent.
    I have a chart that shows what the business aviation 
community looks like--it's made up primarily of piston twins. 
The next largest category is turboprops, then the entry-level 
business jets. Those three categories, represent 85 percent of 
the business aviation community represented.
    The types of companies and organizations that operate 
business aircraft in the United States are primarily, 85 
percent, small and mid-size companies, and non-profit 
organizations. And of course, as you know, a lot of State 
organizations also operate business aircraft.
    A typical example of an NBAA member, is Richard Shine, the 
head of a family owned recycling company in upstate New York 
that uses a turboprop to expand their business, but also to 
allow them to stay headquartered in a community that does not 
have strong commercial service.
    Another example would be a family-owned company called 
Aero-Charter in Chesterfield, Missouri, which has a fleet of 
aircraft--piston, turbo-prop, and jet--to help it as the sole 
transportation provider to a nationwide organ transplant 
company. These are typical members of NBAA, and reflective of 
the business aviation community.
    Now, I know the purpose of this hearing today is to talk 
about what people have called the ``next-generation'' air 
traffic bill. But for anyone who was around 10 years ago, this 
does not have as much of a forward feel to it, as it does a 
sense of deja vu. You'll recall that in 1997, the Nation's big 
airlines came forward with a proposal that was designed to 
shift $600 million worth of their taxes onto whom they viewed 
as their competitors. It also had what was--according to a 
senior airline executive--as a goal of control of the FAA for 
the airlines' exclusive benefit.
    Today, their proposal to shift costs has gone up, with 
inflation, to $2 billion. Their goal of control--according to 
public statements by the Air Transportation Association--
remains in place.
    Were we here to talk about a modernization bill, we in the 
business aviation community and, in fact, the entire general 
aviation community, would be very excited about it. We feel 
that we have been at the forefront of every modernization 
effort that has taken place, and that's not just because we 
view ourselves as good citizens, it's a matter of national 
survival for us.
    You see, everywhere in the community, everywhere in the 
country, when airports and airspace become congested, it's 
general aviation that has been pushed out. Some of you may 
recall when Midway Airport in Chicago was a thriving general 
aviation airport. Then commercial service came, and we were 
pushed out to secondary and tertiary markets.
    We see that happening today in Ft. Lauderdale, with 
JetBlue's arrival. It's been repeated in San Jose, and numerous 
other airports. When there is a squeeze in the system, general 
aviation loses. Therefore, we're profoundly interested in 
anything that can expand system capacity. It's one of the 
reasons we've worked so closely with Senator Stevens on the 
Capstone Program up in Alaska, which has led us to the 
development of ADS-B technology, which I think everyone would 
agree is the very foundation of our modernization effort.
    Capacity enhancement is the reason the general aviation 
community replaced all of our altimetry, so that we could 
double the amount of capacity of our en route airspace, by 
reducing vertical separation.
    General aviation was at the lead in calling for the 
creation of the Joint Planning and Development Office. We are 
deeply involved in the modernization process, because if it 
doesn't work, we're the ones that will lose.
    Now, knowing that modernization is important, we were 
hopeful the Administration would come forward with a 
modernization bill. Unfortunately, what they came forward with 
is not modernization. Their bill cuts FAA spending on the FAA 
by $600 million. It caps the General Fund contribution below 
what it is today, and has it reduced further in out-years. It 
diverts money that could be used for modernization to the 
creation of an assessment and collection bureaucracy. It allows 
the FAA to go into debt, and most of all, it fails to have a 
clear modernization plan attached.
    What we are talking about with modernization, according to 
everyone who has looked at it, and that includes the groups at 
the table today, is an addition to current spending of 
somewhere between $200 million and a billion dollars. So, to 
put that in perspective, you can see on the chart up there, 
we're talking about an increase in FAA spending of somewhere 
between 3 percent and 8 percent.
    We would argue that there are five options to get to that. 
One, we can look for efficiencies in the FAA--we can look for 
non-essential programs that do not relate to safety and 
efficiency, and we can make cuts. Two, we can increase by a 
couple of percentage points the General Fund contribution. 
Three, we can raise industry taxes. Four, we could do some 
combination of any or all of those. Or, five, we can throw out 
a funding system that has worked for 40 years, that is well-
understood, that every person in the aviation community has 
based their long-term projections on, and replace it with a 
radical funding scheme that is going to give unelected 
officials tax and spend authority, and it's going to reduce 
Congressional oversight.
    We would urge this Committee to take option number five off 
the table, and get down to the serious work of defining a 
modernization process, and figuring out how we pay for it.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Bolen follows:]

       Prepared Statement of Edward M. Bolen, President and CEO, 
                 National Business Aviation Association

    Mr. Chairman and members of the Subcommittee, my name is Ed Bolen, 
and I am the President and CEO of the National Business Aviation 
Association. I am grateful for the opportunity to appear before you 
today. NBAA commends the Subcommittee for holding this important 
hearing to discuss the future of our national air transportation 
system. NBAA members have a vital interest in a strong and healthy 
aviation system.
    NBAA was founded 60 years ago to represent companies that utilize 
General Aviation as a tool for meeting some of their transportation 
challenges. NBAA and our members are committed to working with Congress 
to transform and modernize the Nation's aviation system. Likewise, we 
are committed to modernization policies that support the continued 
growth of each aviation segment, including General Aviation, which 
plays a critical role in driving economic growth, jobs and investment 
across the U.S. We strongly support the shared goal of keeping our 
national aviation system the safest and most efficient system in the 
world.
    General Aviation is an essential economic generator, contributing 
more than $150 billion to annual U.S. economic output, and directly or 
indirectly employing more than one million people. Most General 
Aviation aircraft operating around the world are manufactured in the 
U.S., and our industry is continuing to build a strong American 
manufacturing and employment base that contributes positively to our 
national balance of trade. Congress recognized just how fundamental 
General Aviation is to our Nation's transportation system, rural 
economies, manufacturing capability, and balance of trade when it 
passed the General Aviation Revitalization Act a little more than a 
decade ago.

Facts about Business Aviation
    Business aviation, as the members of this Subcommittee know, is an 
FAA-defined term. According to the FAA, business aviation is the use of 
any General Aviation aircraft--piston or turbine--for a business 
purpose.
    Business aviation is a vital part of the American economy and our 
national transportation system. There are some facts about business 
aviation of which you might not be aware.
    Business aviation operators encompass a broad cross-section of 
interests, including businesses, governments, schools and universities, 
and not-for-profit organizations. Servicing and supporting these 
organizations are FBO's, maintenance technicians, suppliers and service 
providers.
    Approximately 85 percent of the entities that rely on general 
aviation to meet a portion of their transportation challenges are small 
and mid-sized businesses that own and operate a single airplane.
    These include businesses like:

   Manitoba--a small, family-owned metal recycling business in 
        Lancaster, N.Y., which first used a piston-twin airplane and 
        now uses a turboprop to help expand its business beyond its 
        local area.

   Aero Charter, a thirty-year-old, family-owned company in 
        Chesterfield, Missouri. The owners, who are also the company's 
        pilots, use a mix of business aircraft types, including 
        business jets, piston planes and a turboprop. They serve as the 
        sole provider of air transportation for Mid-America transplant 
        services, an organ-donation company.

    Business aviation also has a long history of philanthropic 
activity.
    Organizations like the Corporate Angel Network arrange free air 
transportation for cancer patients traveling to treatment using the 
empty seats aboard business aircraft. They have arranged more than 
20,000 flights since their founding in 1981.
    Similarly, Angel Flight America's seven member organizations and 
7,200 volunteer pilots arranged more than 18,000 flights in 2005 alone 
to carry patients to medical facilities.
    The Veterans Airlift Command uses business aircraft and unused 
hours of fractional aircraft ownership programs to provide free flights 
for medical and other compassionate purposes for wounded service 
members, veterans, and their families. Veterans Airlift finds 
volunteers in the business aviation community to fly their missions on 
request and contribute the full cost of their aircraft and fuel for the 
missions flown.
    The community also reliably snaps into action to respond to 
national crises. In the days and weeks following Hurricane Katrina, our 
operators provided an outpouring of generosity and assistance. Hundreds 
of thousands of pounds of supplies were transported into the Gulf Coast 
region aboard business aircraft, which also were used to transport 
victims out of harm's way.
    The aircraft involved in business aviation are diverse, like the 
industry itself. For instance, according to statistics by the Aircraft 
Owners and Pilots Organization, a majority of the hours flown in 
piston-engine airplanes are for business purposes. Among the turbine-
powered airplanes used for a business purpose the Beech King Air is the 
most common model. The King Air is a twin-engine turboprop that was 
first introduced in 1965 (see Chart 1).
    Business aviation tends to fly at altitudes above and below the 
commercial airline traffic that prefers to operate in the range between 
29,000 feet and 39,000 feet. We also tend to use different airports. In 
fact, General Aviation represents less than 5 percent of the total 
operations at the Nation's 20 busiest commercial airports. The ability 
to use smaller, less-congested facilities is key to the value and 
flexibility of business aviation aircraft.

FAA Reauthorization
    Mr. Chairman, we in business aviation are united with the rest of 
the General Aviation community in our grave concern about legislation 
the FAA recently unveiled, which the Agency calls the Next Generation 
Air Transportation System Financing Reform Act of 2007.
    The FAA and the Nation's big airlines are promoting this user fee 
proposal as a forward-looking ``modernization bill.'' But to everyone 
who was around the last time the Nation's big airlines pushed a user 
fee scheme in Congress, there is a strong sense of daja vu.
    Some of you may remember that, in 1997, the Nation's seven largest 
airlines pushed for a user fee scheme that would shift $600 million in 
taxes onto what they viewed as their competitors--the low-cost 
airlines. But, according to one airline CEO at the time, the real goal 
was ``control of the FAA by the Big Seven and for their exclusive 
benefit.''
    This time around, the airlines have picked a new target for their 
tax shift--General Aviation, and they have increased the amount to $2 
billion. The objective of reducing Congressional control of the FAA 
remains unchanged.
    The airlines have not been secretive about their goal of reducing 
Congressional control. One year ago today, the Air Transport 
Association (ATA) called a press conference where, according to The 
Wall Street Journal, their chief lobbyist was quoted as saying: ``We 
need to get Congress out of this process.''
    Lest anyone think ATA was misquoted, the association said again in 
August at an Airports conference in Florida, ``it is critical we have a 
governance structure that is, to the best of our ability, free of the 
pressures of Congress.''
    Mr. Chairman, as I said earlier, the proposed bill is being 
promoted by the FAA and the big airlines as a modernization bill. Let 
me be clear, the General Aviation community, including business 
aviation, takes a backseat to no one in terms of pushing for 
modernization. Our motivation is simple--every time airports or 
airspace get congested, it's General Aviation that is the first to get 
squeezed out.
    It wasn't that long ago that Midway Airport in Chicago was a great 
General Aviation airport with flight schools, flying clubs, and so 
forth. Then, low-cost carriers began using the airport, forcing General 
Aviation flights to go elsewhere. This same scenario has been repeated 
in San Jose, California and Manchester, New Hampshire, and it is 
happening in Fort Lauderdale, Florida.
    In order to expand system capacity, General Aviation has been at 
the forefront of the modernization effort. We were early adopters of 
GPS navigation systems. We worked with Senator Stevens to develop the 
ADS-B test program in Alaska--a test program that is now the 
foundational technology of the modernization effort. Just 2 years ago, 
General Aviation operators collectively spent millions of dollars 
equipping their airplanes with new altimetry so that we could double 
the capacity of our en route airspace.
    We are also working closely with the Joint Planning and Development 
Office to define and implement the Next Generation Air Transportation 
System.
    Because of its deep involvement in the modernization process, NBAA 
has as much knowledge and visibility into FAA modernization process as 
any industry organization in the country. It is with that knowledge and 
visibility that I can tell you without hesitation that this FAA/airline 
bill is NOT a modernization bill.
    2Let's look at the facts:

   This proposal cuts FAA funding by $600 million in 2008 
        alone.

   It caps the use of general taxpayer revenues--the General 
        Fund contribution--below what it is today and further reduces 
        the General Fund contribution in out-years.

   It takes money that could be used for air traffic control 
        transformation and diverts it to assess and collect user fees. 
        Whether the bureaucracy is built inside the government, or 
        outside through contractors, money must be used to create and 
        maintain this new assessment and collection bureaucracy.

   It also authorizes the FAA to go up to $5 billion in debt 
        starting in 2013.

   This FAA proposal does not outline the technologies, the 
        time lines or the costs of the next phase of modernization.

    So, rather than modernizing, this bill cuts FAA funding by $600 
million, reduces the General Fund contribution by hundreds of millions, 
and diverts money that could and should be spent on runways, towers and 
modernization technologies and wastes it on a new bureaucracy. After 
all that, it allows the FAA to go into debt.
    Mr. Chairman, this is not a modernization bill.
    Worse still is the fact that this bill is based on a flawed and 
unprecedented cost allocation study. By FAA's own admission, they have 
abandoned all economic principles for how to allocate costs to 
different users in favor of a simple accounting approach. No other 
nation uses such an approach for allocating air traffic control costs 
or for setting user charges or taxes.
    In fact, the FAA's new approach runs counter to international 
guidelines. The International Civil Aviation Organization states:

    ``. . . it is particularly important to recognize that the major 
part of the air navigation facilities and services infrastructure has 
been established to serve the requirements of commercial air traffic, 
and that some users receiving extensive service could not, by reason of 
the nature of their activity, have called for the provision of service 
on such a scale on an economic basis.''
    ``The primary beneficiaries among the users should therefore be 
carefully identified to ensure that realistic allocations of costs to 
the various user categories are made.''

    This is a very serious issue. As you know, the FAA has proposed in 
its legislation that all future fees and charges must be based on its 
own cost allocation study. Any errors in the study or its methodology 
will put at risk many segments of our Nation's air transport industry 
and those communities around the country that are dependent on them.

    So, if this is not a modernization bill, what is it?
    This proposal is an effort by the FAA and the airlines to reduce 
Congressional authority and move toward commercialization.
    Mr. Chairman, I have already reminded this subcommittee what the 
big airlines' goal was in 1997, and what they have said their goal is 
today: basically to shift their costs and reduce Congressional control. 
Their public comments suggest that Congress is an impediment to 
modernization and that the authorization/appropriation process is too 
unstable and unpredictable to allow for modernization.
    The facts tell a different story.
    FAA funding has steadily increased over the past decade, often in 
excess of the amount the FAA has requested (see Chart 3). Moreover, 
there has never been an FAA modernization program that has ever failed 
for a lack of Congressional support or funding. Even this year, 
Congress is funding the FAA's two Next Generation Air Traffic 
programs--System Wide Information Management, or ``SWIM,'' and ADS-B--
in excess of what the FAA requested.
    Mr. Chairman, in our view, the battle over aviation user fees is a 
battle over whether Congress will retain control of the air traffic 
system or whether that control will shift to unelected bureaucrats or 
even industry.
    Aviation user fees would reduce Congressional authority and put us 
on the slippery slope toward commercialization.
    In fact, last August, the Reason Foundation published an article in 
support of aviation user fees that said ``user fees are the essential 
precondition to commercialization.'' The General Aviation community 
urges you not to establish that precondition.
    Instead, we urge this subcommittee to produce a real modernization 
bill that retains Congressional authority over air transportation in 
the United States. The continued transformation of the system is a 
primary focus of the General Aviation community. In our view, this 
debate should not be about winners and losers, but about building a 
system that can meet all future demand.
    Mr. Chairman, modernization is not one ``big bang''--it's not 
purchasing a big new piece of technology and plugging it in. It is a 
stable transformation of our communication, navigation and surveillance 
systems.
    It has been said that modernization could cost somewhere between 
$300 million per year and up to $1 billion per year in new spending 
(although the FAA itself is proposing a little less than $200 million 
in modernization spending in FY09). If those numbers are in the 
ballpark, we are talking about an annual increase in the FAA's current 
budget of between 3 percent to 8 percent (see Chart 4).
    If that is what is needed, then it seems Congress has a least 5 
options for getting there:

        1. Congress can direct the FAA to make modernization a priority 
        and find 3 to 8 percent of its budget that can be redirected to 
        modernization without compromising system safety or efficiency. 
        Most multi-billion-dollar budgets, whether in the government or 
        the private sector, include some non-essential spending that 
        can be redirected. In fact, businesses are often faced with 
        unexpected or new priorities and must meet these challenges 
        within existing resources. A re-ordering of priorities in the 
        range of 3-8 percent of a budget is not excessive.

        2. Congress can declare modernization a national priority and 
        increase the general taxpayer revenues supporting 
        modernization. Increasing the General Fund contribution from 19 
        percent of the FAA's total budget to 25 percent would fully pay 
        for even the high-end estimates of modernization. The last time 
        that Congress fully debated an appropriate General Fund 
        contribution, in 1990, it was determined that 25 percent was 
        the correct amount to cover the public benefits of a strong 
        national aviation system--including national defense, emergency 
        response, postal service, medical emergencies, local commerce 
        and interstate commerce.

        3. Congress can increase the existing aviation excise taxes 
        across the board.

        4. It can do some combination of the above; or

        5. It can scrap a Congressional process that has allowed the 
        United States to be the world's leader in all aspects of 
        aviation for decades, and has given the U.S. the largest, 
        safest, and most efficient air transportation system in the 
        world, and replace it with a radical scheme that will reduce 
        Congressional authority, divert millions of dollars to 
        establish a massive new bureaucracy (either inside or outside 
        the government), dilute the FAA's focus on safety by giving it 
        the authority to assess and collect revenues, and put us 
        squarely on the path toward commercialization.

    Mr. Chairman, expanding the capacity of our Nation's air 
transportation system to accommodate demand can and must be a national 
priority. But no one should mistake aviation user fees with a 
modernization plan (see Chart 5).
    We urge this Subcommittee to immediately reject aviation user fees 
in any form and begin focusing on how we work within the established 
Congressional process to expand system capacity to enhance mobility for 
all Americans. NBAA looks forward to working with this Subcommittee to 
accomplish this critical national goal.












    Senator Rockefeller. Thank you, Ed Bolen, that was 
excellent testimony.
    This hearing, as I indicated, would be perhaps a little bit 
different, and I hope there will be a series of them, because 
we have the decisionmakers not just sitting here, but some are 
here as witnesses. And together, we're going to have to work 
this out.
    Now, there are several models to this. We meet frequently 
with your representatives who come to see us and our staff. 
They are not empowered to be able to make decisions when we 
say--as I'm wont to--``What do you suggest? What do you think 
are some potential compromises? What are those areas?'' For 
example, Jim May in, on page [37], has a, is a very interesting 
thing, he says, ``What we're not saying,'' and then there's a 
series of things after that. In other words, don't attack 
others. I haven't read them all.
    So, the question is, what is it? That you can look at it in 
two ways--we've got a short-term financing problem, we've got a 
long-term financing problem. My own predilection is that 
America is making a tremendous mistake right now by doing 
everything short-term and incrementally. That we're not looking 
at the big picture, that we have to virtually reconstruct 
America from every single point of view. From our education 
system, to our transportation system--and all of its forms--to 
a War on Terror, to Homeland Security--I mean, the list never 
ends.
    I think we have about a 10 to 15 year window in which to do 
this. The next question is, how can you afford that? I have 
absolutely no idea. But, I do know this. That, when President 
Clinton left office, he had a $5.6 trillion surplus. He may 
not--because of the Congress at the time--been able to get away 
with it, but he could have figured something out with his 
lawyers to take that $5.6 trillion, not use it into paying down 
debt, but to use it to--for the one time in our recent life, in 
our generational life, to create a construction fund, you know, 
a ``Build America F''und--everything from education, to 
transportation, to everything else.
    We have enormous needs. We are not meeting them. At the 
rate that we are going, we will not meet them. We will become a 
Congress and a society of incrementalists, because we are 
forced to do that by our economic situations, by various things 
going on in the world, the rest of it, and we're not going to 
make it, in my judgment. Just speaking as the Chairman of the 
Intelligence Committee, I don't think we're going to make it. I 
don't think we have the time to make it. Unless we do these 
things in a fairly short period of time.
    And, I checked this with Senator Lott, and he didn't hit 
me, I said, ``Can we look at a short-term resolution of 
financing problems? And, can we look at a long-term?'' And we 
can't do the long-term today, because all of the answers aren't 
in. But, I would just start with this question, and I'll ask a 
couple. How much more capacity could we add to the system by 
adding more runways?
    That'd be you, Chip.
    Mr. Barclay. I'm not sure how to answer that specifically--
--
    Senator Rockefeller. Then don't. Then answer just in 
general terms.
    Mr. Barclay. Back in 2000, the calculation was what we 
needed was 50 miles of runways to meet the coming demand in the 
system. We've built about 20 miles, not the 50 miles that we 
needed.
    One of the reasons we talked about it that way it is 
because looks pretty modest compared to highway miles to say, 
``This is the amount you need.'' On the other hand, a lot of 
the remaining runway capacity we'd like to get at is going to 
be very hard for reasons other than economics. We've been 
building new runways. The difficulty is not just getting the 
dollars, it's getting permission, and going through all of 
the----
    Senator Rockefeller. Will you say it's possible that if we 
do not reconfigure the runway system at O'Hare Airport, that it 
would have a--I'm not quite sure what the word is, but--almost 
a, the beginning of a closing effect on American aviation?
    Mr. Barclay. Yes. Back in the year 2000 we all felt what 
rolling gridlock feels like. One out of every four airplanes 
was delayed, and that was rippling from just one airport. 
Either it was O'Hare where a plane was delayed--a lot of planes 
were delayed at O'Hare--or La Guardia early in the morning and 
throughout the day it ripples delays. It's like, one of the 
bridges coming into Washington at nine o'clock that's working 
fine. But you get an accident on one, and everybody is 
scurrying, and everything winds up in gridlock.
    Senator Rockefeller. Let me ask one more quick question. 
The FAA proposal has been assaulted and attacked by everybody. 
I get along very well with Marion Blakey, she called me several 
weeks ago, I thought I was in for a big conversation, and she 
said, ``Well, are you for pilots flying at the age of 65?'' and 
I said, ``Yes, I always have been,'' and then she hung up.
    [Laughter.]
    Senator Rockefeller. I haven't talked to her since.
    [Laughter.]
    Senator Rockefeller. So, you know, it's not just you that's 
feeling frustration, it's all of us sitting up here.
    But, the trend is that we attack each other's advantages 
and disadvantages. And, that we attack plans that are either 
put before us, might be put before us, or we hope will be put 
before us, and often in the case of this bill, they don't 
contain the necessary details.
    So, that's where we are. Democrats and Republicans have, 
Administrations over the years have underfunded air 
transportation and the FAA, that's not a recent problem, that's 
gone on forever. It's true in a lot of other areas, too.
    But, is there anything in any of this--and I, I don't have 
to have you answer now, because it's Trent's turn to ask 
questions--nobody seems to support anything in any of this. Are 
there areas of support, do you believe, that you could reach 
accommodation with each other?
    What we used to do in West Virginia, in transportation--
please forgive me--we used to have temporary restraining orders 
in the coal mines. This was 34 years ago. And, I'd wake up 
every morning, and there would be the headline in the 
newspapers saying, ``Temporary Restraining Orders, Union Brings 
Against Company,'' and the mines would all shut down. Which was 
not, West Virginia is not a wealthy state, and this was not 
good news.
    Suddenly, what happened is that a couple of leaders within 
the Union and within the companies decided, ``This is stupid, 
this is hurting all of us.'' And they decided, from now on, 
when there is a problem, we're going to fix it at the face of 
the mine, which is where the coal is mined. Which means, one, 
that the owner or operator of the mine has to be down under the 
mine. Those were the days when people who owned mines tended to 
have come up through working in them. Now, people on Wall 
Street own mines, and many of them haven't been in mines. But, 
the principle is the same--you get people at the place of the 
problem, and you say, ``OK, now what are we going to do about 
this? What can we agree on, so that we don't have to come to 
conflict?'' In this case, to strike. Is there any possibility, 
euphemistically, in terms of what I have suggested through that 
example with the industry? Please.
    Mr. Alterman. Senator, I was somewhat struck by the 
testimony at what, actually, this whole panel agrees upon. And 
we seem to get stuck on the things we disagree upon, and we 
seem to argue with each other about the financing, and what we 
agree on gets lost in the equation.
    And what I've heard from everybody here, and I certainly 
agree with, is that we all agree that the system is going to 
break, and break fairly quickly, and we need to fix it, we need 
to modernize. That's going to take money, it's going to take 
programs.
    And, I've got to say, the criticism of the FAA bill that 
we've heard, has been on the financing side. On the 
programmatic side, there are actually some very good programs 
in there--ADS-B demonstration programs, the whole Section 600 
environmental initiatives are very, very good--we all seem to 
agree on those things. The only thing we break down on is who 
pays what, and we're all looking out for our own wallets.
    I was even struck by the fact that, in Mr. May's testimony, 
he didn't call it a user fee, he called it a usage tax, which 
means we're back in the tax system, and we're debating exactly 
what tax there will be, rather than whether it's a user fee 
versus a tax. I think that's a step forward, frankly.
    The problem we have, is that we all represent 
constituencies who obviously want somebody else to pay for the 
system, so I, you know, I would be tempted to say, ``Why don't 
we have 100 percent General Fund contribution?'' And we 
probably wouldn't argue with each other.
    [Laughter.]
    Mr. Alterman. Having said that, there have to be ways to 
compromise. And, I think what we'd first do is agree on what we 
agree upon, take all of those things off the table, and just 
try to isolate and define what we disagree about. As I said we, 
in our perspective, we're in sort of a unique situation, 
whatever way you look at the process, we pay approximately 100 
percent of our system usage, a little more. So, from the cargo 
perspective we say, just, you know, just don't hurt us, do no 
harm, but we understand there are arguments on the other side.
    The one point that I made that I'd like to reiterate, and I 
think everyone else did, is that I'm not sure we can afford to 
establish a new, multi-million dollar bureaucracy to figure out 
how to do this. I think there's got to be a simpler way. And 
there are two ways to do that, as I look at it--one, we simply 
look at the present system, and see what inequities there are, 
and tweak it. And, number two--and we don't support--I don't 
want anyone to take this wrong, we are not advocating what I'm 
about to say, if I advocate it, I will probably not be employed 
tomorrow----
    [Laughter.]
    Mr. Alterman.--but, and I'll say it anyway----
    [Laughter.]
    Mr. Alterman. Another possibility which might be explored 
is funding the whole system through a fuel tax. I don't know 
how that comes out. I have no idea how my members come out. 
But, I'm looking for something that we might be able to agree 
upon.
    Senator Rockefeller. Within that spirit--I have vastly 
exceeded my time, not giving the rest of you a chance to 
answer, and I call upon Senator Lott. I will come back.

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

    Senator Lott. Well, thank you, Mr. Chairman, and I 
certainly look forward to working with you and the Chairman of 
the full Committee, Senator Inouye and Senator Stevens, and 
coming up with a really visionary, far-sighted reauthorization 
of FAA, and my other colleagues here on the Committee.
    Some people say, ``Well, he's dreaming.'' Well, that's how 
things happen. When you dream, and you have a vision, then you 
try to figure a way to go get it.
    I've enjoyed working in this area for several years now, 
worked on the FAA reauthorization in the 2000 bill with Bud 
Schuster, and of course, in 2004, Senator Rockefeller and 
Congressman Young and Oberstar--I don't think we did incredible 
jobs, although each one of you would probably pick apart parts 
of it, I think it was incrementally OK, I hope we take the 
quantum leap this time, way beyond what we've been willing to 
do before.
    And as I listen to this panel, I must confess, I got to 
feeling pretty negative about how we're going to get all of 
this done. But then I said, there's no use, this is what you're 
paid to do, to point out your problems, and I think Marion 
Blakey is an excellent leader, there at FAA, I think some of 
the problems you point out really were foisted on her and the 
bill, probably by OMB. They recommend spending less of AIP, 
they know that isn't going to happen.
    We're going to spend AIP, it's a Trust Fund, and it's for a 
purpose, and we're going to make sure it's spent for the 
purpose it is accumulated.
    So, then I said, well there's no use of being negative 
about all of this, because I believe with this Committee, we're 
going to do this, and we'd like to do it with your help. Maybe 
we need to have some meetings where we get you all to actually 
confess where you're willing to do more, but I think we all 
agree we need to modernize the air traffic control system, do 
we all agree? Anybody disagree? No, OK.
    So, that's kind of the bottom line. I think we can all 
agree we need more money. We can argue over programmatic 
changes, and we will. But, we're going to take input from all 
of you. We've done that, I've worked with you in the past, and 
I worked with all segments of industry, I met with most of you 
already, I know Jay has, Chairman Inouye.
    But, I'm going to not ask any further questions, I'm just 
going to quote two of my favorite people, one of them is 
Russell Long, good Democrat who said, you know, ``On tax 
policy, it's don't tax me, don't tax you, tax the guy behind 
the tree.'' Or something to that effect. And that's what you're 
all saying. You're all saying, ``No, not me, go, get over 
here.'' Some of you like the current system, some of you don't 
like it, none of you want to pay more, and that's just not the 
way it's going to happen.
    So, my second favorite quote of modern time, is one from 
Morgan Freeman, a great Mississippian in the movie ``Glory'' in 
which he said, ``We're all going to have to ante up and kick 
in.'' Every one of you are going to have to pay more, do more, 
give more. Because we gotta go for the big league this time. 
We've got to finance this modernization. We have got to do 
what's necessary to keep this industry competitive, not only so 
they can serve the American people, but be competitive in the 
world.
    And, I hope that Senator Rockefeller and I can approach it 
from that standpoint. It's time we do something grand. And, I 
hope that Senator Rockefeller's name will go up in history as 
having done what really needs to be done. So far, I don't see 
it. You're all saying, ``Not me.'' And, my attitude is, yes, 
all of you. You're all going to pay more. So, let's find out 
how we can make that happen.
    That's my speech for the day, Mr. Chairman.
    Senator Rockefeller. That was a hell of a speech.
    Senator Lott. Thank you.
    Senator Rockefeller. Senator Inouye, Chairman?

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

    The Chairman. Is it my turn to give a speech?
    [Laughter.]
    Senator Rockefeller. You're a Chairman, you do whatever a 
Chairman wants to do.
    The Chairman. Well, it's no secret that I represent a small 
state, small in size, small in population. And I do hope that 
whatever decision we make here, we take into consideration the 
unique nature of my state. That would make me very happy.
    And I was listening to Mr. May, and your remarks pleased 
me.
    Certainly, I serve as Chairman of the Defense 
Appropriations Committee, and I'm constantly reminded of the 
word ``change'' and it comes about every 2 weeks. Something 
that is current today is obsolete in about a month.
    And I think it's the same here in aviation. Now, we have 
aircraft that require just a small portion of a runway now. We 
have powerful engines that can fly you across the country in 
just 2 hours. And I suppose, someday, we will see such aircraft 
carrying passengers. We can't stop that, because every study 
indicates that flying is the preferred method of traveling, it 
is no longer the rail, or the automobile--it is aircraft.
    And so we have a grave responsibility. When I became 
Chairman of the Commerce Committee, there was a brief moment 
when I said, ``Wow,'' you know, to be called Chairman, it's 
ego-boosting. But when you realize the jurisdictional 
responsibilities of this Committee, and it's not--the nature of 
this Committee is not like, say, Foreign Relations, where you 
try to maintain the status quo. You don't want any ruffling of 
feathers.
    This Committee--take communications, 10 years ago, we 
adopted the 1996 Act on Telecommunications, and it is so 
obsolete today, that we are scrambling to write a new one. And 
we know very well that 10 years from now, that one will be 
obsolete. You have one little instrument now that does 
everything.
    It's the same thing with aviation. And so, I plead with you 
to help us come up with something. Yes, Senator Lott is--one 
thing I like about him, he's always optimistic, and he's 
usually correct. And my colleague here from West Virginia, he's 
rather philosophical, I think that was his training in Japan.
    [Laughter.]
    The Chairman. But, we've got to do something, and I hope 
that we do the right thing. And I don't have the answers, I 
have a lot of questions, here, I'd like to submit to you. And 
Mr. Chairman, I'd like to have my statement made part of the 
record.
    [The prepared statement of Senator Inouye follows:]

 Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii

    As the Senate Commerce Committee considers the reauthorization of 
the Federal Aviation Administration (FAA), we must remain aware of the 
impact our policies may have on various segments of the aviation 
industry. The industry is a large part of the economy and increasingly 
the preferred method of travel for many Americans. The FAA currently 
estimates aviation contributes $690 billion annually to our Gross 
Domestic Product (GDP). The policy decisions we make this year, both in 
the area of modernization and funding, will have a profound affect on 
the U.S. national airspace system (NAS) and our aviation industry for 
decades to come.
    These issues are particularly important to my constituents, the 
people of Hawaii. We depend on aviation to connect us as a state, as 
well as to the rest of the country and the world. Our economy is 
uniquely dependent on aviation, and the ability of people to travel in 
a safe, efficient, and timely manner at reasonable prices. Any policies 
we adopt must recognize the relationship between aviation and the 
economy, as I cannot support any policy that will adversely affect 
Hawaii's airlines or their customers.
    Today, we will hear from aviation stakeholders on the plan the FAA 
unveiled that would fundamentally change the current aviation system 
and how it is financed. We must ensure that the air system continues to 
serve the public well, and at the same time, the air traffic control 
system must be modernized and it must be done quickly so our social and 
economic growth are not stifled.
    Unfortunately, the FAA has not yet made a solid case supporting 
their proposed changes. Specifically, the Committee needs to know how 
this plan affects consumers, local communities and various aviation 
stakeholder groups. We must determine whether the FAA plan is equitable 
to all parties involved. The entire country, rural and urban, will feel 
the impact of the FAA reauthorization that we enact. Any aviation 
proposal that moves through Congress must deliver the promise of 
improving access and providing affordable, secure and quality air 
service to all Americans, regardless of geographic location.
    Today is another step in understanding this important issue. We 
must proceed in a dedicated, cooperative manner that ensures we enact 
the best legislation for the system and our Nation.

    Senator Rockefeller. All statements--and yours will be 
included--all statements, nobody has given a statement, they're 
all parts of the record.
    The Chairman. Thank you very much.
    Senator Rockefeller. Thank you, sir.
    Senator Pryor?

                 STATEMENT OF HON. MARK PRYOR, 
                   U.S. SENATOR FROM ARKANSAS

    Senator Pryor. Thank you.
    Mr. May, let me start with you.
    Arkansas has a healthy mix of commercial aviation and 
general aviation, and we have a lot of businesses there that 
use both, and a lot of people use both--can you give me a 
little detail about which general aviation operators would be 
defined as corporate operators--did you use that term, 
corporate operators, in your testimony? Who, who was that?
    Mr. May. Senator Pryor, I'd be happy to do that.
    There are actually, if you were to look at the cost 
allocation study as presented by the FAA, there is a specific 
category called ``high performance GA,'' if I recall correctly, 
and it is very specifically turbine, i.e., jet aircraft that 
are effectively corporate.
    There is a second category in that cost-allocation study 
that is more broadly defined as ``high performance 
commercial,'' that also includes in the definition, outfits 
like Net Jets, for example, the fractionals. Charter 
operations, for instance, et cetera. So, when I talk about 
restoring equity or balance, those are the two principle 
characters, categories I'm referring to.
    Senator Pryor. OK. Did you want to add something to that?
    Mr. Bolen. The term ``corporate aviation'' is also an FAA-
defined term. It is the use of any general aviation aircraft 
for a business purpose with two professional pilots. So, in the 
United States, we have corporate operations that include piston 
and turbine-powered.
    I would just say that the FAA's cost allocation study 
defines ``high performance'' as ``any turbine airplane'' so 
that includes single-engine turboprops, and twin engine 
turboprops.
    Probably the most common turbine-powered aircraft in the 
United States is the twin-engine turboprop, the Beech King Air.
    Senator Pryor. Right. Thank you.
    Mr. Forrey, you paint a fairly dim picture in your 
testimony about the future for employment of air traffic 
controllers, and I'm concerned about that issue. And maybe you 
covered this in your testimony, but if you could tell the 
Committee where the air traffic controllers and the FAA are in 
their negotiations? And, you know, what the immediate future 
looks like for air traffic controllers?
    Mr. Forrey. Well, currently we're not in negotiations with 
11, 12 bargaining units at this time. In fact, 12 bargaining 
units are working under imposed work rules and pay, and that 
includes air traffic controllers, engineers, safety engineers, 
system engineers, nurses, several others--that is causing quite 
a problem with retaining very experienced and valuable 
employees, that they're basically retiring as soon as they're 
eligible, because there's no reason to stick around.
    We also believe that this is discouraging new, qualified 
employees to get hired by the FAA. We, at one point, had seen 
many of our controller new hires come from the military ranks, 
that had experience as controllers in the military, and they 
are no longer coming into the FAA in the numbers they used to, 
because they can find better employment with the military, with 
better pay, or with the Department of Defense as civilian air 
traffic controllers with them.
    So, it's having a very negative impact on the ability for 
us to maintain a safe system, and of course, to keep up with 
the efficiencies that the system demands.
    You know, we're all in favor of modernization, we think 
that's something we need to do. But we don't want to let the 
discussion get away from the fact that what's going on right 
now, the short-term--we need the system to maintain its safety 
and efficiency as it is, and we need to prepare for the future 
of that modernized system, so that we can ensure that system is 
still safe.
    Senator Pryor. So, if you were able to get your contract 
issues resolved, what should the FAA be doing to try to 
increase air traffic control retention, and to enhance their 
training?
    Mr. Forrey. Well, I think initially what we need to do is 
get us back to the table under a fair negotiations process, so 
that we can actually show the controllers that they have an 
opportunity, at least, to receive better pay and better working 
conditions than we're getting right now. That will retain our 
experienced controllers, I believe, and I think that will start 
attracting more qualified individuals to come and enter into 
the occupation. So, that would be the initial thing we could do 
right away.
    Senator Pryor. Mr. Bolen, I just have a couple of seconds 
left, and I just wanted to get your thoughts on the FAA 
financing reform proposal--have they reached out to your 
organization, and to other members of the panel--have they 
reached out to try to get your input on reforming financing 
through FAA?
    Mr. Bolen. Well, I think we've been pretty clear in our 
comments regarding financing. We view the modernization 
hurdle--finding an additional 3 percent, or 8 percent above the 
current budget, as a little bit like finding the right diet. I 
mean, there are really two ways to lose weight--you exercise 
more, or you eat less. Maybe there are three ways, you could do 
a combination of those. What we see, in terms of the 
modernization, we either need to find savings within the 
current FAA budget, that does not affect essential programs, 
that does not affect system safety, does not affect system 
efficiency, or we're going to have to find additional revenues. 
Those revenues can come from an increase in the General Fund, 
or they can come from an increase in the taxes.
    I think Senator Lott was right on target when he made it 
clear that no one should expect to get a tax break as we go 
through this process. We may need to pay more, and I think our 
goal ought to be a way to make sure that as we are looking at 
the funding options, we don't harm any one segment of the 
industry, and destroy it, as we're trying to move the system 
forward.
    We've tried to make that clear to the FAA, and to others. 
We've tried to work with them on their cost allocation study. 
We've been, frankly, a little frustrated that they've not 
provided us any data, despite a year's worth of requests.
    Senator Pryor. Mr. Chairman, thank you.
    Senator Rockefeller. Thank you very much.
    Senator Lautenberg?

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

    Senator Lautenberg. Thanks, Mr. Chairman, for holding this 
series of hearings as we continue our work to improve air 
travel in our country.
    And, just as a preface to my questions, just a reminder, 
you may have discussed it, the number of people who will fly 
this year, and that it won't be too many years away that we'll 
have a billion people flying almost every year. And then we're 
looking at the very light jets--they'll be carrying passengers, 
in my view, in the next 10 years, and we've just got to improve 
our capacity to handle it.
    And, you know, suddenly to realize that the sky is a finite 
place to put things. And, it makes it very tough and before we 
go ahead and start spending taxpayer money, I'd like to know 
exactly what we're, what is being planned.
    And, Mr. Forrey, you talked about the source for new 
controllers, and seeing that dry out. And right now, we're not 
replacing those that will be retiring quickly. And there are 
1,000 less controllers now than we had just a few years ago. I 
happen to come--as contrasted to Senator Inouye--I come from a 
very small state, but the largest population of any of the 
states that are represented here today, and we've got busy, 
busy airports as you all know. Whether, it's not just Newark-
Liberty, it's Teterboro, it's Morristown, and it's other 
airports throughout the state. We like them. We like the 
commerce and the opportunity it presents, you know, when we 
think of aviation, we think almost exclusively of the passenger 
side, but the cargo side is really a big factor in the movement 
of goods, and the development and the functioning of our 
society.
    But, the user fee sounds like the last thing that we ought 
to be thinking about right now. To make it equitable to 
everybody is going to be a very tough thing to do, and I'm sure 
that we can come up with things that are more, that are fair, 
than going to a user fee.
    And, I ask--what do we do as we continue to stretch the 
population of aircraft in the sky, and to increase it? One of 
the things I'd like to see us do, because it creates problems 
for you, and for all of us, and that is airport noise, aviation 
noise. And I think it's essential that we phase out some of the 
older, noisier Stage Two jets, and I've got a bill that does 
that.
    Now, this legislation, I understand, will bring some 
hardship for some of the members of your organization, that 
recently upgraded them with new altimeters to comply with the 
vertical separations now required, 1,000 feet--so there are 
investments that have to be made. But, nevertheless, I think 
these changes must be made to accommodate what we have now, and 
what we're going to have over the next years. Any suggestions 
as to the legislation that I've proposed, that you'd recommend 
in order to get your support?
    Mr. Bolen. Well, Senator, speaking from the business 
aviation community, I think you hit directly upon the issues at 
hand. I think everyone in aviation has to find a way to be a 
good neighbor, and to be welcome parts of every community. 
Noise is certainly a part of that equation that has to be 
addressed. You have introduced a Stage Two phase-out, and 
you've hit on the target--there are a number of people who have 
invested heavily in Stage Two aircraft so that they could be 
part of the altitudes between 29,000 feet and 41,000 feet. I 
think we'd like an opportunity to sit down with you and figure 
out what the appropriate way to address that situation is.
    Your bill, I believe, talks about a 3-year phase-out. I 
think that would be very onerous on some of the people who have 
made the investment, but I think you've touched on all of the 
issues that need to be addressed, and we look forward to 
sitting down and working with you on that.
    Senator Lautenberg. We want to help solve the problem, but 
understanding that people have been encouraged to make 
investments in these aircraft, that we don't want it to be too 
heavy-handed, but we have to figure out ways to do it. The 
communities at large will not permit this to continue, we're 
getting all kinds of complaints, and appropriately so.
    Mr. Chairman, I ask that my statement--you did say all of 
them would be included in the record, and to keep the record 
open for questions to be submitted in writing, and I thank you 
very much for doing it, and all of you.
    [The prepared statement of Senator Lautenberg follows:]

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

    Mr. Chairman, thank you for holding today's hearing as we continue 
our work to improve air travel in America. Seven hundred-sixty million 
people will fly this year. By 2015, that number will hit one billion. 
In addition, nearly five thousand very light jets will be carrying 
passengers over the next 10 years.
    To serve those future flyers and aircraft efficiently and safely, 
we need new equipment--in our towers and on our runways. But before we 
spend taxpayer money, I want to know what Congress is being asked to 
buy.
    Right now, the Bush Administration's proposal is too vague to 
evaluate. As my colleagues point out, buying the equipment that will 
serve as the backbone of our future aviation system is one of the most 
important jobs the FAA will ever have.
    We also must be sure our air travel system is adequately staffed--
and that means having enough air traffic controllers to get our 
passengers and planes safely to their destinations. Our air traffic 
controllers are retiring in large numbers, and the FAA is not replacing 
them fast enough. There are a thousand less controllers than we had a 
few years ago.
    At Newark Liberty International Airport alone, there are seven 
fewer controllers than even FAA Administrator Blakey has said is 
needed. It takes several years to train a new controller. And with 
operational errors and traffic levels on the rise at Newark--and staff 
levels on the decline there--we need a plan from the FAA to get more 
controllers in our Nation's towers.
    Finally, we've got to address the funding imbalance in our aviation 
system.
    I came from the business world. And I am the first one to say that 
an airline passenger who is sitting in economy class on a delayed 
commercial flight should not be subsidizing the flight of a corporate 
executive who's sitting on a business jet that's been cleared for take-
off.
    I look forward to hearing directly from our excellent panel of 
witnesses on the proposals before us to modernize our system and create 
more balance in maintaining the Aviation Trust Fund.
    Thank you Mr. Chairman.

    Senator Rockefeller. I thank the Senator, and that is the 
order.
    Senator Thune?

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Mr. Chairman, thank you for 
holding this hearing, and I too, have a statement that I would 
like to have included in the record.
    I would like to pose a couple of questions to our panel, 
and first off--the Administration's plan includes aviation fuel 
tax increases on general aviation users, and I've seen an 
estimate that said it would go from about 21 cents a gallon to 
70 cents a gallon. Do you all believe that the increase in fuel 
taxes for general aviation will have an impact on the number of 
general aviation flights, or number of general aviation pilots?
    Mr. Bolen. Well, Senator, I think the general aviation 
community and all of the associations that represent it, and 
NBAA is certainly proud to be one, are being inundated with 
letters from pilots and operators that are very concerned about 
the impact of this 360 percent increase in the tax.
    They're concerned about the proposed tax increase. But even 
more than what we are hearing on taxes, we're hearing concern 
about user fees and the impact that that's going to create, 
both financially and administratively--paying those taxes, and 
then trying to fund a bureaucracy that is ultimately going to 
have to assess and collect them.
    So, I would say the Administration's proposal has certainly 
captured the attention of the general aviation community, 
they've been very vocal about their concerns about that, and I 
would also say that it has gone beyond the pilot and the 
operating community.
    We are hearing from small towns, we're hearing from airport 
operators, we're hearing from local civic groups that are very 
concerned about the impact that this proposal will have on 
small towns and rural communities.
    Senator Thune. And one of the questions that is 
particularly, important in rural areas, has to do with 
Essential Air Service, and what is your understanding of how 
this change would affect the funding structure, to impact the 
future viability of the Essential Air Service Program? Most of 
the FAA charges and the funding for EAS, comes out of 
overflight fees, that those that fly in the United States in 
airspace, controlled airspace, but neither take off nor land in 
the United States--what's your sense of how this would impact a 
program that's important to a lot of the smaller communities 
that I represent, and others, I think, on this Committee 
represent as well?
    Mr. Barclay. Senator, on behalf of airports, our view is 
that the provisions in the bill for small community air service 
are not adequate, including the EAS provision. The 
Administration would cut the current funding for EAS. It's 
about $110 million a year, and they'd cut that down to $50 
million and they would take the money in the future from the 
Trust Fund rather than from the overflight fees. That's 
something that is a fairly new idea, and we haven't had much 
chance to evaluate the funding source issue. But our members 
don't agree that we should be cutting back on the EAS program, 
as envisioned by the Administration.
    When you think about air transportation, you have this 
vibrant market-based system where 90 percent of the passengers 
fly between the top 70 markets. But you have 550 air carrier 
airports out there that need a connection into that system if 
you're going to have a national air transportation system. Not 
all good ideas, and people, live in those very large markets 
that are market-driven.
    So, figuring out how do we properly connect rural America 
to that system that will operate by the market, is one of our 
great challenges. We shouldn't be undermining the only program 
we have to do that currently, while we try to figure out better 
ways to do it.
    Senator Thune. Let me just----
    Mr. May. Senator, I'd like to just quickly reinforce our 
concerns, that are quite similar to Mr. Barclay's. That, we 
think rural and small communities must continue to be served, 
and I think this is one of the many flaws in the 
Administration's bill, is to not only change that funding, but 
cut the funding for EAS.
    Senator Thune. And I assume that none of you believe that a 
rancher from a remote community like Wall, South Dakota, that's 
flying a piston-powered general aviation aircraft, flying 
around South Dakota puts the same strain on our air traffic 
system as a Gulf Stream business jet might, flying up and down 
the East Coast.
    And, I guess my question is, how does the current cost 
recovery system differentiate between those two types of 
flights, how would the FAA proposal differentiate the flights, 
and how would you make sure that each of the system users--the 
South Dakota rancher, and the East Coast businessman pay their 
fair share, and nothing more? That's a complicated series of 
questions, but----
    Mr. Bolen. Senator, let me begin with that--currently both 
the rancher and the jet flying up and down the East Coast are 
currently paying through a fuel tax. The piston-powered fuel 
tax is at a lower rate than the jet fuel tax. So, we have a tax 
on aviation gasoline, which is used in piston-powered 
airplanes, at 19.5 cents a gallon, and we have a tax on jet 
fuel at 21.9 cents. So, we have separated the tax levels 
between piston and turbine.
    Using that fuel tax we are able to link system usage to 
costs paid. So, for both of those airplanes, the more they fly, 
the more they pay. Obviously that differential, or the 
progressivity, of the fuel tax is enhanced by the fact that 
there are two different fuel rates. But, I would also tell you 
that a turboprop going on, say, an hour-long flight, would pay 
something on the order of 500 percent less than that turbo jet, 
simply because the turbo jets are heavier, more sophisticated, 
so they burn more fuel.
    One of the reasons that the general aviation community has 
been such a strong advocate of continuing the fuel tax, is that 
we see it as a tremendous proxy for use of the system, and an 
enormously efficient way to pay for use. It captures aircraft 
weight, it captures distance flown, it captures the number of 
takeoffs, it provides a penalty if you fly into congested 
airspace because you're held at less-than-optimal altitudes, 
and often put in holding patterns--so we think it is the 
perfect way for general aviation to pay. And we look forward to 
working with this Committee to discuss the appropriate levels 
of that.
    Mr. May. Senator, a couple of additional points, if I may, 
I don't disagree with Mr. Bolen's description of the current 
environment.
    Going forward, we feel very strongly and, I think, as does 
the FAA, that you need to tie system income to use. There needs 
to be a cost-based allocation. In the Administration proposal, 
the fundamentals of that, the principles of that are 
incorporated. There are a lot of issues that need to be 
addressed. I don't think that rancher flying a piston-powered 
plane should be charged in the same way that the corporate 
aircraft is driven, or if you don't like the term corporate-
driven, it's a jet aircraft using the same airspace, flying 
Derek Jeter around, or anyone else. And, I think the FAA has 
shown quite clearly in its cost allocation exercise that you 
can distinguish between that class of folks that are in the 
aviation industry flying the piston-driven--especially those 
that are flying VFR flight rules--from those that are 
corporately owned and driven, that are flying at significant 
altitude, imposing on the system, if you will. As Mr. Forrey 
will probably tell you, I mean, it's fairly easy to tell who is 
being actively controlled in the system, and who is not.
    So, I think, going forward, we need to find a way, this 
Committee needs to find a way to distinguish between those 
different classes of users in the system, and to tie their 
contributions to the system to the use that they place. And I 
think that will be one of the fundamental challenges that we 
have, going forward.
    Mr. Forrey. Senator, as a system provider, I think the 
major concern for us is that there's enough money and funding 
to staff the system, to maintain the system, and to modernize 
the system.
    The question and problem with this Administration's 
proposal at this point in time is that it calls for user fees 
that don't provide the funding that the current system does 
right now, and so I don't know how we're going to modernize the 
system staff and maintain it, when you're talking about less 
funds.
    I don't know that it accurately excises the fees on the 
users in the proper manner, you know, it doesn't really point 
to that very clearly in the proposals, second.
    And third, I think that with--we're certainly open. I mean, 
we're concerned about making sure that we have the right 
equipment, the right staffing and the system is safe. That's 
what we're concerned about, and I don't know that it's 
necessarily in this proposal, when you talk about privatizing 
and user fees, that's what it looks like to us. So, that's our 
big, major concern with the Administration's proposal right 
now.
    Senator Thune. I thank the panel.
    Mr. Chairman, my time is well expired. Thank you.
    [The prepared statement of Senator Thune follows:]

 Prepared Statement of Hon. John Thune, U.S. Senator from South Dakota

    Chairman Rockefeller, Ranking Member Lott--Thank you for you 
holding this hearing today. Thank you to the witnesses for providing us 
your reaction to the FAA Reauthorization proposal and the reaction of 
the aviation system users that your organizations represent.
    Both general aviation and the airline industry are important to a 
rural state like mine. We have over 75,000 square miles of breathtaking 
landscape with, as Senator Burns used to say, ``a lot of dirt between 
light bulbs.'' Getting from point to point quickly often means that 
business owners, farmers, and ranchers get their pilot's license.
    Tourism is one of the largest industries in the western part of 
South Dakota. That means we obviously need a strong airline industry to 
get those visitors in and out of the Black Hills and other destinations 
in our state.
    Like each of the Senators on this committee we have a vested 
interest in both general aviation and commercial aviation. We need to 
make sure any changes we make to our system keep both of these segments 
strong.
    Thank you, again, for holding this hearing. I look forward to 
working with this committee along with the stakeholders represented 
here to produce a bill that strengthens our Nation's air transportation 
system.

    Senator Rockefeller. No, thank you, Senator Thune.
    Gentlemen, first of all, we need to have more of these 
hearings. Which is a vast inconvenience to all of you, and I 
appreciate that, but they've got to happen.
    Second, I want to say that, I think there's no way to put 
into words the way the American public, the American political 
process has underestimated, failed to understand, the 
revolution in technology, and maybe most importantly, the 
revolution in size of what the aviation industry has become. I 
can remember, not that long ago, in West Virginia, about 16 
percent of the people were flying. It's a lot more than that 
now. You talk about a billion people, I agree.
    That fact hasn't entered into the psychology of either the 
body politic, or the American body politic to cause movement. 
And, I just give a simple comparison--we've had a series of 
tragic events come to light at Walter Reed Hospital. Now, 
veterans have been around for a long time, and veterans have 
had difficulties, PTSD, and all kinds of things for a long, 
long time, going back to World War I and before, they just 
aren't--we don't have any people left from before.
    That, the newspaper writes some stories, and all of sudden 
the Nation is totally gripped, and they're gripped in a way 
that they should be. Because what they want to do is to reform, 
in a very complicated way, what is, in fact, the Nation's best 
healthcare system--particularly in terms of recordkeeping 
efficiency and the rest of it--which is the V.A. system, with 
vast inattention on the part of the military and the V.A., in 
fact, to our veterans.
    Now, it's extraordinary to me to compare those two. Within 
2 weeks, 25 Congressional hearings. Not even waiting to get 
rooms in Congress, but going out to Walter Reed. And here is 
something called the aviation system, which is just going like 
this in every single way. We're not keeping up with it. No 
Democratic Administration that I can think of, and no 
Republican Administration that I can think of has even begun to 
keep up with it. Because it does not engage the American psyche 
in an emotional or ``I am at risk''--it did, obviously, after 
9/11, but recovered, ``I am at risk,'' ``This affects me 
directly and absolutely, therefore I'm going to be part of this 
solution, no matter what I have to do.''
    That takes me to the floor process. I've talked with people 
who've said, ``All right, what you need to do, Senator 
Rockefeller, is to figure out what has to happen.'' And in 
modernization, obviously Senator Lott and the two Committee 
Chairmen, ``what has to happen, and what we have to do about 
it, and how it's going to be allocated.''
    The problem with that, is twofold. One, I can't go to the 
floor, to either Majority Leader Harry Reed, or Minority Leader 
Mitch McConnell, and say, ``I need a week at the end of July, 
so that we can debate out the various issues,'' I won't get 
that time. I won't get that time, even though we're expiring. 
Because their question is going to be, ``Is there a consensus? 
Is there the beginning of a consensus? Am I committing myself 
to a two and a half-week food fight?'' And that factor of not 
being able to get time is, in fact, ought to scare all of us a 
lot. I may be wrong in my judgment, but that's my reading of 
it.
    Because, when you've got Iraq Resolutions, and you've got 
all kinds of things going on, in a basically, chaotic 
situation, things fitting in at the time that they ought to be 
fitted in for discussion, vote and resolution doesn't turn out 
that way. And you all know the Senate.
    So, what I prize, enormously, is what I started out by 
saying. That there is, in fact, Senator Lott said he was 
disappointed, then he said he was optimistic. There was a lot 
of disagreement, but there was also, frankly, quite a lot of 
agreement on what I heard.
    I want to take the positive side, and lock it down with 
you, and others. And then we'll isolate what is difficult, and 
then we'll have our Quaker meeting. And, I think if we do that 
in a timely fashion, we'll get floor time. I think that if I 
were to ask any of you, what do you think that a modern air 
traffic control system ought to be, I don't think I'd get a 
whole lot of argument, would I?
    Mr. Alterman. No.
    Senator Rockefeller. I think you'd all agree on it. Well, 
that's called ``the big item.'' Not the only item, but the big 
item.
    How to pay for it, is a nasty item. But, it's not an 
insoluble item. In no way is it an insoluble item, and that 
comes through in some of the testimony which you all gave. Yes, 
you're going to hold onto what you got. Yes, there's going to 
be the 94 percent, and we only get 70 percent return--that's 
gotta be. That's the way the system works, it has to.
    But, behind that, I thought that I read--and Senator Lott 
said this to me, just before he left. That he thought he read 
in your body language a desire for this to work out. And that, 
in fact, if we get a set of principles that we can agree on 
which are fundamental to the advancement of this massive 9 
million employee industry, with--you know, as I often say, I 
love the interstate system, but I can't convince anybody to 
bring any kind of a business to West Virginia on an interstate 
highway, it's got to be through the air, commercial or general 
aviation. It's the only way.
    And so, I just want to say that I conclude this hearing 
with, in fact, a very good feeling. You're all people of good 
faith. You more than anybody, want this to work, because it's 
your life. You know, it's like, you think of people that have 
headed up various airlines, various associations, et cetera, I 
mean they're--cargo, it's what you do every day, all day.
    And so I want to be part of a solution on this, and I want 
to do it with you, and with others. And, I think that is 
entirely possible. I'm fully engaged in this. I have other 
things I have to do, sure, we all do. But this has to happen. 
And not just because of the timing of it, but because of the 
overwhelming magnitude of its force and power to do good, or if 
it doesn't work, to do damage, to America as a Nation.
    So, with those, somewhat less than Churchillian words, I 
thank you, sincerely, and I very much look forward to 
continuing this.
    Mr. Alterman. Thank you.
    Mr. Forrey. Thank you.
    Mr. Barclay. Thank you.
    Mr. May. Thank you.
    [Whereupon, at 11:15 a.m., the hearing was adjourned.]

                            A P P E N D I X

    Prepared Statement of Hon. Ted Stevens, U.S. Senator from Alaska

    Good morning, I'd like to thank Senator Rockefeller and Senator 
Lott for holding this hearing today.
    I am pleased to see we are moving ahead on this bill. I encourage 
the Committee to act quickly and work steadily toward finishing a 
committee product. There is limited time before the current 
authorization expires, and it is my preference to see this bill 
finished on time and in a bipartisan manner.
    I also have a personal interest in a FAA bill moving forward given 
that my state of Alaska depends on aviation more than any other state. 
Alaska's infrastructure and safety needs are significant. Over 70 
percent of our communities can be reached only by air. Alaska alone 
represents 20 percent of our national airspace, and is home to over 
20,000 pilots, nearly 10,000 registered aircraft, and over 250 
airports. In addition, we have Anchorage International Airport, one of 
the top cargo airports in the world. For these reasons, and many 
others, I am greatly interested in the future of our aviation system.
    The Committee needs to look ahead and provide a solution to a 
system that will have to accommodate growth in airline passengers and 
cargo, the innovation of unmanned aerial systems, and increased 
business jet traffic. Congress is going to have to make some tough 
decisions in order to meet projected increases in air traffic volumes, 
enhancement of the system's safety infrastructure, and increase the 
efficiency of the air traffic control system.
    We can no longer afford to simply maintain the status quo. While I 
am not convinced the entire system needs revamping, I do believe we 
need to provide a mechanism by which the air traffic control system can 
be modernized in a quick and efficient manner. The economic importance 
and safety improvements associated with a modern and efficient air 
transportation system are vast.
    It is important we concentrate our efforts on moving a bill 
forward, and in doing so, I will be focused on improving rural air 
service, cargo initiatives, and air traffic control modernization. I 
look forward to working with my colleagues on their priorities.
    Thank you, I look forward to the testimony.
                                 ______
                                 
    Prepared Statement of Bill Connors, Executive Director and COO, 
                  National Business Travel Association

    The National Business Travel Association (NBTA) applauds the 
Administration's efforts to enhance funding for the Federal Aviation 
Administration as part of the FAA reauthorization bill. Additionally, 
NBTA calls on Congress to move quickly on this critical issue so that 
work can begin on building a much-needed next generation air traffic 
control system.
    Business travelers count on an effective and efficient aviation 
system. Taking steps now to modernize and implement new technology is 
absolutely critical to smooth aviation operations in the years ahead. 
The time for Congress to act is now, particularly considering the 
strong growth in air travel that we all project over the coming years. 
Without needed investment, this already strained infrastructure will 
become unbearably congested.
    The new funding model proposed by the Administration is a 
thoughtful approach that merits thorough Congressional consideration. 
Shifting the economic burden for paying for aviation infrastructure 
from passengers to airplanes, while dramatically different from the 
current approach, may well be a better approach. Whatever formula is 
used to fund the aviation system of the future, we urge that formula to 
be fair and equitable and reflect the interests of consumers and the 
broad traveling public.
                                 ______
                                 
                                  Air Travelers Association
                                         Potomac, MD, March 7, 2007
Senator John D. Rockefeller IV,
Chairman of the Aviation Subcommittee,
Committee on Commerce, Science, and Transportation,
Washington, DC.

Re: Hearings on the Administration's Proposal to Reauthorize the 
            Federal Aviation Administration

    Dear Senator Rockefeller:

    I am President of the Air Travelers Association which advocates for 
airline passengers on airline safety, security, savings, and service.
    I support the Administration's call for a cost-based, user-
supported, air traffic management system. I believe that aviation taxes 
and fees must be adjusted so that airline passengers are no longer 
forced to subsidize the operation of corporate jets. Corporate 
executives, entertainers, real estate moguls, and other fat cats have 
been getting a free ride from airlines passengers for over 25 years and 
this must stop!
    According to the FAA's most recent analysis, airlines and their 
passengers use about 70 percent of the air traffic control costs yet 
contribute almost 95 percent of the revenue into the Airport and 
Airways Trust Fund that funds the system. Who benefits from this 
inequity . . . the users of Learjets, Gulfstream jets, Falcon jets, and 
the like. If they can afford these planes, believe me, they can afford 
the fair and equitable taxes and fees that go with using them.
    As airline passengers, we have been taxed, charged, and ``fee'd'' 
to excess. We pay the passenger ticket tax, passenger facility charges, 
flight segment fees, international flight taxes, and airline security 
fees, all of which can add up to more than 20 percent to 50 percent of 
an airline ticket. Without aviation tax reform this could get even 
higher and threaten the continued availability of low airfares.
    The ``air-limo'' crowd says that the airlines are just trying to 
shift the aviation tax burden to corporate jets. That's right! Aviation 
taxes should properly be shifted from airline passengers who have been 
overpaying for years to the corporate jet crowd that has been 
underpaying for years.
    All that passengers are asking is that corporate jets pay their 
fair and equitable share of what they use of the aviation system . . . 
no more, no less. Airline passengers have been footing the bill for 
corporate jets for too long, and it must stop.
            Respectfully submitted
                                         David S. Stempler,
                                                         President.
                                 ______
                                 
         Prepared Statement of Gregory Principato, President, 
             Airports Council International--North America

    Mr. Chairman, on behalf of Airports Council International--North 
America (ACI-NA) and our United States airport members and associate 
member companies, I want to thank you for the opportunity to submit 
this statement for the record. The mission of Airports Council 
International--North America (ACI-NA) is to advocate policies and 
provide services that strengthen the ability of air carrier airports to 
serve their passengers, customers and communities. ACI-NA is the 
largest airport-based association, representing local, regional and 
state governing bodies that own and operate commercial airports in the 
United States and Canada. ACI-NA member airports enplane more than 95 
percent of the domestic and virtually all the international airline 
passenger and cargo traffic in North America. Nearly 400 aviation-
related businesses are also members of ACI-NA.
    This year will be a critical year for aviation in the United 
States. On September 30 of this year, both the authorization for the 
Federal Aviation Administration's (FAA) programs and the taxes and fees 
that support those programs will expire. This provides an historic 
opportunity to make needed revisions to the way our national air 
transportation system is funded, developed, and operated. Many in the 
industry are calling this the most important reauthorization in 
decades, and we concur with this view.
    Air transportation has recovered from the tragic events of 
September 11, 2001 with passenger traffic and cargo volumes now 
surpassing pre-9/11 levels. This places many airports at or near 
capacity. The FAA predicts that by 2017, only 10 years away, the United 
States air transportation system will have to expand to accommodate 
1.07 billion passengers annually.\1\ This is a 45 percent increase over 
today's passenger levels. Cargo volume is also expected to grow at 5.2 
percent annually, resulting in 71.7 billion Revenue Ton Miles by 
2017,\2\ which represents a dramatic 83 percent increase over today's 
volume.
---------------------------------------------------------------------------
    \1\ Federal Aviation Administration, ``FAA Aerospace Forecast 
Fiscal Years 2006-2017'' .
    \2\ Ibid.
---------------------------------------------------------------------------
    Airports need to respond to the inevitable capacity strains 
associated with these higher traffic levels by building facilities that 
provide safe, secure, comfortable and environmentally compliant 
facilities for air travelers. With runway and other major capacity 
projects often taking upwards of 10 years to complete, it is clear that 
we need to take action now to be able to accommodate increasing demand.
    An assessment of airport capital needs is being completed by ACI-NA 
based on a 2006/2007 survey of U.S. airport operators. The preliminary 
results of this survey indicate that total capital development costs 
for all airports are approximately $17.5 billion per year from 2007 
through 2011, in current year dollars. This represents a 19.5 percent 
increase in annual capital needs from a similar survey conducted in 
2005 for the period 2005-2009.
    Last month, FAA released the Next Generation Air Transportation 
System Financing Act of 2007, proposing significant and challenging 
concepts to change the funding and investment policies of the airport 
and airways system and would affect our member airports throughout the 
United States. While the proposal provides an innovative framework to 
begin discussions, more work is necessary to ensure that funding for 
airports is properly conceived so that it meets growing demands for 
passenger and cargo service. ACI-NA and the airport community firmly 
believe that the five provisions below are critical for the future of 
U.S. airports and, therefore, must be included in any final FAA 
reauthorization bill enacted by Congress.

   The FAA and its programs should be funded by a stable and 
        predictable revenue stream that provides sufficient resources 
        for capital investments in the air traffic system. 
        Additionally, fees and/or taxes targeted to capital investment 
        accounts should be protected for their intended investment use.

   The FAA should be bolstered by a strong, guaranteed General 
        Fund contribution.

   The Passenger Facility Charge (PFC) ceiling must be 
        increased to $7.50.

   The PFC application process must be streamlined and 
        eligibility rules aligned with airport needs.

   The Airport Improvement Program (AIP) needs to be simplified 
        and funded at or above today's level.

Stable, Predictable Funding Stream
    FAA proposed changes to the current system of taxes and fees to a 
structure largely based on user fees that will require thorough 
explanation and justification. While ACI-NA has not taken a position on 
whether to retain the current system or to implement a user fee based 
system, we believe this discussion is appropriate as we must ensure 
that adequate funding is in place to pay for its capital programs, 
including AIP and an overdue program for air traffic modernization 
through the Facilities and Equipment, or F&E, budget account. As can be 
seen in the Figure 1, in recent years the strains on the Airport and 
Airways Trust Fund (AATF) combined with increases in FAA operational 
costs have put downward pressure on both AIP and the F&E capital 
accounts.



    The Administration's reauthorization proposal also includes a 
complete overhaul of the FAA's funding structure as follows:

   By FY 2009, most of the current excise taxes on passengers 
        and cargo would be eliminated, in favor of a system largely 
        based on new user fees.

   Along with this change, the proposal also includes a 
        restructuring of how the FAA classifies its obligations or 
        accounts.

   Rather than having a single large, multipurpose AATF, the 
        FAA would have separate accounts for the Air Traffic 
        Organization, Safety and Operations, and a smaller AATF for 
        traditional AIP and RE&D accounts.

    The table below describes the current account structure, the new 
account structure, and the revenue sources that would support each 
after transition is completed:

------------------------------------------------------------------------
      Old account              New account            Revenue source
------------------------------------------------------------------------
Operations               Air Traffic              User Fees, Gasoline
                          Organization (ATO)       Taxes and General
                                                   Fund.
Facilities & Equipment   Air Traffic              User Fees, Gasoline
                          Organization (ATO)       Taxes and General
                                                   Fund.
N/A                      Safety and Operations    Inspection,
                                                   Registration and
                                                   Certification Fees,
                                                   Gasoline Taxes and
                                                   General Fund.
AIP                      Revised AATF             International Arrival
                                                   and Departure Taxes,
                                                   Gasoline Taxes and
                                                   General Fund.
Research, Engineering &  Revised AATF             International Arrival
Development (RE&D)                                 and Departure Taxes,
                                                   Gasoline Taxes and
                                                   General Fund.
------------------------------------------------------------------------

    User fees collected from commercial airlines would be deposited 
into the new ATO account which would pay for most of the operating and 
capital costs of the ATC system. However, operating and capital 
expenditures appear to be interchangeable uses of the accounts and this 
may raise concerns, given that the growth of Operations has already 
been crowding-out funding for the capital equipment required for 
modernization.
    A 70.0 cents/gallon fuel tax to be paid by general aviation, 13.6 
cents/gallon commercial fuel tax, a variable General Fund contribution 
and $6.39 per person international arrival/departure tax are proposed 
as the revenue sources for the revised AATF, which would fund AIP and a 
host of other FAA needs. ACI-NA is very concerned about the ability of 
this system to fund a robust AIP, as well as FAA's other programs 
proposed to be financed from this account. We are currently evaluating 
the financial viability of this proposal using an AATF simulation and 
forecasting model ACI-NA has developed in preparation for the 
reauthorization debate.

Strong, Guaranteed General Fund Contribution
    Over the past 25 years, the General Fund contribution to the FAA 
has been unpredictable year-to-year, and steadily declining in the long 
term (Figure 2). ACI-NA is concerned that the proposed General Fund 
contribution contained in the Administration's proposal does not 
adequately reflect these benefits to the general public and should be 
significantly increased.



PFC Ceiling Must Be Raised to $7.50
    The current PFC ceiling of $4.50 has not been raised since 2000. In 
that time, construction cost inflation has stripped the PFC of much of 
its value. While the Administration recommends that the PFC ceiling be 
adjusted to $6.00, that level is not sufficient to offset the combined 
effects of (1) the deflated value of the current PFC, (2) the proposed 
elimination of AIP passenger entitlements at large-hub and medium-hub 
airports, and (3) increased capital needs faced by airports.
    Analysis conducted by ACI-NA shows that the $4.50 PFC is worth only 
$2.86 in 2007 when the effects of construction cost inflation are 
applied. In order to recapture the lost value of the PFC, the ceiling 
must be raised to $7.50 and indexed to prevent future erosion. Figure 3 
shows the effects of construction cost inflation when applied to the 
PFC.



Streamline the PFC Process and Clarify Eligibility Rules
    PFCs were enacted by Congress in 1990 and over the last 16 years, 
they have become a cornerstone of airport capital programs. Many of the 
administrative procedures governing the original program are now 
obsolete and burdensome given that the PFC program has fully matured 
and is an essential element of airport financial planning. The current 
application process takes at least 6 months and countless FAA and 
airport staff hours to complete (Figure 4).



    Similar to ACI-NA's ``Impose, Report and Review'' recommendation 
for streamlining the PFC application process, the Administration 
proposes to allow airports to notify carriers and their local community 
of initiatives under their PFC program and then begin collecting a PFC. 
An annual report on both ongoing and new projects would be required, 
laying out costs, intended uses, and estimated PFC collections. This 
proposed system would also ensure that FAA could stop a collection if 
such action is warranted under Federal regulations.
    PFC eligibility rules must also be clarified and simplified. 
Today's eligibility rules leave much to the discretion of the various 
FAA offices leading to a patchwork set of rules leading to differential 
treatment in FAA's regions. This has resulted in added costs and 
confusion as to how PFC eligibility is determined. A project or project 
element in one region may be deemed eligible, while a similar project 
in a neighboring region may be deemed ineligible. Such a discretionary 
system does not serve the traveling public.
    The Administration proposes to treat PFC revenues more like airport 
capital, expanding eligibility considerably and simplifying what can be 
a lengthy and tedious process to determine eligible from non-eligible 
uses (especially in a passenger terminal) and ACI-NA supports these 
proposed changes. To clarify the new process, the FAA is proposing a 
reasonable system that if the project is an eligible use of airport 
capital and it is not anti-competitive, then the project would be 
eligible to be funded by PFCs. This promotes local decision-making and 
allows airports to meet local needs. The new eligibility rules would 
also eliminate the different eligibility criteria for PFC levels above 
$3.00, which is widely supported by the airport community.

Strengthen and Increase AIP
    A balanced capital investment strategy for a system of airports 
requires a strong AIP program. Therefore, the Administration's 
recommended funding levels for the next 3 years of $2.75B (FY 2008), 
$2.90B (FY 2009) and $3.05B (FY 2010) are not adequate. AIP must be 
reauthorized at current or higher levels to ensure that adequate 
funding is available, especially for smaller airports that depend on 
this program to fund important infrastructure improvements.
    ACI-NA is pleased that the proposed new AIP structure will provide 
a more direct approach to providing additional funding to the smaller 
airports that need it most (Figure 5), with more predictability of 
funding. The new structure also is designed to ensure that as AIP 
funding grows, more funds would be available in the discretionary fund 
for FAA's Letter of Intent program, which ACI-NA believes should grow 
significantly, as well as for other important projects that expand 
capacity and improve safety in the national airport system.



    FAA proposes to eliminate the Small Airport Fund, which has been 
funded by PFC ``turnbacks'' from large and medium hubs, replacing it 
with a Small Airport Discretionary Fund. This Fund, providing a 20 
percent small airport discretionary fund set-aside for all airports 
below the level of medium-hub, would be smaller than the old Small 
Airport Fund under the funding levels proposed in the Administration's 
bill. However, the approach would provide a more predictable funding 
source since the only variable affecting the funding amount is the size 
of the annual AIP appropriation, rather than the choices of larger 
airports and their PFC programs. Small airports would also still be 
able to compete for the project funding in the other, now increased, 
discretionary fund.
    While large and medium airports are willing to forego AIP 
entitlements in Fiscal Year 2010 if an increased PFC ceiling is 
approved, there is concern that a small increase in passenger traffic--
as little as one flight a day--would result in a small hub airport 
being re-designated as a medium hub and losing AIP entitlements. 
Therefore, Congress should amend this provision to require that the 
designation of medium hub airport be effective for 3 years prior to the 
airport being required to forego AIP entitlements.
    FAA also proposes to repeal the ``$3.2 billion trigger,'' the 
program currently in place to provide airports below the level of 
medium hubs a fixed, formula-based entitlement each year. ACI-NA 
supports this change as primary airports would no longer annually face 
the risk of a 50 percent reduction in entitlements and non-primary 
airports would not lose all entitlements should the appropriated level 
of AIP fall below $3.2 billion in any particular year. This provides 
more predictability when airports are planning their capital programs.
    ACI-NA strongly supports the proposed increase in the minimum 
amount in the Discretionary Fund. Under the Administration proposal, 
that amount would be raised to $520 million. The previous minimum was 
$148 million plus an amount calculated based on Letter of Intent (LOI) 
payments prior to 1996. ACI-NA believes that the proposed elimination 
of passenger entitlement funds at large-hub and medium-hub airports 
should be balanced with a corresponding increase in discretionary funds 
thereby allowing these funds to facilitate those projects that make the 
greatest contribution to improving system capacity for the benefit of 
all stakeholders.
    In conclusion, airport capital needs are growing and we must act 
now to meet these demands. Increased airport capacity is critical for a 
safe, efficient and successful aviation system. Congress in 
reauthorizing FAA has an excellent opportunity to improve and modernize 
the public-private system for funding airport infrastructure. In order 
for that to be a success, the FAA reauthorization bill must include the 
five critical elements discussed above.
                                 ______
                                 
     Response to Written Question Submitted by Hon. John Thune to 
                          Stephen A. Alterman

    Question. Can you give the Committee your thoughts on the new 
governance board in the FAA proposal? Do you think the board would 
represent your interests well? Do you think that the board would take 
away too much authority from Congress?
    Answer. Assuming that a revamped Advisory Board is deemed necessary 
under a reauthorized Federal Aviation Administration, the Cargo Airline 
Association submits that the Air Transportation System Advisory Board 
proposed in section 401 of the FAA's Next Generation Air Transportation 
System Financing Reform Act of 2007 does not adequately represent the 
interests of individual members of the aviation community.
    In support of this position, the following comments are offered:

   Board Membership--The proposed Board would consist of 13 
        members drawn from a diverse group of interests. From a purely 
        ``cargo airline'' perspective, having one seat on a 13-member 
        Board provides little opportunity for influence. In addition, 
        there would be three members with a ``fiduciary responsibility 
        to represent the public interest.'' While fairness to all 
        segments of the aviation community probably dictates this broad 
        membership, it appears unlikely that any real consensus could 
        possibly be forthcoming from this sizable and diverse group.

   In addition, the proposed Board has no real power to 
        influence decisions and is purely advisory, leaving the 
        Administrator with complete power to set fees at will, with 
        virtually no oversight from Congress.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                             Patrick Forrey

    Question 1. There has been concern raised over the level of 
controllers at the FAA. Do you believe the FAA has enough controllers 
right now?
    Answer. Mr. Chairman, no we do not have enough controllers in the 
system right now. We are down over a thousand controllers since 1998. 
At the conclusion of the 1998 contract, the FAA and NATCA agreed on 
15,606 air traffic controllers. Today we have onboard 14,500 of which 
only 11,450 are certified professional controllers.

    Question 1a. Has the FAA acted quickly enough to address the 
pending retirement wave?
    Answer. No, the FAA is not hiring enough to address the current 
controller retirement wave. Here are just a couple of examples. Dallas-
Fort Worth TRACON has 68 fully certified controllers on staff, along 
with 14 in training, including three with military controller 
experience. Combined with two controllers currently out on extended 
medical leave, there are 84 on staff. Controllers believe there should 
be 117, the number the FAA agreed was needed to safely and efficiently 
run the facility before the agency arbitrarily replaced in March with a 
new ``range'' of 83 to 101 that was not backed up by any study or proof 
that it met traffic demands.
    At Atlanta Terminal Radar Approach Control (TRACON) the facility is 
so short-staffed that the FAA management officials were forced to spend 
approximately $865,000 in overtime from January to March of this year 
to cover for staffing shortages, nearly seven times the amount of 
overtime spent in the same three-month period in 2006.

    Question 1b. Is the FAA now hiring enough controllers to meet its 
future needs?
    Answer. The FAA employs more than 14,500 air traffic controllers. 
They safely guide about 50,000 aircraft through the system each day. 
These employees provide air navigation services to aircraft in the U.S. 
domestic airspace, and in the 24.6 million square miles of 
international oceanic airspace delegated to the U.S. by the 
International Civil Aviation Organization.
    In FY 2006, there were 583 controller retirements, which were 116 
more than the FAA anticipated. The FAA has underestimated retirements 
by 25 percent over the last 3 years.
    Despite numerous public statements that the FAA is having no 
trouble attracting qualified candidates to enter the air traffic 
control profession, the FAA is now offering $20,000 ``recruitment 
incentive'' for applicants that have previous air traffic control 
experience, indicating the agency's apparent inability to overcome a 
staffing shortage by simply hiring candidates off the street using 
MySpace and Facebook solicitations.

    Question 1c. What have the controller levels been over the past 10 
years? Relative to workload? Relative to safety levels?
    Answer. During FY00 bargaining unit employees (air traffic 
controllers) numbered 14,904. The number rose to 15,386 by FY 2003. 
During the next 4 years the number of controllers dropped to 14,500. 
During that time we have had the safest system without a major 
accident. The National Transportation Safety Board in their recent 
report stated that controller fatigue is becoming a serious issue. 
Current FAA regulations and policies place limits on controller work 
schedules, but they do not adequately consider the potential impact of 
work scheduling on fatigue and performance.

    Question 2. During the year, we have heard a number of concerns 
regarding the Administration's implementation of the new work and pay 
rules. What are the main concerns/issues that are raised regarding the 
new pay/work rules?
    Answer. What has happened on pay is that the FAA has created a two 
tier pay system. Current controllers will not receive another pay raise 
and the new hires will be paid 30 percent less than the current 
workforce. The current workforce by the new pay rules will not be 
adding money to their base pay thus not adding to their Federal 
retirement. That is why we have seen a 25 percent increase in air 
traffic controller retirement according to Administrator Blakey.

    Question 2a. Have there been efforts by the FAA and/or NATCA to 
resolve these issues short of reopening contract negotiations?
    Answer. When Pat Forrey became President of the National Air 
Traffic Controllers Association (NATCA) he went to the Administrator to 
see if both sides could resume contract negotiations. The 
Administrator, after a number of meetings, both by phone and in person, 
did not want to open the imposed work and pay rules. This is after the 
union offered $1.6 billion in cost saving. Chairman Costello and 
Chairman Oberstar worked for 3 weeks to bring both sides to the table. 
They were not successful. The FAA did not want to move away for 
lowering the pay bands. That was their bottom line.
    Since the FAA is unwilling to go back to the table we cannot 
address the outstanding issues such as the dress code, leave scheduling 
and the other 21 articles NATCA and the FAA did not come to an 
agreement on.

    Question 3. Obviously air traffic controllers are the key component 
to our air traffic management system, and a continued record of safety 
excellence. Modernization of the air traffic management has progressed, 
to what extent have air traffic controllers been involved?
    Answer. In the early 1990s during the development of the standard 
terminal automation replacement system (STARS) the FAA severely limited 
controller input, which resulted in significant cost overruns and 
schedule delays. Because of what happened to the STARS program. The 
Clinton Administration under FAA Administrator Jane Garvey brought in 
35 air traffic controllers to aid the FAA on the deployment of new 
technology. This was a very successful program.
    Administrator Blakey disbanded this collaboration effort and sent 
all of the air traffic controller's home.

  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                  Charles ``Chip'' M. Barclay, A.A.E.

    Question 1. Funding for the AIP program is proposed to be cut 
significantly. However the FAA states this will be offset by PFC 
increases. How is this likely to affect capital projects at airports?
    Answer. The Administration is proposing $2.75 billion for AIP in 
FY08--approximately $1 billion less than the amount Congress authorized 
in FY07 and $765 million less than the appropriated level. The 
Administration argues that raising the cap to $6.00 would generate 
approximately $1.2 billion and offset the proposed cut in AIP funding.
    In other words, the Administration's proposal to raise the cap on 
PFCs would merely generate enough money to offset the proposed AIP cut. 
When it comes to airport capital development projects, maintaining the 
status quo is simply not enough. As you know, passenger enplanements 
are expected to increase from about 740 million to 1 billion by 2015, 
and flight delays are back to pre-9/11 levels. With increasing 
passenger levels, increasing delays and increasing constructing costs, 
it is critical that Congress increase AIP funding and raise the cap on 
PFCs.
    We are urging Congress to reject the Administration's proposal to 
drastically cut AIP funding and roll back the progress made in AIR-21 
and Vision 100. Instead, we recommend that Congress increase AIP 
funding to at least $3.8 billion for AIP in FY08, $4 billion in FY09, 
$4.1 billion in FY10, and $4.3 billion in FY11. This would be enough to 
allow AIP funding to keep up with increasing construction costs. We 
also recommend that Congress raise the PFC cap to $7.50 and index it 
for increasing construction costs. Both actions would help provide 
airports with the resources they need to meet increasing demand and 
help reduce delays.

    Question 2. The FAA's reauthorization proposal includes a provision 
to expand the types of projects eligible for AIP/PFC funding--
specifically navigational aids (NavAids) that have traditionally been 
covered by other funding sources. What's your position on expanding 
AIP/PFC eligibility to include NavAids?
    Answer. We are concerned about the Administration's proposal to 
have airports take over navigational aid systems (NavAids). The 
Administration's proposal would authorize ``a new pilot program 
permitting the FAA to transfer to up to 10 medium or large hub airports 
terminal area navigational equipment, such as instrument landing 
systems and approach lighting systems.'' Airports that participate in 
the program would be able to charge a $7.00 PFC. In return, airports 
would agree to ``operate and maintain all of the covered equipment at 
the airport in accordance with FAA standards, allow periodic 
inspections, and replace the equipment when needed.''
    Many airports are concerned that the Administration's proposal is 
simply an effort to shift their operating costs onto airports at a time 
when airports need more money for their own capital development needs. 
Even those airports that may be willing to participate in such a pilot 
program in exchange for being able to collect a higher PFC would much 
prefer that Congress raise the cap to $7.50 without the NavAid 
requirement instead. Doing so would help airports prepare for 
increasing demand and to help offset increasing construction costs.
    Separately, we oppose the Administration's proposal to allow 
airports and other sponsors to use AIP funding to acquire Automatic 
Dependent Surveillance-Broadcast (ADS-B) equipment. We support the ADS-
B program. However, the FAA should use money from the Facilities and 
Equipment account to pay for ADS-B--not AIP--especially at time when 
the Administration is proposing to cut AIP funding by almost $1 
billion.

    Question 3. The Administration proposes to increase the PFC limits. 
How much additional funding is this likely to bring to airports?

    Question 3a. Which airports are likely to benefit from this?

    Question 3b. If AIP is cut, but PFCs increased, are there 
guarantees to ensure the smaller amount of AIP funding is directed to 
smaller airports?

    Answer to Questions 3-3b. According to the FAA, raising the PFC cap 
from $4.50 to $6.00 would generate approximately $1.2 billion. Although 
this is a welcome step in the right direction, AAAE recommends that 
Congress increase the cap to $7.50 to help commercial service airports 
of all sizes keep up with increased construction costs to prepare for 
increasing demand.
    Airports of all sizes would benefit from increasing the cap on 
PFCs. For instance, many small airports use PFC revenue to pay for 
capital development projects at their facilities and to help pay their 
local match for AIP projects. According to the FAA, there are about 300 
small airports collecting PFCs (including 3 airports in Hawaii), and 
about 218 of those small airports collect PFCs at the $4.50 level.
    Large airports traditionally rely more on PFCs and airport bonds to 
finance capital development projects than their counterparts at smaller 
airports. According to the FAA, 68 large and medium hub airports 
collect PFCs (including 2 airports in Hawaii), and 50 of those airports 
are approved to collect PFCs at the $4.50 level.
    In addition to increasing the cap on PFCs to $6.00, the 
Administration is proposing to cut AIP by almost $1 billion from the 
authorized level. Although the Administration is proposing to phase out 
AIP entitlements to large and medium hub airports, we are concerned 
that the Administration's proposal would actually make less money 
available to small airports. The Administration's suggested formula 
change coupled with its proposal to cut the AIP funding to $2.75 
billion would cost small airports approximately $430 million in FY08. 
Rather than cutting funds for those airports that rely on AIP the most, 
we strongly believe that Congress should increase AIP funding and that 
small airports should be ``held harmless'' by any proposed formula 
changes.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Thomas R. Carper to 
                  Charles ``Chip'' M. Barclay, A.A.E.

    Question 1. Noise impacts are becoming a big problem for many 
communities. As a result, airport expansions are meeting with greater 
and greater opposition. This is at a time when most of the witnesses 
today are talking about the necessity of expanding airports to address 
congestion. How does the FAA plan help airports and the airlines reduce 
noise impacts on surrounding neighborhoods? What can Congress do to 
help decrease noise and support quieter aircraft to prevent this from 
being a road block to needed capacity expansions?
    Answer. Airport operators have long been concerned about aircraft 
noise and continue to work hard to reduce noise around their 
facilities. Congress could help airports mitigate aircraft noise by 
increasing the cap on Passenger Facility Charges (PFCs) from $4.50 to 
$7.50. When Congress created the PFC program in 1990, one of the 
primary purposes of the program was to help reduce aircraft nose. Since 
then, the FAA has approved about $2.8 billion in PFCs for noise 
projects. Increasing the PFC cap to $7.50 would make more money 
available for airports to spend on noise mitigation projects such as 
soundproofing nearby schools and homes. Increasing the cap on PFCs 
would also help airports accommodate skyrocketing construction costs 
and increasing demand.
    Congress could also reduce aircraft noise by phasing out noisy 
Stage 1 and Stage 2 aircraft. Some airport representatives are 
recommending that lawmakers include a provision in the next FAA 
reauthorization that would require all Stage 1 and Stage 2 aircraft to 
cease operations in the 48 states 3 years after the bill is enacted 
into law. We support that proposal.

    Question 2. One factor that impacts the cost of air travel for many 
people is the cost of transportation to the airport. Here in D.C., 
there is a stark difference in the cost of travel to Reagan National, 
BWI and Dulles based on the availability of transit or intercity 
passenger rail. In Delaware, people use both Philadelphia and BWI 
because they are both accessible by either transit, Amtrak or both. How 
should airports work with local surface transportation authorities to 
address this? What could be done to better connect airports to 
population centers by rail?
    Answer. Raising the PFC cap and increasing Airport Improvement 
Program (AIP) funding would improve access to airports since airports 
are allowed to use both sources of revenue on rail service to their 
facilities. There are numerous restrictions. For instance, the rail 
line must be on airport property or within a right-of-way acquired by 
the airport. To date, the FAA has approved about $3 billion in PFCs for 
access to airports, and approximately $2 billion of that amount has 
been approved for rail projects. Raising the cap on PFCs to $7.50 and 
indexing it to increased construction costs would make more funding 
available for rail projects. Increasing AIP funding to $3.8 billion in 
FY08 and increasing that amount incrementally would also make more 
money available for airport access projects.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John Thune to 
                  Charles ``Chip'' M. Barclay, A.A.E.

    Question 1. As you know there is a Passenger Facility Charge 
increase in this administration's proposal from $4.50 up to $7.00 per 
enplanement in some cases. I like the idea of giving local airports 
greater flexibility in making capital improvements the local 
communities deem as necessary. But will this increase in the PFC fee 
per segment have a larger impact on passengers who often fly in and out 
of smaller destinations that nearly always require two or more legs on 
the trip? Are there any alternative options that don't have a magnified 
impact on rural destinations?
    Answer. Under current law, a PFC may not be collected from a 
passenger for more than two boardings on a one-way trip. In other 
words, passengers may be charged a maximum of $9.00 for each one-way 
trip or $18.00 for each round-trip. The Administration is proposing to 
raise the cap on PFCs to $6.00 in most cases and keep the current two-
fee limit in place. So, passengers may be charged a maximum of $12.00 
for a one-way trip or $24.00 for a round-trip unless one of the 
airports happens to participate in a PFC pilot program.
    It is also important to point out that small airports in South 
Dakota and throughout the country would benefit from a higher PFC. For 
instance, Rapid City, Pierre and Aberdeen currently collect $4.50 PFCs. 
If the cap on PFCs is raised to $6.00 or to higher amount airports 
would be able to generate more revenue for important safety and 
security projects at their facilities.
    Even small airports in South Dakota that don't collect PFCs at 
their own facilities benefit from the PFC program. That's because large 
and medium hub airports that collect PFCs have a portion of their 
Airport Improvement Program entitlements withheld. (Large and medium 
hubs that collect $4.50 PFCs have 75 percent of their entitlements 
withheld.) Current law requires that 87.5 percent of those withheld 
funds be distributed to small airports through the Small Airport Fund. 
Small airports are expected to receive about $427 million from the 
Small Airport Fund this year.
    Finally, the Administration's proposal to raise the cap on PFCs to 
$6.00 is a welcome step in the right direction. But the American 
Association of Airport Executives and the Airport Legislative Alliance 
are recommending that Congress increase the cap on PFCs to $7.50 in 
order to offset the impacts of inflation and skyrocketing construction 
costs. By 2010--the final year in the Administration's FAA 
reauthorization proposal--a $4.50 PFC would need to be raised to $7.14 
to keep up with inflation and to $8.03 to keep up with increased 
construction costs. Moreover, it is critical that airports be able to 
build the infrastructure they need to accommodate increasing demand and 
to help prevent delays.

    Question 2. Can you give the Committee your thoughts on the new 
governance board in the FAA proposal? Do you think the board would 
represent your interests well? Do you think that the board would take 
away too much authority from Congress?
    Answer. The FAA is proposing an Air Transportation System Advisory 
Board. The Board would be comprised of 13 members:

   FAA Administrator;

   Department of Defense representative;

   3 members ``who shall have a fiduciary responsibility to 
        represent the public interest;'' and

     8 members representing aviation interests:

     1 airport representative;

     1 major air carrier representative;

     1 national air carrier representative;

     1 regional air carrier representative;

     1 cargo representative;

     1 general aviation representative;

     1 business aviation representative; and

     1 aviation manufacturing representative.

    It is my understanding that the board is dominated by airline and 
general aviation representatives, in part, because the panel would make 
recommendations on the type and level of user fees that aircraft owners 
and operators would be required to pay for air traffic control 
services. Nonetheless, some have questioned whether one airport 
representative is enough and that it may be more appropriate to have 
one airport representative from each hub size instead.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                              James C. May

    Question 1. I am concerned about how the FAA proposal will affect 
air carriers in my home state, Hawaii. Aloha and Hawaiian have served 
our people for many years. Given the unique air traffic conditions and 
needs in Hawaii, can you give me some assurance that these carriers 
will not be left at a competitive disadvantage with other carriers 
under a user fee system.
    Answer. I want to preface my answer with a general comment about 
the administration's reauthorization bill, which was submitted to the 
President of the Senate on February 14, 2007, by the Honorable Mary E. 
Peters, U.S. Secretary of Transportation. The Air Transport Association 
(ATA) has stated that the administration's bill was a good start on a 
number of very important issues. However, ATA expressed significant 
reservations right from the beginning regarding some of its provisions. 
For example, I testified on March 8 before your Committee noting that 
small communities have unique air service needs and that 
reauthorization legislation should recognize those needs in its funding 
and Essential Air Service Program provisions. The FAA bill, 
unfortunately, did not support strong funding for Essential Air Service 
provisions.
    I further noted at that hearing that, ``Air transportation is an 
indispensable element of America's infrastructure and our Nation's 
economic well-being. Individuals, businesses and communities depend on 
the national air transportation system.'' The ATA is seeking a 
reauthorization that assures the continuation and expansion of that 
system, so that all areas of the country enjoy the benefits of air 
service. We do not want any area of our Nation disadvantaged in such 
legislation.

    Question 2. FAA proposes dividing airports into 3 categories, and 
levying different terminal fees on flights using the 2 busiest 
categories of airports to cover the costs of air traffic control 
services associated with those airports. What's your position on the 
proposal? How about congestion fees? How are these market measures 
likely to affect access for small communities to large hubs?
    Answer. The ATA appreciates the manner in which you, Chairman 
Rockefeller, Co-Chairman Stevens and Ranking Member Lott have handled 
these issues. Under the current funding system, airline passengers 
subsidize corporate aircraft using the same ATC services, so any 
proposal that calls for business aviation to pay more of its fair share 
is a step in the right direction.
    The commercial hub-and-spoke system has been critical to small 
community air service. The reason for this is that as flights from 
smaller cities arrive at hubs, passengers can be combined into flights 
back to smaller cities or on to other final destinations--both domestic 
and international. Congestion fees that do not apply equally to 
corporate aircraft simply add to the problem instead of reducing 
congestion. It is important to recognize that congestion at hubs takes 
place in the airspace as well as on the runways. Corporate jets 
contribute to the congestion at hubs by using the same airspace, even 
when they are not using the hub airport. For example, corporate 
aircraft flying into Teterboro Airport, just six miles from Newark 
International Airport, compete with Newark departures since the two 
airports share common airspace. Therefore, even aircraft that are not 
using the hub-and-spoke system help to drive the cost of providing ATC 
services to hub airports. If all system users--commercial and corporate 
aircraft--pay for the ATC services they use, that system will be 
strengthened.
    In addition to funding for the Essential Air Service program 
mentioned above, ATA believes that an important way to improve service 
to and from small communities is to provide stable funding for the 
next-generation ATC system.

    Question 3. Is it accurate to say that the Administration's 
proposal is designed to have smaller airlines that connect thru hubs 
pay the most proportionately?
    Answer. I believe that my answers to your second and fourth 
question address the matters you raise in this question.

    Question 4. It would be unfair to have the one-quarter of 
passengers who currently fly on regional airlines pay more because they 
live in rural communities where the smaller airline might be the only 
option. How would any plan that you support address that?
    Answer. The issue is not whether regional airlines should pay more 
or less relative to their mainline airline partners, but whether their 
passengers should continue to subsidize corporate and private jets. 
Under the current system, a regional jet may pay many times more than a 
similarly-sized private jet through passenger ticket taxes and segment 
fees, even though it imposes the same costs on the ATC system. A more 
equitable funding scheme will benefit all airline passengers by 
shifting some of that burden to other users of the system who can well 
afford to pay for it.
    In addition, I have indicated to this Committee that the 
significant increase in the Passenger Facility Charge (PFC) proposed in 
the administration's bill would disproportionately affect small 
communities. Thus, the ATA is very pleased with the manner in which you 
have handled that issue in your reauthorization bill with Senators 
Stevens, Rockefeller and Lott.
    The ATA opposed that aspect of the administration's bill because 
most travel to or from small communities involves a connecting flight; 
those passengers frequently would have to pay the administration's 
proposed higher PFC twice for each direction of a round-trip flight. 
For example, urban passengers flying between major cities would have 
more nonstop options and more likely would have to pay the PFC only 
once for each direction. Thus, on a round-trip basis, passengers from 
smaller communities would pay $14.00 more than nonstop passengers if 
the PFC increases from $4.50 to $7.00 per segment. Passengers from 
smaller communities would be disproportionately affected by this 
proposed increase because, in most cases, they will be on connecting 
flights.
    As you know, PFCs are a tax on both passengers and airlines; while 
they are imposed on passengers, the airlines collect them as part of 
the price of a ticket. It is well accepted that PFCs affect the revenue 
airlines earn. Moreover, you should understand that the local community 
has virtually no say in PFCs and the projects they fund since that is 
an airport decision. If PFCs were collected separately at the airport 
and not included in the price of an airline ticket, local 
accountability and transparency for PFC projects would occur and should 
achieve the goals of local community involvement that you noted in your 
question.
    As I have said to this Committee, our concerns about these 
increases in costs to our customers apply not only to PFCs. The total 
fees and taxes paid by passengers flying out of rural communities is 
proportionally more than would be the case for passengers flying out of 
middle-sized or larger cities. A family of four flying from a rural 
airport, then connecting through a hub, and then getting to their 
destination, and back, would face multiple PFCs, segment fees and 
security fees. For that family of four, there could be as much as $150 
to $160 in fees and taxes.
    Your bill has addressed the ATA concerns because you have not 
called for increases in PFCs except for permitting increases that the 
airlines would not collect regarding six pilot studies.
                                 ______
                                 
 Response to Written Question Submitted by Hon. Frank R. Lautenberg to 
                              James C. May

    Question. Current law caps the number of aviation security 
screeners that the Transportation Security Administration may hire at 
45,000, regardless of the agency's budget. I've suggested the first 
thing we need to do in order to fully staff the TSA and keep airline 
passenger security lines to a minimum is to remove this arbitrary cap 
of 45 thousand security screeners. Do you agree Congress should remove 
the cap and fund the agency's staffing needs to an appropriate level?
    Answer. The simple answer is that the Transportation Security 
Administration should be given all the resources it needs to implement, 
in the most efficient and effective way, the Congressional mandates in 
the Aviation Transportation and Security Act (ATSA). In ATSA, Congress 
very clearly required the Federal Government to provide for the 
screening of all passengers and property, including cargo, carried on 
passenger aircraft. In fact, Congress specifically required that the 
screening ``shall be carried out by a Federal Government Employee.''
    The security issues facing America and the Department of Homeland 
Security are very significant. Indeed, the Comptroller General of the 
United States submitted testimony on February 7, 2007, to the Congress 
on the security challenges facing this country and the DHS. With 
respects to all modes of travel, GAO complemented DHS by saying that 
progress has been made ``particularly in aviation'' and that ``DHS and 
TSA have taken numerous actions to strengthen commercial aviation 
security, including strengthening passenger and baggage screening, 
improving aspects of air cargo security, and strengthening the security 
of international flights and passengers bound for the United States.''
    That GAO testimony praised TSA for using covert testing and other 
means to measure effectiveness of airport screening systems and for 
working to enhance passenger and baggage screener training. GAO also 
noted that TSA has modified airport screening procedures based on risk. 
On the negative side, GAO said that TSA continues to face challenges in 
implementing a program to match domestic airline passenger information 
against terrorist watch lists and in ``fielding needed technologies to 
screen airline passengers for explosives.''
    The GAO did raise an across-the-board criticism of DHS for not 
basing program investments on risk analysis. I believe the more 
detailed answer to your question depends on a thorough risk-analysis of 
all facets of the security problems facing this Nation. Since the air 
transport industry represents only one segment of the full picture, I 
would propose that the Congress undertake to hold hearings on the 
matter you raised so that all the security needs of the U.S. could 
properly be balanced before a decision is made as to whether to raise 
that cap, or not.
    TSA has come a long way in just a few years and is doing an 
effective job of ensuring the security of our air transport system 
within the budget provided by the Congress. TSA has been coordinating 
with the Air Transport Association. The ATA and our member airlines 
will continue to work with the TSA to address new security concerns and 
to look for additional ways to improve the experience of airline 
passengers.
                                 ______
                                 
  Response to Written Question Submitted by Hon. Thomas R. Carper to 
                              James C. May

    Question. Noise impacts are becoming a big problem for many 
communities. As a result, airport expansions are meeting with greater 
and greater opposition. This is at a time when most of the witnesses 
today are talking about the necessity of expanding airports to address 
congestion. How does the FAA plan help airports and the airlines reduce 
noise impacts on surrounding neighborhoods? What can Congress do to 
help decrease noise and support quieter aircraft to prevent this from 
being a roadblock to needed capacity expansions?
    Answer. The ATA is concerned about the noise impacts of airports on 
communities, and our member airlines have been working to address those 
issues. First of all, airlines have been investing in newer aircraft, 
which are designed to produce less noise, and our member airlines will 
continue to do so. Further investments of General Funds by Congress in 
additional noise-reduction research would be very helpful in this 
effort.
    Second, Congressional support for the Next Gneration Air Traffic 
Control System will provide noise-reduction benefits by permitting 
descent routes into airports and more precise routing in a manner that 
minimizes the impact of noise on neighboring communities.
    The FAA and the ATA, in addition, support reasonable noise-
mitigation efforts for homeowners living near airports. The ATA and its 
member airlines are ready to work with you and this important matter.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John Thune to 
                              James C. May

    Question 1. As you know there is a Passenger Facility Charge 
increase in this administration's proposal--from $4.50 to as much as 
$7.00 per enplanement in some cases. I like the idea of giving local 
airports greater flexibility in making capital improvements that the 
local communities deem as necessary. But will this increase in the PFC 
fee per segment have a larger impact on passengers who often fly in and 
out of smaller destinations that nearly always require two or more legs 
on the trip? Are there any alternative options that don't have a 
magnified impact on rural destinations?
    Answer. A PFC is a tax imposed on passengers who may not live or 
vote in the jurisdiction that levies it. This is especially true in the 
case of connecting passengers, who are literally ``passing through'' 
and have no business or community ties to the governmental entity that 
operates the connecting airport.
    The significant increase in the Passenger Facility Charge (PFC) 
proposed in the Administration's bill would somewhat disproportionately 
affect small communities. Because most travel to or from small 
communities involves a connecting flight, those passengers frequently 
would have to pay the proposed higher PFC twice for each direction of a 
round-trip flight. For example, urban passengers flying between major 
cities would have more nonstop options and more likely would have to 
pay the PFC only once for each direction. Thus, on a round-trip basis, 
passengers from smaller communities would pay $14.00 more than non-stop 
passengers if the PFC increases from $4.50 to $7.00 per leg. Passengers 
from smaller communities would be disproportionately affected by this 
proposed increase because in most cases they will be on connecting 
flights.
    It should not be overlooked that PFCs are a tax on both passengers 
and airlines; while they are imposed on passengers, the airlines 
collect them as part of the price of a ticket. It is well accepted that 
PFCs affect the revenue airlines earn. Moreover, you should understand 
that the local community has virtually no say in PFCs and the projects 
they fund since that is an airport decision. If PFCs were collected 
separately at the airport and not included in the price of an airline 
ticket, local accountability and transparency for PFC projects would 
occur and should achieve the goals of local community involvement that 
you noted in your question.
    Our concerns about these increases in costs to our customers apply 
not only to PFCs. The total fees and taxes paid by passengers flying 
out of rural communities is proportionally more than would be the case 
for passengers flying out of middle-sized or larger cities. A family of 
four flying from a rural airport, then connecting through a hub, and 
then getting to their destination, and back, would face multiple PFCs, 
segment fees and security fees. For that family of four, there could be 
as much as $150 to $160 in fees and taxes.
    One means of reducing the impact on travelers to and from rural 
communities would be to place a limit on the total amount of PFCs that 
could be added to a single itinerary, regardless of the number of 
connections. This is currently done with the September 11 security fee, 
which is set at $2.50 per flight segment but capped at $10.00 total.

    Question 2. I served on the House Transportation and Infrastructure 
Committee during the last FAA reauthorization and I remember well the 
spirited debate that occurred over what Air Traffic Control activities 
drove FAA costs. During that debate, the Committee was given 
information that one of the major cost drivers in the system was the 
hub-and-spoke systems operated by the major airlines. I would be 
interested in having both Mr. May and Mr. Bolen's views about the 
merits of this argument in light of the current debate on this FAA 
reauthorization?
    Answer. While an interesting question in 1997, the issue is a red-
herring today because the FAA is now able to accurately capture and 
allocate its costs. In a cost-based charging scheme where charges are 
based on the costs different users drive, the source of those costs is 
immaterial. By looking at each facility or service and asking whether 
it principally benefits a single user type and determining if other 
secondary users cause an incremental cost, FAA has been able to assign 
costs on a more sophisticated basis than simply looking at activity 
levels. Whatever the costs of providing ATC services for a hub airport 
are, they will be paid by the users of that airspace, whether a network 
carrier, point-to-point carrier, or corporate jet. The costs these 
users drive can be captured and allocated to them so each pays its fair 
share.
    It is also worth mentioning that the hub-and-spoke system is the 
most efficient method of connecting rural America to the rest of the 
world. Indeed, many more rural communities would not have commercial 
airline service without the hub-and-spoke system. While most 
communities cannot support nonstop service to all of the destinations 
that people may want to reach, the hub-and-spoke system allows 
residents of those communities to get almost anywhere in the world, 
often with just one connection.
    Although we tend to think of the hub-and-spoke system in terms of 
airports, congestion at hubs take place in the airspace as well as on 
the runways. Corporate jets contribute to the congestion at hubs by 
using the same airspace, even when they are not using the hub airport. 
For example, corporate aircraft flying into Teterboro Airport, just six 
miles from Newark International Airport, compete with Newark departures 
since the two airports share common airspace. Therefore, even these 
aircraft that are not using the hub-and-spoke system help to drive the 
cost of providing ATC services to hub airports.
    Another example is right here in the Washington, D.C., area. Even 
though corporate aircraft might not fly into Washington Reagan National 
Airport as much as they did before 9/11, they have in fact just shifted 
to smaller nearby airports--Manassas, Frederick, Leesburg and 
Hagerstown. The Washington, D.C., terminal-area controllers are still 
handling that traffic and costs are still being imposed on the system.
    The large and growing volume of corporate aviation increasingly 
will drive ATC costs in the future. Corporations own approximately 
17,000 jets today, with another 10,000 corporate jets expected over the 
next 10 years. Indeed, corporate jets are selling at a record pace--a 
new world record was recently set in corporate jet shipments of $18.8 
billion--a 24 percent increase over last year.

    Question 3. Can you give the Committee your thoughts on the new 
governance board in the FAA proposal? Do you think the board would 
represent your interests well? Do you think that the board would take 
away too much authority from Congress?
    Answer. We support the creation of a board that has decisional 
authority over Air Traffic Organization (ATO) issues, particularly 
those involving user fees, subject to appropriate Congressional 
oversight. However, the proposed composition of the board--only four 
airline representatives out of a total of 13 members--is inadequate 
because it does not reflect the proportion of funding that the airline 
community will contribute to the ATO.
    The composition of the board should reflect the investment of 
airlines and their customers, and future investments in the ATC system 
should be focused on efficiently moving more than two million 
passengers per day to their destinations while meeting the needs of 
recreational piston-aircraft owners and the high-performance corporate 
jets.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                            Edward M. Bolen

    Question 1. Do you support a funding system, whether comprised of 
taxes or fees, based on the principle that users should contribute in 
proportion to the costs they impose on the system?
    Answer. NBAA generally agrees that users should contribute to the 
trust fund based on the costs they ``impose'' on the system, through 
taxes set by Congress. NBAA disagrees with the assertion by the 
Nation's big airlines that overall traffic levels reflect costs imposed 
on the system. If general aviation were grounded, the costs for running 
the Air Traffic Control system would decrease by less than 10 percent. 
When general aviation operators were barred from Reagan National 
Airport, costs did not go down at all.
    Congress should reject FAA's recent cost allocation report which 
assigns costs to users based on a flawed methodology that deviates from 
international practice, from widely held economics principles and from 
the FAA's own recommendations advocated from 1973 until 2007.
    As the Government Accountability Office (then the General 
Accounting Office) found during the last debate on FAA financing, 
``hubbing operations at the Nation's largest airports increase the peak 
service demands on the airway system and increase FAA's operating and 
staffing costs.'' (GAO/RCED-97-23) General aviation is an incremental 
user of the aviation system, representing only a single-digit 
percentage of activity at the Nation's top 20 hub airports.
    This is not to say that the airlines' hub-and-spoke network is good 
or bad; rather, it is to say that this network is what drives the costs 
for the aviation system. The decision of one airline to put dozens of 
airplanes into one hub location in a 30 minute period forces the FAA to 
make major investments in technology and staffing to meet peak hub 
demands. We at NBAA are unified with the rest of the general aviation 
community in our belief that, if the carriers are largely responsible 
for driving up the FAA's costs, they should pay for a significantly 
larger portion of those costs.
    It is also important to look at what has changed in the last 10 
years since Congress considered FAA financing legislation. During that 
time, general aviation operations have remained flat, while hubbing has 
increased. In light of that fact, it is unlikely that the costs general 
aviation imposes on the system have increased substantially enough that 
the general aviation community should be subjected to new user fees and 
a 300 percent increase in the fuel tax, while the commercial airlines 
get a $2 billion tax break.
    However, these elements are at the very foundation of the FAA's 
user fee funding proposal. To justify its new funding setup, the FAA 
points to its unprecedented cost-allocation study, conducted by the 
Agency, that abandons all mainstream economic principles for allocating 
costs to different types of users in favor of a faulty approach that 
assumes all users are the same. No other nation uses such an approach 
for allocating air traffic control costs or for setting user charges or 
taxes.
    I encourage Congress to reject the FAA's flawed assumptions and 
review GAO's own figures, which indicate that the hub-and-spoke system 
drives FAA's costs. General aviation remains an incremental user of the 
aviation system and we look forward to working with Congress to ensure 
that we pay in proportion to our use and the cost it imposes.

    Question 2. FAA has released a cost allocation report that it feels 
provides the necessary information to support the development of their 
proposed user fee system. Do you have any comments on the results and/
or methods used in this report?
    Answer. I submit for the record the following independent, economic 
analysis of the FAA's cost allocation report, prepared by Dr. Michael 
W. Tretheway, Executive Vice President & Chief Economist, InterVISTAS 
Consulting, Inc.
                                 ______
                                 

FAA's Cost Allocation Study--A Flawed Approach to Assigning Costs that 
               Discards Mainstream Economic Fundamentals

Overview
    The tax mechanism that supports the Federal Aviation Administration 
(FAA) is set to expire in September 2007, setting the stage for the 
Federal reauthorization process that will determine FAA funding for the 
next several years. A debate is taking place about what changes, if 
any, are needed to FAA's funding structure, including how costs should 
be allocated among users of FAA services, particularly commercial 
airlines and general aviation (GA).
    This summary will show that, thus far, the discussion on cost 
allocation has been incomplete, because the FAA's recently issued cost-
allocation study for air traffic control (ATC) services sets aside 
established economic principles and international practices recognized 
by economists, the International Civil Aviation Organization, other 
national air traffic systems, and, previously, the FAA.

Summary
    The FAA's cost-allocation methodology does not conform to basic 
economic principles or international practices.
    Mainstream economic principles are set aside. When allocating costs 
for services, the standard practice is to apply mainstream economic 
principles to determine incremental costs imposed by different services 
and/or users, and allocate costs accordingly.

   Unfortunately, in its 2007 cost-allocation study, the FAA 
        abandons an economics-based methodology, used in previous FAA 
        cost-allocation studies, in favor of a simple, arithmetic 
        approach to costs. While this has the characteristic of 
        simplicity, it results in inappropriate cost allocations. Not 
        only has the FAA rejected the ``first best'' principle widely 
        accepted by economists, they also abandoned second best pricing 
        principles.

    International practices are ignored. Government and commercial/
privatized air traffic service providers in other nations recognize 
that different types of operations impose different costs on an air 
traffic system.

   Unlike ATC cost allocations used in virtually all other 
        nations, the FAA's cost-allocation method fails to recognize 
        that most Air Traffic Organization (ATO) costs are driven by 
        the operational needs of the commercial airlines (i.e., the 
        costs involved in operating airline hub-and-spoke systems).

     This assumption is not supportable, in view of 
            international guidelines recognizing that most ATO costs 
            are driven by commercial airline operations through their 
            hub networks. The International Civil Aviation Organization 
            states:

                ``. . . It is particularly important to recognize that 
                the major part of the air navigation facilities and 
                services infrastructure has been established to serve 
                the requirements of commercial air traffic, and that 
                some users receiving extensive service could not, by 
                reason of the nature of their activity, have called for 
                the provision of service on such a scale on an economic 
                basis. . . .The primary beneficiaries among the users 
                should therefore be carefully identified to ensure that 
                realistic allocations of costs to the various user 
                categories are made.''

   The study also departs from international practices in 
        failing to recognize that aircraft weight and other factors are 
        appropriate cost drivers when considering cost allocation. 
        Instead, the FAA's study assumes, without evidence, that all 
        high performance aircraft (from 5-seat single-engine 
        turboprops, to 350-seat 747's) drive the same costs.

Conclusion
    The FAA's cost-allocation methodology does not conform to economic 
principles or international practices. The Agency's approach, based 
upon faulty economics, would produce a misguided direction for future 
funding decisions. The FAA's methodology should be set aside, and a 
serious, economics-based methodology developed to replace it. 
Furthermore, the FAA's new cost-accounting database should be made 
available to stakeholders and researchers to allow a transparent and 
collaborative approach to developing an appropriate cost allocation 
methodology.

    Question 3. What's your position on the proposed Air Transportation 
System Advisory Board?
    Answer. The FAA governance board is simply a thinly veiled attempt 
by the FAA and the big airlines to reduce the critical role Congress 
has in aviation system oversight. The ploy calls to mind the last time 
the Nation's big airlines pushed a user fee scheme in Congress, in 
1997. According to one airline CEO at the time, the real goal was 
``control of the FAA by the Big Seven and for their exclusive 
benefit.'' This time around, the airlines' objective of reducing 
Congressional control of the FAA remains unchanged.
    The carriers have not been secretive about their goal of reducing 
Congressional control. Last year, the Air Transport Association (ATA) 
called a press conference where, according to The Wall Street Journal, 
their chief lobbyist was quoted as saying: ``We need to get Congress 
out of this process.''
    Lest anyone think ATA was misquoted, the association said again in 
August, at an Airports conference in Florida, ``it is critical we have 
a governance structure that is, to the best of our ability, free of the 
pressures of Congress.''
    We disagree with ATA on this issue, especially considering that 
Congress has steadily increased FAA funding over the past decade, often 
in excess of the amount the FAA has requested. There has never been an 
FAA modernization program that failed for a lack of Congressional 
support or funding. Furthermore, Congress has done an effective job of 
ensuring that all aviation interests--including those for general 
aviation--are represented. This critical oversight role must be 
preserved.
    We believe Congress should reject the ill-conceived rate-setting 
entity, envisioned in the FAA's user fee proposal, which would allow 
the FAA to set user fees and outline spending priorities without 
Congressional input. This is not a good government model, as it would 
provide no incentive for the FAA to control costs or focus on funding 
priorities outlined by Congress. The ability to set priorities, 
authorize programs, appropriate funds and determine costs for system 
users must remain with Congress.

    Question 4. What's the GA community's position on the changes to 
AIP, specifically changing the distribution formula for smaller 
airports? What are the implications for the GA community? Do you think 
this will be beneficial or problematic?
    Answer. Airports are critical transportation centers that 
collectively form a network that makes flying the fastest, most 
efficient way to travel. General Aviation relies heavily on smaller, 
less-congested airports, which are the key to the value and flexibility 
of business aviation aircraft. In fact, General Aviation represents 
less than 5 percent of the total operations at the Nation's 20 busiest 
commercial airports.
    Through the current trust fund model, the FAA has received ever-
increasing budgets for the Airport Improvement Program (AIP), which 
helps fund airport capital improvements at airports of all sizes. 
However, the FAA's reauthorization bill radically changes how airports 
are funded and provides less money for AIP than under the current 
funding system.
    According to the American Association of Airport Executives, ``the 
Administration's suggested formula change coupled with its proposal to 
cut the AIP funding to $2.75 billion would cost small airports 
approximately $430 million in FY08.''
    Perhaps more concerning is that the FAA proposes a tripling of 
general aviation fuel taxes in order to help fund the AIP program. It 
appears that the FAA has failed to determine the price elasticity of 
its fuel tax proposal and the result it would have on trust fund 
revenues.
    Congress should reject the FAA's user fee proposal that, among its 
many flaws, would provide less money for AIP.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John Thune to 
                            Edward M. Bolen

    Question 1. I served on the House Transportation and Infrastructure 
Committee during the last FAA reauthorization and I remember well the 
spirited debate that occurred over what Air Traffic Control activities 
drove FAA costs. During that debate, the Committee was given 
information that one of the major cost drivers in the system was the 
hub-and-spoke systems operated by the major airlines. I would be 
interested in having both Mr. May and Mr. Bolen's views about the 
merits of this argument in light of the current debate on this FAA 
reauthorization bill.
    Answer. An important part of this debate is not only how much 
modernization will cost, but who will pay for it. As the Government 
Accountability Office (then the General Accounting Office) found during 
the last debate on FAA financing, ``hubbing operations at the Nation's 
largest airports increase the peak service demands on the airway system 
and increase FAA's operating and staffing costs.'' (GAO/RCED-97-23) 
General aviation is an incremental user of the aviation system, 
representing only a single-digit percentage of activity at the Nation's 
top 20 hub airports.
    This is not to say that the airlines' hub-and-spoke network is good 
or bad; rather, it is to say that this network is what drives the costs 
for the aviation system. The decision of one airline to put dozens of 
airplanes into one hub location in a 30 minute period forces the FAA to 
make major investments in technology and staffing to meet peak hub 
demands. We at NBAA are unified with the rest of the general aviation 
community in our belief that, if the carriers are largely responsible 
for driving up the FAA's costs, they should pay for a significantly 
larger portion of those costs.
    It is also important to look at what has changed in the last 10 
years since Congress considered FAA financing legislation. During that 
time, general aviation operations have remained flat, while hubbing has 
increased. In light of that fact, it is unlikely that the costs general 
aviation imposes on the system have increased substantially enough that 
the general aviation community should be subjected to new user fees and 
a 300 percent increase in the fuel tax, while the commercial airlines 
get a $2 billion tax break.
    However, these elements are at the very foundation of the FAA's 
user fee funding proposal. To justify its new funding setup, the FAA 
points to a flawed and unprecedented cost-allocation study, conducted 
by the Agency, that abandons all mainstream economic principles for 
allocating costs to different types of users in favor of a faulty 
approach that assumes all users are the same. No other nation uses such 
an approach for allocating air traffic control costs or for setting 
user charges or taxes.
    I encourage Congress to reject the FAA's flawed assumptions and 
review GAO's own figures, which indicate that the hub-and-spoke system 
drives FAA's costs. General aviation remains an incremental user of the 
aviation system and we look forward to working with Congress to ensure 
that we pay in proportion to our use and the cost it imposes.

    Question 2. Can you give the Committee your thoughts on the new 
governance board in the FAA proposal? Do you think the board would 
represent your interests well? Do you think that the board would take 
away too much authority from Congress?
    Answer. The FAA governance board is simply a thinly veiled attempt 
by the airlines to reduce the critical role Congress has in aviation 
system oversight. The ploy calls to mind the last time the Nation's big 
airlines pushed a user fee scheme in Congress, in 1997. According to 
one airline CEO at the time, the real goal was ``control of the FAA by 
the Big Seven and for their exclusive benefit.'' This time around, the 
airlines' objective of reducing Congressional control of the FAA 
remains unchanged.
    The carriers have not been secretive about their goal of reducing 
Congressional control. Last year, the Air Transport Association (ATA) 
called a press conference where, according to The Wall Street Journal, 
their chief lobbyist was quoted as saying: ``We need to get Congress 
out of this process.''
    Lest anyone think ATA was misquoted, the association said again in 
August, at an Airports conference in Florida, ``it is critical we have 
a governance structure that is, to the best of our ability, free of the 
pressures of Congress.''
    We disagree with ATA on this issue, especially considering that 
Congress has steadily increased FAA funding over the past decade, often 
in excess of the amount the FAA has requested. There has never been an 
FAA modernization program that failed for a lack of Congressional 
support or funding. Furthermore, Congress has done an effective job of 
ensuring that all aviation interests--including those for general 
aviation--are represented. This critical oversight role must be 
preserved.
    We believe Congress should reject the ill-conceived rate-setting 
entity, envisioned in the FAA's user fee proposal, which would allow 
the FAA to set user fees and outline spending priorities without 
Congressional input. This is not a good government model, as it would 
provide no incentive for the FAA to control costs or focus on funding 
priorities outlined by Congress. The ability to set priorities, 
authorize programs, appropriate funds and determine costs for system 
users must remain with Congress.

                                  
