[Senate Hearing 115-64]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 115-64

                  FAA REAUTHORIZATION: PERSPECTIVES ON
                    IMPROVING AIRPORT INFRASTRUCTURE
                       AND AVIATION MANUFACTURING

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

                                HEARING

                               BEFORE THE

       SUBCOMMITTEE ON AVIATION OPERATIONS, SAFETY, AND SECURITY

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 23, 2017

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation
                             
                             
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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                   JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi         BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri                  MARIA CANTWELL, Washington
TED CRUZ, Texas                      AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska                RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas                  BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska                 EDWARD MARKEY, Massachusetts
DEAN HELLER, Nevada                  CORY BOOKER, New Jersey
JAMES INHOFE, Oklahoma               TOM UDALL, New Mexico
MIKE LEE, Utah                       GARY PETERS, Michigan
RON JOHNSON, Wisconsin               TAMMY BALDWIN, Wisconsin
SHELLEY MOORE CAPITO, West Virginia  TAMMY DUCKWORTH, Illinois
CORY GARDNER, Colorado               MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana                  CATHERINE CORTEZ MASTO, Nevada
                       Nick Rossi, Staff Director
                 Adrian Arnakis, Deputy Staff Director
                    Jason Van Beek, General Counsel
                 Kim Lipsky, Democratic Staff Director
              Chris Day, Democratic Deputy Staff Director
                      Renae Black, Senior Counsel
                                 ------                                

       SUBCOMMITTEE ON AVIATION OPERATIONS, SAFETY, AND SECURITY

ROY BLUNT, Missouri, Chairman        MARIA CANTWELL, Washington, 
ROGER F. WICKER, Mississippi             Ranking
TED CRUZ, Texas                      AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska                RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas                  BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska                 EDWARD MARKEY, Massachusetts
DEAN HELLER, Nevada                  CORY BOOKER, New Jersey
JAMES INHOFE, Oklahoma               TOM UDALL, New Mexico
MIKE LEE, Utah                       GARY PETERS, Michigan
SHELLEY CAPITO, West Virginia        TAMMY BALDWIN, Wisconsin
CORY GARDNER, Colorado               TAMMY DUCKWORTH, Illinois
TODD YOUNG, Indiana                  MAGGIE HASSAN, New Hampshire
                           
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 23, 2017...................................     1
Statement of Senator Blunt.......................................     1
    Prepared statement...........................................    31
Statement of Senator Nelson......................................     2
Statement of Senator Cantwell....................................     3
Statement of Senator Inhofe......................................    17
Statement of Senator Gardner.....................................    20
Statement of Senator Peters......................................    21
Statement of Senator Sullivan....................................    23
Statement of Senator Klobuchar...................................    25
Statement of Senator Heller......................................    27
Statement of Senator Cruz........................................    28
Statement of Senator Hassan......................................    53
    Letter dated March 21, 2017 to Hon. Margaret Wood Hasson from 
      Richard J. Dyment, Airport Manager, Lebanon Airport........    54
Statement of Senator Duckworth...................................    60

                               Witnesses

Rhonda K. Hamm-Niebruegge, Executive Director, St. Louis Lambert 
  International Airport..........................................     4
    Prepared statement...........................................     7
Bob Montgomery, Vice President, Airport Affairs, Southwest 
  Airlines.......................................................     8
    Prepared statement...........................................    10
Margaret Gilligan, Associate Administrator, Aviation Safety, 
  Federal Aviation Administration; Accompanied by Dorenda Baker, 
  Director, Aircraft Certification Services, Federal Aviation 
  Administration.................................................    32
    Prepared statement...........................................    34
Gerald L. Dillingham, Ph.D., Director, Physical Infrastructure 
  Issues, U.S. Government Accountability Office..................    38
    Prepared statement...........................................    40
Gregory J. Fedele, Executive Vice President--Corporate 
  Development, Inova Aerospace...................................    48
    Prepared statement...........................................    49

                                Appendix

Response to written questions submitted by Hon. Deb Fischer to:
    Rhonda K. Hamm-Niebruegge....................................    65
Response to written question submitted to Bob Montgomery by:
    Hon. Deb Fischer.............................................    66
    Hon. Todd Young..............................................    66
Response to written questions submitted by Hon. Deb Fischer to:
    Peggy Gilligan...............................................    67
    Gerald L. Dillingham, Ph.D...................................    67

 
                  FAA REAUTHORIZATION: PERSPECTIVES ON
                    IMPROVING AIRPORT INFRASTRUCTURE
                       AND AVIATION MANUFACTURING

                              ----------                              


                        THURSDAY, MARCH 23, 2017

                               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 10:01 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Roy Blunt, 
Chairman of the Subcommittee, presiding.
    Present: Senators Blunt [presiding], Wicker, Cruz, Fischer, 
Moran, Sullivan, Heller, Inhofe, Gardner, Young, Cantwell, 
Nelson, Klobuchar, Booker, Peters, Duckworth, and Hassan.

             OPENING STATEMENT OF HON. ROY BLUNT, 
                   U.S. SENATOR FROM MISSOURI

    Senator Blunt. The hearing will come to order. I am 
certainly pleased to have the two panels we have with us today. 
The first panel I will introduce in just a minute, and then we 
will get to the second panel after we have heard from and have 
had a chance to ask some questions of our first panel.
    This hearing is the first of a series that Senator Cantwell 
and I intend to have to look at the reauthorization of the 
Federal Aviation Administration.
    Civil aviation is, obviously, critically important to our 
economy. According to FAA statistics, in Fiscal Year 2014, the 
aviation industry, which is collectively made up of airports, 
air carriers, and manufacturers, supported 10.6 million jobs, 
contributed $1.6 trillion in economic activity, and accounted 
for 5.1 percent of the U.S. gross domestic product.
    Today's panels will focus on two important subjects: first, 
airport infrastructure and the funding of capital needs through 
the FAA's Airport Improvement Program, federally-authorized 
passenger facility charges, and other things the Federal 
Government does to encourage and help meet those capital needs; 
second, the FAA's regulatory certification process and an 
examination of further reforms that could improve safety while 
also enhancing competitiveness in the global marketplace for 
U.S. aviation products.
    Regarding the first panel on infrastructure, we are very 
mindful that our Nation's airport transportation system could 
not exist without the important relationship between airports 
and airlines, both of whom are well-represented on this panel. 
The United States has nearly 20,000 airports, ranging from the 
largest international hubs to the smallest airfields, all 
providing important services to the aviation community and to 
our economy.
    Of these, over 3,000 are eligible for Federal funding 
assistance. The Federal Government supports airport 
infrastructure primarily in three ways: one, grants to increase 
safety and capacity through the Airport Improvement Program; 
two, federally-authorized fees on passenger enplanements to 
support capacity and terminal projects; and third, the tax-
exempt bonds issued by states and local authorities for airport 
improvements.
    Despite this Federal support and the efforts made by local 
communities and the airlines themselves, the American Society 
of Civil Engineers recently noted that the infrastructure of 
airports is not keeping up with demand. In fact, the grade that 
the civil engineers gave to the airport infrastructure was a 
grade of D, which is mostly below standard, and that is, of 
course, not where anybody wants to be.
    So we will be talking about those issues today. And before 
we do that, I would like to turn to the Ranking Member, Senator 
Cantwell, and then the Ranking Member of the Full Committee, 
Senator Nelson, for any comments they want to make.
    Senator Cantwell. Thank you, Mr. Chairman. I would like to 
defer to the Ranking Member of the Full Committee to make any 
kind of comments he would like to make before I make mine.
    Senator Nelson. Thank you, Madam Ranking Member.
    Senator Cantwell. Can I say something else?
    Senator Nelson. Of course.
    Senator Cantwell. Can I just say: Go, Gonzaga, tonight. Can 
I say that?
    [Laughter.]
    Senator Cantwell. Thank you.

                STATEMENT OF HON. BILL NELSON, 
                   U.S. SENATOR FROM FLORIDA

    Senator Nelson. Well, this is super important because 
airports and airplane certification have to stay up with the 
times, and with the increased traffic in airports. There is a 
limited amount of money that airports have in order to be able 
to stay up with the needs, both capacity and safety, and the 
Passenger Facility Charge is one of the few, and it has not 
been raised in nearly 16 years.
    So we have to face the music, particularly when we see 
skinny budgets being produced that cause a slimming down of a 
lot of the nondefense part of the budget, and you cannot keep 
handling increased traffic and increased capacity at airports 
without attending to the expansion needs and the safety needs. 
It is as simple as that.
    When it comes to aircraft certification, we simply cannot 
skimp on anything. We can be more efficient, but we cannot 
skimp, because that is certifying an aircraft of being 
airworthy to carry people.
    Then if all that were not enough, I know it is not within 
the purview of this hearing, but we have these increased 
threats that we are picking up in our intelligence community. 
It is going to cause further disruption in airports. It is 
going to cause a slowing down of people going through TSA and 
especially abroad in the points of last departure coming into 
the USA that has been noted by the Department of Homeland 
Security.
    So airlines and airports are going to continue to have 
challenges, and we have to meet those challenges.
    Thank you, Mr. Chairman.
    Senator Blunt. Thank you, Senator.

               STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Well, thank you, Senator Nelson, and 
thank you, Chairman Blunt, for holding this important hearing.
    And for all the witnesses who are going to be here today, 
as the Ranking Member of the Committee said, these are very, 
very important issues to our economy of the future, and 
continuing to make sure we make the investments in how this 
critical infrastructure helps our communities grow is 
definitely of utmost importance in the state of Washington and 
I am sure in many other parts of the United States as well.
    So I want to first take a moment to acknowledge Peggy 
Gilligan as she approaches retirement. I know she is on our 
second panel. After 3-plus decades of service to the FAA, the 
fact that air travel is safer today is due to a large amount of 
her work that is instrumental in FAA's successful efforts to 
have the flying public be so safe. So we wish her all the best 
in retirement.
    In 2016, over 825 million passengers traveled in our 
domestic aviation system. And while people travel for many 
different reasons, nearly all of them will have passed through 
some of the 389 commercial service airports that comprise the 
core of our airport network. These airports come in all shapes 
and sizes, but each is critical to its community services and 
to its community's economic abilities.
    The impact of air service, what it has on our economy, 
cannot be overstated. In the state of Washington, for example, 
we know that 97 percent--97 percent--of gross business income 
is generated by businesses within 10 miles of an airport, and 
70 percent of businesses within a 5-mile radius of an airport.
    So the public aviation authorities and local governments, 
each airport has a mission to serve the community, provide 
connectivity for consumers and products, and, indeed, the 
services of our entire community.
    Congress created the Passenger Facility Charge in 1990 to 
fund the needed airport infrastructure projects, and these PFC 
fees, which are collected as part of the airline ticket, are 
locally levied user fees that are invested directly back into 
the airport.
    I know we just are making a major expansion at our North 
Terminal that is going to help us add 80 flights.
    While the PFC is a critical component of airport funding, 
it is also one of the several funding streams available to 
airports, which also include the FAA's improvement program and 
tax exempt bonds, and State and local grants.
    As Congress again debates whether to use the PFC in an 
aggressive way, we must consider how airports will invest these 
local dollars. As part of that discussion, I hope we can find 
some ways to improve the experience for the air-traveling 
public. Much can be done in this regard, including, in my 
opinion, making sure airports have the right options for food, 
a visual paging system for the hearing loss, and making sure 
terminals are configured to handle the large crowds that we are 
seeing.
    I also know that many Members of this Committee and all 
across the Congress have concerns about the Contract Tower 
Program and its health. Contract towers provide a vital and 
efficient layer of safety to our national aerospace system, and 
I look forward to working with my colleagues to ensure that the 
health of these contract tower programs remain into the future.
    With the second panel, we are also going to examine another 
issue of critical importance--aviation manufacturing. Our 
Nation's economy depends on civil aviation, which connects 
businesses and consumers around the globe. And here in the 
United States, civil aviation supports 11.8 million jobs, and 
civil aviation manufacturing is the Nation's number one net 
exporter, with a positive trade balance of nearly $60 billion.
    In my home state, obviously, aerospace manufacturing is 
huge--252,000 jobs and more than $69 billion in gross revenues.
    So aviation manufacturing is critical to our Nation's 
economy and world-class equipment and technology that is based 
on it. In order to preserve that, we need the Export-Import 
Bank. The Export-Import Bank finances U.S. exports of 
manufacturers' goods and services to maintain our 
competitiveness. And the President needs to make sure he is 
making appointments to this Board so that the Board can 
function as it has been designed to do.
    In last year's Senate FAA bill, we passed with broad 
support language to improve the FAA certification process. And 
although the language on certification was not ultimately part 
of the FAA extension bill, I plan to continue to work on that 
as we move toward legislation this year.
    As the FAA improves safety function, we must continue to 
make sure the certification process is predictable and 
efficient.
    So with that, Mr. Chairman, I certainly appreciate the 
witnesses being here today and your focus on helping us 
continue to be very, very good partners with local businesses 
and communities on a very strong FAA bill this year.
    Thank you.
    Senator Blunt. Thank you, Senator Cantwell and Senator 
Nelson.
    Let's go to our first panel. We have Rhonda Hamm-
Niebruegge, the Executive Director of the St. Louis Lambert 
International Airport, and Bob Montgomery, the Vice President 
of Airport Affairs for Southwest Airlines.
    Rhonda, if you want to make some comments? And anything you 
want to insert in the record that you do not cover, you can.
    And then we will go to Mr. Montgomery.

STATEMENT OF RHONDA K. HAMM-NIEBRUEGGE, EXECUTIVE DIRECTOR, ST. 
              LOUIS LAMBERT INTERNATIONAL AIRPORT

    Ms. Hamm-Niebruegge. Good morning, everyone. Thank you for 
allowing me to be here.
    As Senator Blunt said, my name is Rhonda Hamm-Niebruegge, 
and I have had the great pleasure of running the St. Louis 
Lambert International Airport since 2010. Prior to that, 27 
years of my adult life were spent on the airline side. So I 
started at LaGuardia Airport right out of college with Ozark 
Airlines in 1982, became part of TWA in 1986, worked my way up 
to Vice President of North American operations responsible for 
101 airports within the TWA system, became a part of the 
American Airline system in 2001, and retired in 2009.
    So my entire adult life and career has been in this 
business. I have a great passion for aviation and what it 
brings to the economy.
    So with that being said, I would like to take this 
opportunity to thank Chairman Blunt, Ranking Member Cantwell, 
and members of the Aviation Subcommittee, for the opportunity 
to appear before you today to outline the pressing 
infrastructure and financial needs, not only of St. Louis 
Lambert International but all of our Nation's airports.
    In my testimony today, I hope to highlight how we can meet 
those needs without affecting the Federal budget or incurring 
more debt.
    Earlier this month, Airports Council International North 
America released its latest study outlining $100 billion in 
infrastructure needs facing our Nation's airports between 2017 
and 2021, and highlighting a significant funding shortfall to 
meet those needs.
    These unmet needs must be addressed if airports are to 
continue to be the economic engines that they are today. St. 
Louis Lambert, for example, has a $4 billion economic impact to 
the state of Missouri and Southern Illinois, and that was a 
study done by almost 4 years ago, so that number has grown 
since then.
    And it is important that we realize that this is not only 
business traffic but, obviously, it is tourism as well. The 
United States takes the risk of slipping further into the 
international rankings of expenditures on infrastructure from 
our present embarrassing position of 10th in the world, 
according to 2016 World Bank rankings. An earlier study by the 
World Economic Forum placed us at 23rd in the world. And 
recently, as Chairman Blunt said, civil engineers gave U.S. 
infrastructure and airports a D rating.
    The ACI study points out several key findings that are 
worth noting. Large hub airports handle 72.6 percent of all 
enplanements, and they represent $60.4 billion of 
infrastructure needs over the next 5 years. Medium hubs, such 
as St. Louis Lambert, handle 15.4 percent of all enplanements, 
and we account for $11.7 billion of infrastructure needs, and 
that is in that same time period. Small hubs handle 8.4 percent 
of all enplanements and account for $8.5 billion.
    When you look at this, we have a $20 billion annual need 
for airport infrastructure, and that far surpasses the amount 
of available funding today that can be generated by net income, 
the current PFC revenue, and AIP grants.
    I make these points to stress whether you are Senators from 
a large, medium, or a small hub airport, you will hear from all 
of your local officials running airports that this is a dire 
need, and the funding simply is not there.
    The good news is that we do feel the economy is improving, 
and the demand on our facilities is rapidly growing. The bad 
news is that Federal AIP funds are limited and the restrictions 
on other revenue tools, such as the Passenger Facility Charge, 
which has been capped at $4.50 in 2000, are simply tying our 
hands.
    Congress can dramatically improve our resource deficit and 
promote self-sufficiency of U.S. airports with no Federal 
investment by increasing or outright eliminating the PFC cap. 
Since the cap was last increased, PFCs have lost 50 percent of 
their purchasing power. An increase or a removal of the cap 
would restore PFC purchasing power while also allowing local 
officials to meet local needs without impact to the Federal 
budget.
    Locally generated user fees are the most logical way to 
deal with our infrastructure requirements, coupled with 
existing AIP funds, airport-generated revenue, and, as 
necessary, long-term financing.
    I mention long-term financing because many of us are 
concerned about proposals being discussed on Capitol Hill to 
eliminate an important financing tool relied on by airports, 
and that is tax-free municipal bonds. Considering the 
infrastructure needs airports and cities alike are facing, the 
last thing we need is the loss of tax-free municipal bonds, 
which, in many cases, are the funding mechanisms of last 
resort.
    In addition, I should mention that due to competition for 
funds, some vitally needed airport projects are never approved 
because they rank lower on the overall list of eligible AIP 
items, and the funding is simply not enough to go around. And, 
therefore, these projects can only be done with PFCs, airport 
revenues, or long-term financing.
    Finally, I would like to remind the Committee that every 
PFC application must undergo the same scrutiny by the FAA as an 
AIP grant. The DOT Inspector General will tell you that the PFC 
program has a stellar record since it was enacted in 1990 in 
meeting all requirements.
    And I would remind Senators representing smaller airports 
that they would stand to benefit even greater since large 
airports enacting a higher PFC would forgo their annual 
enplanement formula, thereby allowing more funds for smaller 
and medium airports.
    Just last year, several well-respected conservative 
organizations, such as the Competitive Enterprise Institute, 
the Tax Foundation, and the Center for Freedom and Prosperity, 
have all endorsed removing the cap or increasing the PFC, and 
they have made two very good observations.
    One is that PFCs are directly invested back into your local 
airport, and unlike a tax, it never goes to Washington. It is a 
local option user fee with local officials and FAA oversight 
making sure that they are invested in the local economy.
    Second, almost all airlines, with the exclusion of our good 
friends at Southwest, charge willingly additional bag fees, 
preferred seating, change fees, yet they balk at airports 
allowing us to increase our fees at all, which benefits their 
customers and the overall experience.
    Senator Blunt. I think we need to move on.
    Ms. Hamm-Niebruegge. Move on? OK.
    In closing, I would just like to tell you that despite all 
the challenges that we at airports have seen and some of the 
large debt that we have, like at St. Louis Lambert, we have 
never once defaulted on paying our debt--never once. Even in 
our darkest days when we were de-hubbed, we never failed to pay 
a single debt that was due.
    I along with many other airport directors have been 
credible stewards of the facilities we manage. And as leaders, 
we are not just ensuring the safety of our passengers and our 
employees, but out of necessity to survive, we have become 
experts in many things--in financial transactions, in customer 
service trends, in development, in community relations, in 
public speaking, and in complying with the ever-growing Federal 
regulations. We wear more hats on a daily basis than most 
professions do.
    So I would like to ask that you hear our concerns today, 
that you recognize the time and effort that we put in, and I 
would ask that we have this PFC increase.
    Thank you for your time.
    [The prepared statement of Ms. Hamm-Niebruegge follows:]

      Prepared Statement of Rhonda K. Hamm-Niebruegge, Director, 
                St. Louis Lambert International Airport
    I would like to take this opportunity to thank Chairman Blunt, 
Ranking Member Cantwell, and members of the Aviation Subcommittee for 
this opportunity to appear before you today to outline the pressing 
infrastructure and financial needs of not only St. Louis Lambert, but 
of all of our Nation's airports. In my testimony today, I hope to 
highlight how we can meet those needs without affecting the Federal 
budget or incurring more debt.
    Earlier this month, Airports Council International--North America 
released its latest study outlining $100 Billion in infrastructure 
needs facing our Nation's airports between 2017 and 2021, and 
highlighting a significant funding shortfall to meet the demand. These 
unmet funding needs must be addressed if airports are to remain the 
economic engines they have always been. St. Louis Lambert, for example, 
has an estimated $4 billion and growing economic impact on the Missouri 
and Southern Illinois economies. The United States takes the risk of 
slipping further in the international rankings of expenditures on 
infrastructure from our present embarrassing position of 10th in the 
world according to the 2016 World Bank rankings. An earlier study by 
the World Economic Forum placed us at 23rd in the world. Recently the 
American Society of Civil Engineers gave U.S. infrastructure a ``D'' 
rating.
    The ACI-NA study points out several key findings that are worth 
noting. Large hub airports, handling 72.6 percent of all enplanements, 
represent $60.4 billion of total infrastructure needs over the next 5 
years and reported a 50 percent increase in needed projects from 2015. 
Medium hubs such as St. Louis Lambert, handle 15.4 percent of all 
enplanements, account for $11.7 billion in infrastructure needs over 
that same period. Small hubs handle 8.4 percent of all enplanements and 
account for $8.5 billion in infrastructure needs. The $20 billion 
overall average annual airport infrastructure needs far surpass the 
available funding from airport generated net income, current PFC 
revenues, and AIP grant funds. I make these points to stress that 
whether the Senators on this Committee or any member of the Senate, 
represent small, medial or large airports, you will all hear from your 
local airport officials about the dire shortfall in funding identified 
in the study.
    The good news is that the economy is recovering and demand on our 
facilities is rapidly growing. The bad news is that Federal AIP funds 
are limited and restrictions on other revenue raising tools such as the 
Passenger Facility Charge, which has been capped at $4.50 since 2000, 
are tying our hands.
    Congress can dramatically improve our resources deficit and promote 
the self-sufficiency of U.S. airports with no new Federal investment by 
increasing or outright eliminating the statutory PFC cap. Since the cap 
was last increased, PFCs have lost approximately 50 percent of their 
purchasing power. An increase or removal of the cap would restore PFCs 
lost purchasing power while also allowing local officials to meet local 
needs with no impact on the Federal budget.
    Locally generated user fees are the most logical way to deal with 
our infrastructure requirements, coupled with existing AIP funds, 
airport-generated revenue, and, as necessary, long-term financing. I 
mention long-term financing because many of us are concerned with 
proposals, being discussed on Capitol Hill to eliminate an important 
financing tool relied by airports: tax free Municipal Bonds. 
Considering the infrastructure needs airports and cities alike are 
facing, the last thing we need is the loss of tax free Municipal Bonds, 
which in many cases are the funding mechanism of last resort. In 
addition, I should mention that due to competition for funds, some 
vitally needed airport projects are never approved because they rank 
lower on the overall list of eligible AIP items and the funding is 
simply not enough to go around and therefore can only be done with 
PFCs, airport revenues, or long-term financing. Finally, I would remind 
the Committee that every PFC application must undergo the same scrutiny 
by the FAA as an AIP grant. The DOT Inspector General will tell you 
that the PFC program has a stellar record since it was enacted in 1990 
in meeting all FAA requirements. I would remind Senators representing 
smaller airports that they would stand to benefit since airports 
enacting a higher PFC would forego their annual enplanement formula 
funds thereby providing more funds for the FAA to distribute to smaller 
airports.
    Just last year, several well-respected, conservative organizations 
such as the Competitive Enterprise Institute, the Tax Foundation and 
the center for Freedom and Prosperity have all endorsed removing the 
cap or increasing the PFC and make two of many important pro PFC 
observations:

  1.  PFC's are invested directly into airports, and unlike a tax, it 
        never goes back to Washington. It is a local option user fee 
        with local officials deciding, with FAA oversight, the best way 
        to invest and the funds go directly into the local economy.

  2.  Many airlines willingly charge additional fees for bags, 
        preferred seats, itinerary changes, etc., yet they balk at 
        allowing airports to increase fees to improve our airports, 
        which benefits their customers.

    To elaborate further on the proposal to increase the PFC, and for 
your benefit Senator Blunt, Lambert would benefit particularly with an 
increase in the PFC cap. At present, the majority of our PFC revenue is 
devoted to reducing the 554 million in debt that we incurred in 
constructing our vitally needed parallel runway. An increase in the PFC 
cap could not only be used to fund projects that have been deferred due 
to a lack of funding, but would provide a substantial opportunity to 
pay down existing debt sooner. Reducing our current debt is extremely 
important as we try to grow back the connecting traffic that we lost in 
recent years. Therefore, while we, St. Louis Lambert, have no looming 
need to build new runways or more gates, we still face infrastructure 
replacement needs that have been deferred far too long because of our 
significant debt.
    In closing, I would also like to note that we have never once 
defaulted on our debt payments! Never once! I, along with many other 
Airport Directors, have been incredible stewards of the facilities we 
manage. As airport leaders, we are not just ensuring the safety of our 
passengers and employees. Out of necessity to survive and yes, even 
thrive, we have become experts in financial transactions, in customer 
service trends, in development, in community relations, in public 
speaking, in complying with ever-growing Federal regulations and a host 
of other things. On a daily basis, we wear more hats than most 
professions wear in a lifetime. We do not complain and find ways to get 
things done. I hope for doing all of that, we have earned your respect! 
I hope you realize we are not whiners, beggars, or a group that looks 
for the easy road. That is not who we are. Now is the time to listen to 
our concerns. We cannot pull more tricks out of the hat. The challenges 
are simply too big. We need this PFC increase as it truly is the only 
option left.
    Thank you for your time today.

    Senator Blunt. Thank you, Ms. Hamm-Niebruegge.
    Mr. Montgomery.

 STATEMENT OF BOB MONTGOMERY, VICE PRESIDENT, AIRPORT AFFAIRS, 
                       SOUTHWEST AIRLINES

    Mr. Montgomery. Good morning, Chairman Blunt, Senator 
Cantwell, and members of this Committee. My name is Bob 
Montgomery, and I handle airport affairs for Southwest 
Airlines, and thank you for the opportunity to address you 
today.
    Forty years ago, I started working for Southwest Airlines 
in Lubbock, Texas, as a part-time ramp agent. For the last 33 
years, I have focused almost exclusively on airports. My task 
in airport affairs is to work directly with airport directors, 
like my friend and fellow panel member, Rhonda Hamm-Niebruegge, 
to determine how best to meet the infrastructure needs in 
airports all around the country.
    I can say with confidence that I have never seen an airport 
with a construction need that has not been addressed due to the 
lack of funding. There may be other reasons for delay to an 
important project, but the lack of funding is never the primary 
reason. Simply put, if there is a capital need, together with 
the airport, we can, we will, and we do find ways to fund it.
    Since 2008, focusing just on the large hub airports in this 
country, which are generally the top 30 airports, we have 
built, we are in the process of building, or we have agreed to 
build over $100 billion worth of improvements. Of this amount, 
about 55 percent are financed with general airport revenue 
bonds, with debt. Twenty percent of that amount is provided for 
by PFCs, the Passenger Facility Charge. Ten percent have been 
generated locally, and about 7 percent provided by various 
grants, including the AIP. About 6 percent of that total amount 
has been supported by private airline and third-party 
investment.
    Regarding the concerns of this body, Southwest encourages 
you to increase the annual funding levels for AIP grants, 
especially considering that the Airport and Airways Trust Fund 
has and enjoys over a $6 billion surplus.
    We object, however, to raising the Passenger Facility 
Charge above the current cap of $4.50 per segment. We see 
simply no good justification to raise our customers' tax and 
fee burden.
    A list of reasons why we oppose the PFC increase is 
provided in my written testimony. However, I would like to 
quickly mention just a few points.
    First, our customers are already overtaxed. Our average 
fares are decreasing, and our customers' tax burden is 
increasing relative to the ticket price.
    Second, airline consumers are very, very sensitive to 
price. Any increase in the PFC means a fare increase for our 
customers, and that usually means less customers.
    Third, a PFC increase will hurt smaller markets 
disproportionately. Profitably serving these smaller markets 
can be very challenging, and we need all the customers that we 
can get. Additionally, many small market customers connect, 
which doubles the impact of a PFC increase to them.
    Finally, commercial airports have many sources of revenues, 
but all of those sources depend on customers. PFC revenues have 
doubled since the year 2000 from $1.6 billion annually to over 
$3 billion annually, and other airport revenues have also 
increased much faster than the rate of inflation, all because 
we are attracting more customers.
    In our American system of airports, the user pays for the 
system. That user is the customer. Whether it is through the 
fare that they purchased the goods and services they buy, or 
the taxes and fees assessed by our governmental entities, the 
customer pays for it all.
    We seem to have two paths to follow. We can grow the number 
of customers using our system, which grows all of our other 
customer-related resources, or we can increase the tax burden 
upon them.
    It requires a very optimistic person to think that we can 
both grow customers and saddle them with additional costs. I am 
not of that camp. Neither is Southwest Airlines.
    We want to spend our energies focusing on the increasing 
tide that floats all boats, and that is growing our customer 
base. We do not want to risk killing or maiming the golden 
goose through higher fees or taxes.
    In conclusion, we have a wonderful bag of tools to apply to 
the airport infrastructure challenge in this country. The most 
important tool, however, is a willing and a strong hand to hold 
and make use of the tool. In partnership with great airport 
operators, like my friend Rhonda, we will succeed.
    Thank you for allowing me to testify today, and I am happy 
to answer any questions that you might have.
    [The prepared statement of Mr. Montgomery follows:]

Prepared Statement of Bob Montgomery, Vice President, Airport Affairs, 
                           Southwest Airlines
    Good morning, Chairman Blunt, Senator Cantwell and members of this 
Subcommittee. I am Bob Montgomery, and I handle Airport Affairs for 
Southwest Airlines. I am happy to be here today.
    I started working for Southwest in 1977, as a Ramp Agent in 
Lubbock, Texas, when Southwest was just an intrastate airline. I'm 
proud to be in my 40th year with Southwest--a company that continues to 
grow and compete.
    Southwest now serves over 120 million Customers annually, employs 
over 53,000 ``Co-Hearts,'' and operates a fleet of over 700 Boeing 737 
airplanes. As a longtime Southwest Employee, I am most proud that 
Southwest has never had an Employee layoff or furlough during its 46-
year history and has provided its Employees with annual profit-sharing 
for 43 straight years.
    Over the past 33 years, I have focused almost exclusively on 
airports. My task in Airport Affairs is to work with Airport Directors 
like my fellow panel member, Rhonda Hamm-Niebruegge, to determine how 
best to meet infrastructure needs in airports all around the Country. 
In that role, I have overseen billions-upon-billions of dollars in 
airport capital investments at over 100 airports.
    We have been successful in small airports, such as the Country's 
newest airport, Northwest Florida Beaches Airport in Panama City, 
Florida. We've been successful in medium, growing airports such as 
Austin Bergstrom Airport, or Dallas Love Field. We've found a way to 
meet the needs in airports ravaged by changing airline strategies, such 
as St. Louis International Airport or Pittsburg. And, we've found ways 
to succeed in large, complex airports such as Los Angeles or Las Vegas. 
We've even found ways to meet the challenge in notorious airports such 
as New York's LaGuardia.
    I can say with confidence that I have NEVER seen an airport with a 
construction NEED that has not been addressed due to the lack of 
funding. There may be political reasons for an airport not proceeding 
with an important project--which I will explain later--or the lack of a 
proper business case, but the lack of funding is not the reason. Simply 
put, if there's a capital need, together with the airport, we can and 
will find a way to fund it.
    Now, when I use the word ``need,'' I mean a critical infrastructure 
improvement related to safety, security, or airport capacity. Airport 
capacity includes accommodating new airlines or the anticipated growth 
in flights or passenger traffic. During our 46-year history, it has 
often been Southwest that has been the new entrant or the fast-growing 
airline at an airport, and our airport needs have been met one way or 
another.
    ``Wants'' are insatiable--they can never be fully satisfied. I am 
sure every government agency wants more money. Airports are no 
different. I know on the private side, I'd like to have more money!
    Normally, however, check and balances are in place to ensure the 
prudent use of scarce resources. In the landlord-tenant relationship--
in which airports are the landlords and airlines are the tenants--
sometimes we debate the merits of a ``Cadillac solution'' over a 
``Chevy solution'' when working to address an infrastructure challenge. 
Usually, a middle ground is found and the project moves forward.
    We have many good tools in the airport development toolbox. The 
largest tool, and the most important, is the General Airport Revenue 
Bond. This is our mortgage, if you will. The next most used tool is the 
PFC, which you are familiar with. Next is airport retained earnings, 
which come from the car you park, the hot dog you buy, or the magazine 
you purchase for your flight. Grants are an important tool, as is the 
Rent Car Facility Charge. Finally, we have the tool of direct airline 
and third party investment.
    Since 2008, at just the large hub airports (generally the top 30 
airports in the country), we have built, are in the process of 
building, or have agreed to build over $100 billion worth of 
improvements. Of this amount, about 55 percent is financed with GARBS, 
20 percent provided for by PFC's, 10 percent generated locally, and 7 
percent provided by various grants, including AIP. The remaining 8 
percent has been provided by private investment and the CFC.
    Before I go any further, let me distinguish between commercial 
airports and general aviation airports. I am certainly not an expert on 
the capital funding needs of most general aviation airports. I 
understand those needs are often addressed through FAA grants under the 
Airport Improvement Program (AIP).
    Southwest has no objection to increasing the annual funding levels 
for AIP grants, especially considering the Airport and Airways Trust 
Fund has over a $6 billion surplus. It is important to note that over 
90 percent of those monies are paid through user fees collected from 
commercial airline passengers--in particular, the 7.5 percent excise 
tax and the $4.10 segment fee. Therefore, we see no reason why AIP 
funding cannot be increased for both commercial airports and general 
aviation airports.
    We object, however, to raising the Passenger Facility Charge above 
the current cap of $4.50 per segment. There is simply no good 
justification to raise our Customer's tax and fee burden.
    With apologies to David Letterman, attached to my testimony is a 
``Top 10'' list explaining the reasons why a PFC increase is not 
needed. I respectfully ask you to review that list.
    I would like to flag a few points. First, our Customers are over-
taxed. Southwest's average airfare has decreased by 8 percent over the 
past two years. However, our Customers' tax burden continues to grow 
relative to the ticket price.
    Second, airline consumers are very sensitive to price. Any increase 
in the PFC means a fare increase for our Customers. This distinguishes 
a PFC from a bag-fee, for instance. Thanks to a 2012 regulation by the 
U.S. DOT, all government-imposed fees--including the PFC--must be 
included in the advertised price of an airline ticket.
    Third, a PFC increase will hurt smaller markets disproportionately. 
At Southwest, we fly exclusively Boeing 737s. To be successful, at a 
minimum, we need to fill a 737 with paying Customers a few times a day 
at any airport we serve. This can be challenging in smaller markets. 
So, for example, say St. Louis doubles its PFC. Then that's a fare 
increase in Wichita, Kansas, or in Panama City, Florida, or in Omaha, 
Nebraska--all cities with nonstop flights to St. Louis. We do not want 
to raise ticket prices, especially in those smaller markets where 
large-plane service is harder to sustain.
    Moreover, if those Customers aren't going to St. Louis, but are 
simply connecting due to the greater number of flights and destinations 
we are able to offer in St. Louis, then the tax increase doubles for 
those passengers, as they must pay PFC's on up to 4 legs of their 
travel itinerary.
    Finally, commercial airports have many sources of revenues. That 
includes existing PFC revenues, which have grown as passenger levels 
have grown over the past several years. Overall, airport revenues have 
increased each and every year since 2010--and well above the rate of 
inflation.
    Beyond PFCs and AIP grants, revenue sources at airports include: 
airline-paid landing fees and terminal rents; passenger-paid parking 
revenues; rental car revenues; advertising revenues; limo-taxi-ride-
share revenues; and concessions revenues.
    One airport has a new gym, where Customers can pay a fee to 
exercise. Another airport this week has announced a new in-terminal 
hotel. All these revenue sources rely on one thing--passengers. That's 
why we must not raise airfares through a PFC increase, which will 
discourage air travel and curb the growth of these other revenue 
streams.
    From an airline perspective, and I believe from a common sense 
perspective, we are faced with a dilemma. One truth pervades our 
American system of airports, that is, the user pays. That user is the 
Customer. Whether it is through the fare they purchase, the ancillary 
services they choose, or the taxes and fees assessed by our 
governmental entities, the passenger pays it all.
    We have two ways to grow our Customer based resources. We can grow 
the number of Customers using our systems. Or, we can increase the fee 
burden upon them. It requires a very optimistic person to think we can 
both grow Customers and saddle them with additional costs. I'm not of 
that camp, nor is Southwest Airlines. We want to spend our energies 
focusing on the tide that floats all boats, and that is growing our 
Customer base. We do not want to increase fees, thereby killing or 
maiming the ``golden goose''.
    Allow me to address the role of political decisions when it comes 
to airport investments. In many cases, politics has hindered progress. 
For instance, local opposition in Kansas City--which desperately needs 
a new terminal for connecting traffic--has prevented the construction 
of a new terminal building, which we are willing to pay for. And, 
several cities have diverted airport revenues for decades, including 
St. Louis, which every year siphons off millions-of-dollars in airport 
funds to support non-aviation programs off-airport. Both examples show 
that the money is there for increased airport spending.
    In conclusion, we have a wonderful bag of tools to apply to the 
airport infrastructure challenge in this country. The most important 
tool, however, is a willing and strong hand to hold and make use of the 
tool. In partnership with great airport operators like my friend 
Rhonda, we will succeed.
    Thank you for inviting me to testify today. I am happy to answer 
any questions you might have.
                               Attachment
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Senator Blunt. I thank both of you.
    Mr. Montgomery, you mentioned in your prepared testimony 
that an increase in Passenger Facility Charges would likely 
hurt smaller airports. It is hard enough, you said, to fill a 
Boeing 737 without increasing any of the costs.
    Do you want to elaborate on that a little bit?
    Mr. Montgomery. Yes, Mr. Chairman. Thank you. I think that 
there are several issues at play.
    One is that, in our smaller cities, we see a larger share 
of customers who are not necessarily business customers but 
that are going on their vacations, a family of four, that type 
of thing. Of course, many of these small market customers go to 
places like say from Omaha, Nebraska, to St. Louis, but they 
are actually going to Panama City, Florida. And the PFC applies 
to the four legs that they fly. Therefore, any increase is 
doubled to that family of four.
    And just by example, a $2 increase in a PFC means an $8 
increase for the family just in the one leg. And by the time 
they finish their trip, that is like a $32 fare increase. It 
hurts them disproportionately because they are connecting.
    Second of all, I would say that the airlines have spent 
years developing finely tuned revenue management systems, and 
those revenue management systems are geared to try to attract 
the most customers for the best price. And as we take a large 
portion of the money that they have to pay to travel and put it 
in an uncontrollable environment such as taxes, that diminishes 
our ability to actually attract more.
    That is why I say it risks those customers and why we think 
it is a very poor idea.
    Senator Blunt. Ms. Hamm-Niebruegge, I think you described 
St. Louis as a medium-sized airport. How do you feel about 
that, as it would impact passengers who are going to more than 
one airport in a trip, or what the impact would be on smaller 
airports versus the large hub airports?
    Ms. Hamm-Niebruegge. Thank you, Mr. Chairman.
    I mean, we take very seriously the cost, and we are very 
cost-conscious of what it is costing the airlines and our 
customers to fly through St. Louis. So this is the world of 
free-market competition.
    I mean, I think for us, when we are attracting the 
connecting passengers, and we have been doing so especially 
with the help of Southwest in recent years, that is a growing 
need for St. Louis. So we are very sensitive to that price.
    So I think when we look at it, we would make sure that we 
are only raising the PFC enough to be able to meet the demands 
that we have and not impact those families. So we would also 
watch other airports and what their PFC rates are doing because 
we do not want to be noncompetitive. I mean, we have gone from 
a $17 cost for per enplaned passenger to $11.75 this past year, 
and we are very proud of that.
    So for us to raise that, it would be a concern. So we would 
continue to make sure that we are very cost competitive and not 
discouraging that connecting family, especially from the 
smaller markets that are coming through our airport.
    Senator Blunt. Mr. Montgomery, I think you suggested more 
money from the Airport Improvement Fund would be a better way 
to meet these needs. I am not sure that taxpayer advocacy 
groups would agree with that, but why do you think that is a 
better way than having the passengers who are using the 
facility pay the cost of improvements?
    Mr. Montgomery. Mr. Chairman, if you will, I will go back 
to my analogy of tools in the toolbox. I think that it is an 
important tool that can be sharpened and can be used better. We 
do not necessarily need to increase the taxes going into the 
airport and airways improvement fund, but we do have a $6 
billion surplus in that fund, and those monies could be 
harvested for many, many airports.
    Increasing the AIP, I would never represent that that is 
the whole solution. That is not the whole solution. But I think 
it is a very important part of the solution.
    Senator Blunt. Probably for this to work, we need to stay 
pretty close to on time, since because we have two panels. I 
will go to Senator Cantwell now.
    Senator Cantwell. Thank you, Mr. Chairman.
    This is such an interesting discussion, and I think we have 
been having at for a long time. And so I am trying to figure 
out how, when I look at my state anyway, and I look at the 
relationship between economic development and airports, I just 
want to continue to see us make this investment.
    Every airport in my state is growing, and every investment 
we have made has paid dividends, so I want to figure out how we 
get here.
    I heard this story once, I do not know if it is true, Mr. 
Montgomery, but I heard that your legendary former CEO, Mr. 
Kelleher, once had a dispute with another airline over the name 
of a frequent flyer program. They had both had branded it the 
same way. But instead of disputing with lawyers, they decided--
Mr. Kelleher suggested that they arm-wrestle instead.
    So I do not know if we are at the arm-wrestling point here 
between the PFC and the AIP, but I just feel that we have to 
get a resolution to this issue because we need this investment. 
We need to get to the point where we can agree on the right 
balance.
    So do either of you have an idea about where you might 
compromise on this issue to get us to that right balance?
    Mr. Montgomery. Well, I will go first.
    Ms. Hamm-Niebruegge. Sure.
    Mr. Montgomery. I think that one of the most important 
things that we do in the airport affairs and airport world is 
collaborate. We are always trying to collaborate, and that is 
the way that we have been able to beat some of the challenges 
in St. Louis. The airport invited us in and talked to us as 
airlines to ask what do you need, how do you see us addressing 
this? We would make suggestions. Some of those worked. Some of 
those did not work.
    I do not want to suggest that I arm-wrestled Rhonda. I have 
way too much----
    Senator Cantwell. She looks pretty tough.
    [Laughter.]
    Mr. Montgomery. I think the end of the story on Herb's arm-
wrestling is you know that he got beat.
    [Laughter.]
    Senator Cantwell. I did not know.
    Mr. Montgomery. Absolutely. I will tell you the whole story 
at another time. It is a fun story.
    But I think that that collaboration is the most important 
thing that we do. I do not think either of us have all the 
answers.
    I would also say that as far as when we look at say ACI's 
recent report that shows the $100 billion worth of challenges 
that are coming up in the next few years, when I submit my 
budget to Gary Kelly for capital improvements that I want to 
do, it is a kitchen sink kind of budget, and he always kind of 
looks over his glasses at me and says, really? And the actual 
budget that I submit is significantly lower than that. And when 
I have an approved budget, when it comes to actually performing 
those projects, only a portion of that set actually get done 
for a wide variety of reasons.
    I think that is the same challenge we have here. Airports, 
yes, they have needs, they have wants. There is a large set. 
But to think that that full set from the surveys is a reality 
is a mistake. The actual number is much less than that, and we 
are able to collaborate and work to do the most important 
projects.
    And the last thing that I would say is that the ACI report 
also shows 50 percent of the need is unfunded, as it should be. 
In the last 10 years--I referenced the $100 million that we 
have done or have agreed to do, and 55 percent of that is 
financed, which is that big, unknown category that is presented 
on the ACI report. So I would represent that the tools that we 
have in the toolbox should be allowed to work, and that they 
are sufficient.
    Ms. Hamm-Niebruegge. I would agree with Bob when we talk 
about collaboration, because I do think the airports have to 
work extremely closely with the airlines. We are not enemies. 
We are partners. And I think, in the past sometimes, we have 
viewed each other as enemies. So I think that collaboration has 
to be there.
    The other piece I would tell you is it is an education 
process. I am always amazed at very, very intelligent men and 
women in the business community who have no idea really how 
airports operate or how they are run. And so I think it is 
incumbent on us as airport directors to help educate our 
communities so that they understand some of the burdens that we 
are under, and they understand what is a PFC. It is not a tax. 
It is a user fee.
    And when we look at that and we look at some of the 
things--my community is asking me all the time, Rhonda, why 
can't we have this? Rhonda, why can't we have this? And you 
have to balance the budget and the monies that are there.
    So I think it is an education process, that we have to 
continue to educate our local leaders in our region on how 
airports operate and what partnerships mean with the airlines, 
and what a PFC really is.
    Senator Cantwell. Well, I am not sure the arm-wrestling 
match is off. We might still have to bring it back. But anyway, 
thank you.
    Senator Blunt. Senator Inhofe.

                 STATEMENT OF HON. JIM INHOFE, 
                   U.S. SENATOR FROM OKLAHOMA

    Senator Inhofe. Thank you, Mr. Chairman.
    A lot of the Members here are also on Armed Services, and 
we are meeting simultaneously, so I missed opening statements 
and maybe questions that have already been asked. But I am 
really interested in this.
    I am going back many years ago to my old Mayor days. That 
was a great concern we had. We were concerned about the 
airlines. I remember, I was Mayor when you guys first came in, 
and I was out there recruiting you.
    Let me ask you, when you refer to a medium-sized airport, 
what Lambert is, I should know but I do not----
    Ms. Hamm-Niebruegge. A medium-size is 5 million to 15 
million.
    Senator Inhofe. OK.
    Ms. Hamm-Niebruegge. And this past year, Lambert had just 
shy of 14 million.
    Senator Inhofe. OK, OK. Well, and the fight has been there 
for a long time. I recall when PFCs first came on, and, of 
course, they started out very, very low. I think the last 
change was made a couple years ago. It went from $3 to $4.50. 
Is that correct?
    Ms. Hamm-Niebruegge. Correct.
    Senator Inhofe. OK. Now, if you look at the AIPs, and I can 
remember when the AIPs, it was partially my effort to try to 
get them to be more of a concern for regional--instead of just 
the regional, large regional airports, getting into some of the 
smaller fields like mine in Tulsa, Oklahoma.
    So you have the AIP. You have the PFC. You have other 
sources like the other revenues generated from the airports. 
But I have not heard anyone say anything, at least since I came 
in, about municipal bonds.
    Where do they fit? You were doing a nice comparison, Mr. 
Montgomery, when I first came in as to these different sources, 
the tools in your toolbox. Where are municipal bonds? How do 
they fit in?
    Mr. Montgomery. Senator, I think that the municipal bonds 
are extremely important. That is where we are in full agreement 
with Rhonda and with all of the airports.
    I said that 55 percent are financed by--the local term is 
GARBs, the General Airport Revenue Bond, which is a form of 
municipal bond. So it is a tax-free instrument, and it allows 
us to borrow money at low rates.
    And we think because that is the biggest tool in the 
investment toolbox, it is absolutely essential that we maintain 
that tool and sharpen it, if we possibly can.
    Senator Inhofe. Now, have you been using that tool?
    Ms. Hamm-Niebruegge. We have, and we agree that that tool 
absolutely has to stay.
    But in an airport like St. Louis Lambert, we built a 
billion-dollar runway several years ago, and so right now, we 
still have a significant amount of debt that we are paying 
down. So the opportunity for us to go out and use municipal--we 
have not gone out for bond sales since 2009, and that was a 
very small one, to do a terminal renovation. Again, AIP doesn't 
cover terminal renovations so we had to do bonds for that.
    But we have not had the ability to really go out for bond 
sales at this point because of a heavy burden of debt. So one 
of the things that I think is important is that the PFCs could 
also allow us to pay down that debt more aggressively.
    Senator Inhofe. You could use those funds.
    Ms. Hamm-Niebruegge. Absolutely. We could use those funds 
to pay down our debt more aggressively. That makes us more 
competitive from a cost perspective, hopefully attracting more 
airlines to grow in St. Louis.
    So that is another tool that the PFC cap would give us by 
allowing us to pay that debt more----
    Senator Inhofe. That might, as Mr. Montgomery said in his 
testimony, have the effect of reducing the overall ridership 
that generates the revenue necessary not only for your 
improvements but to pay off the debt.
    Ms. Hamm-Niebruegge. You know, that is probably one of the 
points we disagree on, because I think, again, you have to look 
at the free market competition. We would not raise our PFC so 
much that it put us out of competition with other airports. We 
would make sure that we watched that very closely and that we 
are keeping that at a rate that allows customers to still fly 
and connect through St. Louis as well as the local customer.
    Senator Inhofe. The $4.5, that is a cap?
    Ms. Hamm-Niebruegge. That is correct.
    Mr. Montgomery. Correct.
    Senator Inhofe. Now it is proposed somewhere--and I am new 
on this committee, so I have not been into a lot of these 
issues.
    But there is a proposal to increase, I think to $8. Is that 
correct?
    Ms. Hamm-Niebruegge. There have been a number of proposals 
out there to have an un-cap to go to $7.50, to go to $8, so it 
has been a little bit over----
    Senator Inhofe. Yes, I do not think that was actually in 
our reauthorization, but it was a consideration at that time.
    Now would you encourage, not that you have to go to the 
cap, but increase in the cap so that the capacity is there, 
should you call upon it?
    Ms. Hamm-Niebruegge. I am sorry? I did not hear----
    Senator Inhofe. Would you be for increasing the cap?
    Ms. Hamm-Niebruegge. I would be for increasing the cap, 
yes.
    Senator Inhofe. And you would not be for increasing the 
cap?
    Mr. Montgomery. I would not.
    And when I hear things like a $4.50 cap, again, that 
applies to just one leg. The passenger pays it on four, so each 
passenger, a passenger who connects somewhere and goes back, 
would be subject to a $36 PFC, and to increase it makes that 
even much more.
    And that is why I am concerned that the large tax burden 
starts to shape people's purchasing decisions because they are 
looking at the entire cost of travel and not the cost at one 
airport, such as St. Louis.
    Senator Inhofe. I understand. My time has expired, but I 
think that makes a pretty good argument there.
    When you increase, if you double this, you are more than 
doubling it because it is per leg and it could be a very, very 
prohibitive thing that might have the adverse effect that you 
do not want to happen in terms of your ridership.
    Ms. Hamm-Niebruegge. Right. The only add that I would add 
to that, and again, Southwest does not do this, but all the 
other carriers are charging the bag fee, the preferred seat 
fee. They are charging change fees. So they are charging 
significant dollars, far more than a PFC.
    So maybe if the airlines could look at that piece of it--
again, Southwest does not follow that model, but all the other 
carriers do, and that is a far more burden on the passenger 
than the PFC.
    Senator Inhofe. Thank you very much.
    Senator Blunt. Senator Gardner.

                STATEMENT OF HON. CORY GARDNER, 
                   U.S. SENATOR FROM COLORADO

    Senator Gardner. Thank you, Mr. Chairman.
    And thank you to the two witnesses today. This argument is 
eerily reminiscent of some conversations we are going to be 
having on the Hill here the next couple months. Should we fund 
this? Should we not fund this? Should we cut this tax? Should 
we not cut this tax? So we will bring you back for that. It 
sounds good.
    Mr. Chairman, thank you very much for holding this hearing 
today. This is very important for Colorado. I have the 
privilege of representing the sixth busiest airport in the 
country, one of the 20 busiest airports in the entire world.
    I am very proud of the work that we do. We are considered 
one of the busiest destinations or locations for United 
Airlines, Frontier Airlines, Southwest Airlines, so I am 
excited about the opportunities and options that flyers in and 
out of Denver, Colorado, and Denver National Airport have.
    It is an important hearing as we talk about infrastructure, 
because we know what Denver's new airport did 20 years ago, and 
we know what the growth around that airport has been. And you 
can go out right now and see. I think there were 15 cranes in 
the skyline just right around the Denver Airport the other day, 
so it is incredible--with red lights and far enough away from 
the airport.
    But it is great to see the work that is taking place there.
    Mr. Montgomery, in your testimony, you talked about and 
answered some of the questions. You talked about raising the 
Passenger Facility Charge being an unnecessary measure and that 
airports should negotiate directly with airlines and use 
existing tools to meet their infrastructure needs. But yet we 
hear from airports across Colorado--Durango, Grand Junction, 
Colorado Springs, and Denver have all said that raising the PFC 
is critical to meeting their long-term infrastructure needs.
    At the same time, Ms. Hamm-Niebruegge--is that how you say 
the last name? Good.
    In your testimony, you talk about $100 billion in 
infrastructure needs at airports, and we are facing a 
significant shortfall to meet those needs. Yet Mr. Montgomery's 
testimony, he says that commercial airports have $12.7 billion 
cash on hand to meet those infrastructure needs, and existing 
PFC revenues are at historical highs right now.
    So you have airports telling the Committee that we have a 
shortfall of billions of dollars to meet infrastructure needs. 
We have airlines telling the Committee that there are billions 
of dollars in surplus to meet infrastructure needs.
    So can you help me understand how both of these can be true 
at the same time?
    Ms. Hamm-Niebruegge. Well, I think--I am sorry.
    Mr. Montgomery. Go ahead.
    Ms. Hamm-Niebruegge. I think one of the challenges is, on 
the PFCs in the case of St. Louis, and there are many, many 
airports out there, our PFCs are currently pledged through 
2032. So our ability to use the existing PFCs, they are already 
pledged.
    And many airports that have done large projects like St. 
Louis have the same issue. We have a very small amount of the 
PFCs currently that are eligible for any programs because of 
the pledge of building out the runway.
    We are, as we see the growth of connecting traffic, which 
is encouraging to us and certainly why we need to be cost 
competitive, we hopefully will see some of that PFC come to us 
to be able to fund other projects. But currently, there are a 
lot of airports whose PFCs are pledged out.
    Senator Gardner. Mr. Montgomery?
    Mr. Montgomery. Yes, Senator, there is an old Texas saying 
that says ``never ask a barber if you need a haircut.'' And 
that comes to mind when I think about the PFC issue because the 
airports are both saying we need it and they are receiving the 
money.
    And I can spend much more than you could ever give me. That 
is a unique talent that I have. I think that there is another 
old saying in the airport business: Once you have seen one 
airport, you have seen one airport. And so it is hard to draw 
conclusions when you look at the needs of Denver International 
Airport versus Grand Junction.
    I do not think that the Passenger Facility Charge, being 
only 20 percent of the total tools that we use to spend at 
airports, is not going to make a significant enough difference 
for them. That AIP funding and increasing that I think can make 
a much bigger difference for those very small airports and for 
the GA airports that are all around the country.
    Senator Gardner. Thank you. And, Mr. Montgomery, I commend 
you on your barber, so thank you very much.
    [Laughter.]
    Senator Gardner. Mr. Chairman, thank you.
    Senator Blunt. That is right, Bob. Your barber has done an 
excellent job.
    Mr. Montgomery. They are still telling me I need a haircut.
    Senator Blunt. Mr. Peters.

                STATEMENT OF HON. GARY PETERS, 
                   U.S. SENATOR FROM MICHIGAN

    Senator Peters. Thank you, Mr. Chairman, and thank you to 
our panelists for being here today and for your testimony.
    Ms. Hamm-Niebruegge, a question for you. The FAA extension 
included a number of provisions to respond to insider threats 
and improve the screening of airport workers, as I know you are 
well aware. The legislation also sought to address 
vulnerabilities in sterile and nonsterile areas in airports by 
doubling the number of VIPR teams that are deployed at airports 
across the country.
    And with the recent attacks in Fort Lauderdale and in 
Brussels, it is clear that we all need to do more to protect 
airports and the traveling public from these types of attacks. 
And I know that for airports in my state, if money were no 
object, and that clearly is not the case with airports in my 
state, and I am sure you are well aware that, that they would 
already be investing in various public safety initiatives such 
as ballistic protective podiums, permanent force protection 
barriers along the curbside drop-off to protect from vehicle-
borne attacks like the ones we saw tragically in London just 
yesterday.
    So I am curious, what are your thoughts on allowing 
airports to utilize AIP funds and/or PFC funds on public safety 
initiatives such as this?
    Ms. Hamm-Niebruegge. I mean, I think we should be able to. 
I think one of the challenges we see is the restrictiveness 
today of AIP funds. The majority of it is used for runway only 
so, obviously, you cannot use them for the terminal. So I think 
the ability to have more flexibility in how we use the funds is 
critically important.
    And I think all of us are very mindful today of the need to 
be looking at security and always enhancing it. You know, we 
have the benefit of a lot of canine dogs in St. Louis that are 
our own that are roving areas. But we know it is just a small 
portion of the total need that is out there. So certainly, the 
flexibility of being able to use both AIP and PFC dollars for 
projects other than runway projects is important.
    Senator Peters. Would there be other innovative ways we 
could finance that in addition to those two? Obviously, I think 
those two are an opportunity, but is there anything else that 
you are thinking about or airports are thinking about to fund 
these projects?
    Ms. Hamm-Niebruegge. You know, I think that is one thing 
that, again, where Mr. Montgomery mentioned the fact that we 
have to work in collaboration, and I think you have to analyze 
the risk. You have to look at your airports, how they are set 
up today, where the most vulnerability is. And I think you can 
partner with the airlines to say this is an enhancement that we 
need, and are we willing to fund it through the rates and 
charges of the airport?
    Again, you always want to make your rates and charges as 
competitive as possible so that you have the opportunity to 
attract. But I do think it is one of those projects that we can 
work with our partners at the airlines to see if it is 
something that can be rate-based.
    Senator Peters. Let me ask you, Mr. Montgomery, from your 
perspective, how are airports doing when it comes to investing 
in state-of-the-art security equipment? And more specifically 
with Southwest Airlines, what are you doing to work with TSA 
and airports to enhance airport security? Any specific examples 
of things that you are doing around the country?
    Mr. Montgomery. Senator, thank you for asking the question. 
We are spending a huge amount of time collaborating with 
airports on this particular subject. One of the huge challenges 
that we see is the dilemma--are there assets that need to be 
built that protect us, or are there processes that we use that 
protect us? And which of those yields the better result?
    And I am not sure that we have concluded anything. I think 
the answer is probably somewhere in the middle. There are some 
things we can actually spend money on that help protect us. But 
are there other electronic initiatives, surveillance 
initiatives, identification of passengers, that do a better job 
of it?
    We have a large department that does nothing but this, and 
I would love to invite them to come visit with you and give you 
the full scope of exactly what they are doing, because I only 
see it from the airport side and not from that real security 
side. So I do not want to dodge your question----
    Senator Peters. I understand.
    Mr. Montgomery. I would just say that there are two pieces 
and several other pieces to this. Which one is more effective, 
we are willing to work on all of them.
    Senator Peters. Well, I would welcome your folks to come in 
to have a broader discussion, actually both of you, to 
understand how we finance some of these security improvements, 
which are absolutely critical and will be in greater need as 
time goes on, so thank you for your answers.
    Mr. Montgomery. Thank you.
    Ms. Hamm-Niebruegge. Thank you.
    Senator Blunt. Senator Sullivan.

                STATEMENT OF HON. DAN SULLIVAN, 
                    U.S. SENATOR FROM ALASKA

    Senator Sullivan. Thank you, Mr. Chairman.
    And I appreciate the witnesses' testimony on a very 
important topic. The President has talked about the major 
infrastructure package that our country needs. I think a number 
of us agree with him. I think that in the realm of airport 
infrastructure, that is certainly an area that we need that 
kind of investment for the country.
    And yet, I think that if you look at any major 
infrastructure project or initiative that we would undertake as 
a Nation, as a Congress, it would not be very efficient if we 
do not also look at modernizing our Federal permitting system 
in order to deploy resources, to build infrastructure.
    And you probably heard a lot of the nightmare scenarios 
about how now it takes about 6 years on average to permit a 
bridge in America. In this great Nation of ours, you cannot 
even permit a bridge let alone build one.
    We had a hearing last year on airport infrastructure and 
the head of the SeaTac Airport--and I know my colleague Senator 
Cantwell probably remembers this--he was talking about the 
runway expansion that they did there. And I asked him how long 
it took for them to build it? I know it was a bit of a 
complicated project. He said, ``I think the answer was 4 
years.'' And then I asked him how long did it take to get the 
Federal permits and the pre-build regulatory permission before 
they built that runway? He answered 15 years. And then he went 
on to say, Senator Sullivan, I think the time it took to build 
it and permit it, the Egyptians built the pyramids in a shorter 
amount of time.
    So what, from your perspective, do we need to do, and a lot 
of it is Federal, no doubt about it, some of it is local, but a 
lot of it is Federal, that if we are going to undertake a 
significant infrastructure package for the country, including 
airport infrastructure, what would we need to do, and if you do 
not have the answers, I would love it if you could submit them 
for the record, to streamline and modernize the Federal 
permitting system that will enable airports to actually build 
new runways and build new terminals and expand in a way that 
does not take 15 years just to get the permit? What should we 
be doing in the Congress on that very, very important issue?
    Ms. Hamm-Niebruegge. Well, I think we need to lessen the 
oversight at the FAA. You know, airports also have the benefit 
in our case, and there are a lot of other ones, that we own lot 
of land. And even on simple things like trying to release 2 
acres of land to be leased for nonaeronautical--I mean, we are 
all looking at ways to raise nonaeronautical revenues. Can we 
do land leases with distributions or things that make sense 
that might not have necessarily an aeronautical value to it but 
rather than sit there empty? The process for us to even get 
approval to use 2 acres of land for a nonaeronautical revenue 
stream is ridiculous.
    So lessening that oversight, giving some credit to the 
airports and allowing them to make decisions that can bring 
alternative revenues into your airport to help with some of 
these funding and cost initiatives would be a critical first 
start.
    Senator Sullivan. OK.
    Mr. Montgomery. I really appreciate you bringing up the 
issue, Senator, because in Southwest's experience, we have 
recently gone into airport construction ourselves. We built 
Dallas Love Field. We built the international concourse at 
Houston Hobby Airport. We are renovating all of Terminal 1 at 
Los Angeles International Airport. And we have a major 
expansion with a concourse and new security area, a concourse 
transfer bridge, going on in Fort Lauderdale. Several billion 
dollars' worth of spending on those projects.
    Our experience is that when we bring private sector 
initiatives to the construction project, we can build 
significantly less than the public sector can, not because the 
public sector is stupid but because they are saddled with 
processes and approvals and things that we might not be saddled 
with. So we can dramatically drop the cost of addressing 
infrastructure needs.
    And I think that creating structures where we can more 
nimbly do that helps us address the needs, and then getting 
better Federal approvals, particularly through the 
environmental process, I think we would probably agree that is 
one of the most complex processes. That would help us shrink 
the time to address things and reduce the cost of----
    Senator Sullivan. Well, I am going to be introducing a bill 
here in the next couple weeks. I certainly want to try to make 
it a very strong bipartisan bill, the Rebuild America Now Act, 
which is all going to be about modernizing and streamlining our 
Federal permitting system to actually build things, not delay 
to build things, build things.
    And we would welcome your comments, if you want to submit 
them for the record, of additional ideas and thoughts and 
legislative changes that you need, that you would want on 
airport infrastructure. We would welcome the chance to try to 
include that as part of our bill.
    So thank you very much.
    Ms. Hamm-Niebruegge. Thank you.
    Senator Sullivan. Thank you, Mr. Chairman.
    Senator Blunt. Senator Klobuchar.

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Thank you very much, Mr. Chairman, and 
thank you to Ranking Member Cantwell, as well.
    My state, Minnesota, has strong connections to aviation, 
childhood home of Charles Lindbergh, also home to the 16th 
busiest airfield in the U.S. Cirrus Design, which makes jets, 
is also up in Duluth, a major employer up there.
    I am not going to be able to stay for the second panel 
because we have something called the Supreme Court hearing 
going on--by the way, our two witnesses, I am going to use the 
same approach that we all use there: Twenty years ago, did 
you--no, I am not going to.
    [Laughter.]
    Senator Klobuchar. But I did want to mention, because I 
will miss the second panel, that Senator Murkowski and I passed 
the Small Airplane Revitalization Act, which sped up some of 
the approvals, directed the FAA to speed up some of the 
approvals on certification to improve safety for small jet 
manufacturers. And we have really been held up a bit in rules, 
and I will submit questions on the record on some of the 
questions for the second panel to be able to build upon the new 
Part 23 regulations we have.
    I did want to ask--I guess I will start with you, Ms. Hamm-
Niebruegge? That is how I see it. Right? OK.
    On the infrastructure package, in your testimony, you 
highlight the consequences of underinvesting. There are a lot 
of bills out there. Senate Democrats have a bill for $65 
billion to modernize America's ports, airports, and waterways. 
I am a big fan of this.
    What kind of improvements do you think would be most 
helpful to the Nation's airports?
    Ms. Hamm-Niebruegge. Well, I think, you know, you have both 
the runway system and, of course, you have the terminal 
experience. I think anybody will tell you--and I love our 
terminal. I mean, it was designed by a famous architect, and I 
love it. But at the end of the day, it was a terminal built in 
1956, and so we have the need to look forward in the future 
about the designs of our terminals. And if you go anywhere 
across the world and you look at the things that they are 
building from a customer experience--and we all want to try to 
encourage people to travel. We face a lot of airports on the 
terminal side that just are not up to speed.
    So I think that is one piece because there is not a lot of 
funding, in most cases, on the terminal side.
    Senator Klobuchar. As you know, the President's proposed 
budget eliminates EAS. In 2016, five Minnesota airports were 
eligible for EAS. It is really important, especially in 
northern Minnesota.
    How would St. Louis Lambert International be affected if 
smaller community airports stopped sending connecting flights 
to your airport?
    Ms. Hamm-Niebruegge. It would have a dramatic impact, a 
negative impact, on us. We currently are served with 10 EAS 
markets. They are extremely critical. Those markets bring in 
about an additional 50,000 passengers every month to our 
terminal, and those are people that would not come to St. Louis 
had they not had access through the EAS market, so they are 
critically important to us.
    Senator Klobuchar. Right. Very good.
    Congress has not passed a multiyear FAA reauthorization 
since 2012. Last year, I was glad we avoided a repeat of 2012 
where we had 23 short-term extensions.
    How can we forget that? But who is counting?
    How do short-term FAA extensions make it more difficult for 
airports to plan their investments?
    Ms. Hamm-Niebruegge. Well, it is very difficult. On short-
term extensions, you know, one, you can barely get the design 
of anything done without knowing that, in the long-term, we are 
going to have the money there to build it. So you are reluctant 
to even do design work and go spend that 20 percent or 30 
percent on design work if you do not have a commitment that the 
long-term revenue is going to be there to build it. So it is 
critically important.
    It is hard to get anything done on short-term 
reauthorizations. You know, it cramps our ability to even go 
out and design the projects.
    Senator Klobuchar. Right. Very good.
    Mr. Montgomery, you mentioned in your testimony that 
Southwest has been successful at small, medium, and large 
airports. In Minnesota and the upper Midwest, we have a strong 
network of small airports that give rural communities 
convenient access to major metro areas. How does Southwest work 
with small airports to grow and expand service?
    By the way, we are home of Sun Country, as you know. But 
you actually had a really good competitive service going for a 
while to Minnesota. The rates went down. I had so many choices. 
It is fine now. Sun Country is doing some of it.
    Mr. Montgomery. Well, on the wall in my office, I have a 
picture of two buffaloes going at it that says bring on the 
competition, and we have been a big believer in competition.
    As far as serving small communities go, we have a network 
planning office. We have a business development office that 
spends an inordinate amount of time meeting with those airports 
to find out, what do the customers want?
    Our challenge is that we only fly 737 aircraft, so with 
some of those smaller operators that feed places like St. 
Louis, a lot of those folks come straight over to Southwest 
Airlines, and we enjoy that very much. But because we do not 
codeshare, we are not able to really do a lot of coordination 
with them. But we see them as very important in dealing with 
the whole aviation challenge.
    Senator Klobuchar. OK. Thank you very much, both of you.
    Senator Blunt. Senator Heller.

                STATEMENT OF HON. DEAN HELLER, 
                    U.S. SENATOR FROM NEVADA

    Senator Heller. Mr. Chairman, thank you. Thanks for hosting 
this, and also the Ranking Member, for putting this together.
    I clearly feel it is probably important to you, knowing 
that--is it Hamm-Niebruegge? Is that correct?
    Ms. Hamm-Niebruegge. Yes.
    Senator Heller. Very good--is here as a witness today. I 
want to thank both of our witnesses for being here and taking 
time out of your busy schedule. I am very familiar with how 
difficult it can be back in the states when you are in charge 
and involved with one of your local airports. So I appreciate 
what you do, what both of you do.
    I want to start with you, Ms. Hamm-Niebruegge. I have a 
good relationship with airports in my state. We have three 
commercial airline facilities, McCarran, Reno-Tahoe, and the 
Elko airport. It is not just about--as you can imagine, in the 
state of Nevada, bringing 55 million people in every year 
through these facilities, how important it is not only to get 
them to the airports but obviously to get them to areas near 
the airport, you know, for example, the Strip, downtown, UNLV. 
You go through the list of it. Very, very important.
    And planning--planning has become very important. I know 
that the Chairman serves with me, I am the Co-chair, is Co-
chair with me on the Tourism Caucus. And I know this is 
important to St. Louis as well or, obviously, you would not be 
here. But how could we better focus as a Congress on Federal 
planning, on tourism infrastructure you just mentioned with the 
last person, with our airports and our convention centers?
    Ms. Hamm-Niebruegge. Well, I just flew out of Reno Sunday 
night as we had a weeklong vacation in Tahoe. Thank you. It was 
wonderful. And toured the strip in Reno as well.
    But, you know, I think one of the things that we have to 
focus on very, very heavily is the tourism industry and what it 
brings, the convention industry, what it brings. We have a 
large convention center in St. Louis as well. We are heavily 
reliant on that.
    So the business traffic, and even in the downturn in 2008 
when we saw businesses pull back and stop flying, that was very 
hard for our industry. So I think making sure that we focus on 
all of those sectors, the business traffic, the leisure 
traffic, the convention traffic, and supporting industry 
standards and supporting industry I guess promotions or 
incentives, to be able to bring those into your cities are 
critical.
    So you have to work very closely with the business 
community, and it goes back a little bit to the education side 
of making sure people understand what the travel, tourism, 
convention businesses bring to your city. The economic impact 
when you have a convention in your city is unbelievable.
    And so I think it is just making sure that we educate 
people on that.
    Senator Heller. You can imagine a city like Las Vegas, I 
believe it is some $60 billion or 13 percent of the GDP for the 
state just in convention business.
    If I can turn just for a minute, with your experience, do 
you know, in the competitive transportation grant program, do 
they take into account wear and tear from visitors that come 
and go out of a community like this?
    Ms. Hamm-Niebruegge. Are you asking me?
    Senator Heller. I am asking you, yes.
    Ms. Hamm-Niebruegge. Taking into--effect on the airport 
or----
    Senator Heller. Yes.
    Ms. Hamm-Niebruegge. You know, I am not sure I can answer 
that question. I mean, I think we certainly take a look on the 
wear and tear on the airport. As airport directors, you want 
that traffic in and out. You build it into your plan. You look 
at both your short-term and long-term planning of what does 
additional growth mean, how are we going to keep the facilities 
up, the cleaning, the restoration, all of those things. But I 
am not----
    Senator Heller. I am just curious if their competitive 
grant process takes that into account.
    Ms. Hamm-Niebruegge. Right. I will try to get that answer 
for you and submit it tomorrow or the following day.
    Senator Heller. Mr. Montgomery, Southwest Airlines is the 
busiest commercial carrier in McCarran Airport. 
Congratulations.
    Mr. Montgomery. Yes, sir. Thank you. I have had a lot of 
history there.
    Senator Heller. Let me know. Let me know what I can do to 
help. What can I do to help you?
    Mr. Montgomery. Well, Senator, I think that you bring up a 
really important subject about mass transit. Las Vegas has one 
of the largest challenges on the planet in that you have so 
many visitors coming and leaving. You just look at the 
cabstands and see the way that they handle that.
    One great thing that you all have done is that a lot of the 
economic development folks, a lot of the folks designing 
monorails and everything else, started at the airport and 
worked with me as we were developing a lot of McCarran. So they 
understand what that airport challenge is.
    And as we come up with new ways, I think one of the 
Senators was talking about approvals and how we quickly get 
approval so that we move into construction. And I would say 
that that is the best way to help, if you could just kind of 
plow the way for us and get the process out of the way so we 
can act, that is best.
    Senator Heller. So if there was regulatory relief, that 
would be it for you.
    Mr. Montgomery. Yes.
    Senator Heller. It would be.
    Mr. Chairman, thank you.
    Senator Blunt. Thank you, Senator Heller.
    Senator Cruz.

                  STATEMENT OF HON. TED CRUZ, 
                    U.S. SENATOR FROM TEXAS

    Senator Cruz. Thank you, Mr. Chairman. And I want to thank 
you for holding this hearing today, and thank the witnesses for 
their testimony.
    And I want to especially thank Bob Montgomery for being 
here. Bob is born and raised in Lubbock and is a lifelong and 
proud Texan. And I want to, in particular, congratulate Bob on 
I understand recently achieving his 40th anniversary working at 
Southwest Airlines.
    Mr. Montgomery. They have not gotten rid of me yet.
    Senator Cruz. I hope they do not pay you in peanuts.
    Mr. Montgomery. The day is not over yet.
    Senator Cruz. Well, welcome to the both of you. Thank you 
for being here.
    Ms. Hamm-Niebruegge, I want to take a minute to discuss the 
use of airport Passenger Facility Charges. And Mr. Montgomery's 
prepared written testimony states, ``Allow me to address the 
role of political decisions when it comes to airport 
investments. In many cases, politics has hindered progress. For 
instance, local opposition in Kansas City, which desperately 
needs a new terminal for connecting traffic, has prevented the 
construction of a new terminal building, which we are willing 
to pay for. And several cities have diverted airport revenues 
for decades, including St. Louis, which every year siphons off 
millions of dollars in airport funds to support nonaviation 
programs off airport. Both are examples that show that the 
money is there for increased airport spending.''
    Do you share Mr. Montgomery's concern about diverting 
airport funds to nonaviation uses?
    Ms. Hamm-Niebruegge. We were the first municipally owned 
airport in the country. In 1927, the city bought the airport 
and the land, and eventually, they invested a lot of money and 
built that terminal. And so we were one of the grandfathered 
markets that has about $6 million a year in gross receipts of 
our revenues that go into the city. As the airlines like to 
call it, it is the GRP, the gross receipts payment.
    But for that particular purpose, I understand that because 
of the investment that the city made into our airport, an 
opportunity for them to be able to regain some of the 
investment that they made, so I think that is a unique example 
of it.
    As a whole, I would agree that airport revenue should not 
be diverted to any other forum. I mean, it should stay within 
the airports.
    Senator Cruz. So I want to understand your testimony. You 
said it is about $6 million a year that is being spent in St. 
Louis on nonaviation purposes.
    Ms. Hamm-Niebruegge. Well, it goes directly into the city 
of St. Louis, into their general revenue fund. Again, it is a 
complicated formula. It is a gross percentage of our 
nonaeronautical revenues that come in.
    But the reason for that was, again, it was bought by the 
city in 1927. The city invested a great deal of money in 
building an airport originally. And so it was a way to be able 
to allow them to recoup some of that investment.
    Senator Cruz. Do you have any sense nationwide what the 
volume of funds are that are diverted to nonaviation purposes?
    Ms. Hamm-Niebruegge. Not exactly. I do know that there are 
12 sponsor airports that are grandfathered similar to how St. 
Louis is, not all in the same way that we are. But I do believe 
it is a decent amount of money that is probably going into 
cities.
    Senator Cruz. Mr. Montgomery, would you care to respond to 
this issue and share your thoughts on it?
    Mr. Montgomery. Yes, thank you, Senator.
    I think that one of the great things that has been included 
in all of our legislation about airports is that money on an 
airport needs to stay on an airport. We need to reinvest with 
the resources because it is so expensive to build runways and 
to operate our airports.
    Nationwide, with the airports that are allowed to divert 
revenues, close to $1 billion a year is diverted. That is a 
significant resource that could be redirected to spending. I 
look at it akin to having the unspent balances in the AIP fund. 
And these are resources that we have to address, infrastructure 
that we should make use of.
    Senator Cruz. Now, Mr. Montgomery, another component to the 
Passenger Facility Charge that you bring up in your testimony 
is not just the diversion of funds, but the request by some to 
increase the Passenger Facility Charge.
    In your judgment, what will the impact be on small-market 
airports, if we were to increase the Passenger Facility Charge?
    Mr. Montgomery. Thank you, Senator. I think that what will 
happen is we will have fewer customers. If we increase the cost 
to those customers in the small cities, their options would be 
fewer. There is less of a population to support 737 service 
that Southwest Airlines flies. So our profitability is very 
critical there, and we believe that an increase in cost causes 
customers to decide to do something else, which is going to 
take them out of the whole formula.
    We need more customers to provide more of the customer-
based resources so that we can spend them.
    Senator Cruz. Ms. Hamm-Niebruegge, do you agree with that?
    Ms. Hamm-Niebruegge. Not really. I think it is a twofold 
question. And again, Southwest is one of the carriers that does 
not do this. But if the airlines were so concerned about the 
$4.50 PFC, then they ought to be concerned about the bag fees 
they are charging, and the preferred seat fees they are 
charging, and the changing a ticket itinerary charges that are 
there. Those are far more significant than the PFC. Again, not 
all airlines do that, but the majority do.
    So that is one way to look at that argument. The other 
would be is that, and I said this earlier, you know, free 
market enterprise is great, and we want to make sure that we 
are competitive. And the cost per enplaned passenger is 
important to us because we know that that is important to the 
airlines.
    So raising the PFC or out-costing ourselves so that we 
would not be competitive with other airports that are trying to 
connect passengers from these small communities would be in 
spite for us. I mean, there would be no reason for us to make 
sure that we are being noncompetitive in that sense.
    So I think it does put a burden back on the airport to make 
sure that you know what the markets can handle, that you know 
what your competitors are doing, that you know what the 
customers are willing to pay for, so that you do not lose those 
customers. But it does go to the free enterprise market, which 
I think makes competition great.
    Senator Blunt. Thank you, Senator Cruz.
    Senator Hassan is going to allow us to move to the next 
panel.
    And, Senator, if you can stay, we will give you the first 
round of questions for the next panel.
    So thanks to both of you for being here.
    Ms. Hamm-Niebruegge. You are welcome.
    Mr. Montgomery. Thank you.
    Senator Blunt. A great discussion. I think one of the 
things that comes out of that discussion, as we are 
transitioning panels here, is this really is a partnership, and 
partners do not always agree on everything, but they still have 
to be partners to make this work, and we are glad to see that 
element of your conversation today as well. So thank you for 
being here.
    I will mention that my prepared remarks will be inserted in 
the record, and the opening remarks of any other members will 
as well.
    [The information referred to follows:]

    Prepared Statement of Hon. Roy Blunt, U.S. Senator from Missouri
    In regards to the second panel on aviation manufacturing, the 
Subcommittee is eager to examine additional steps we can take to 
enhance safety, and U.S. competitiveness.
    Civil aircraft manufacturing continues to be the top net exporter 
in the U.S., with a $59.9 billion positive impact on the trade balance.
    Moreover, the FAA's mission--first and foremost--is to ensure our 
Nation has the safest and most efficient aerospace system in the world.
    Safety is paramount, but when FAA uses its limited resource to 
review and certify all products and aspects of manufacturing--even 
those not directly related to aviation safety--it needlessly slows down 
the whole process.
    If everything is a priority, then nothing is a priority.
    Bureaucratic inertia and inconsistent interpretation of regulations 
by different FAA field offices create inefficiencies that may result in 
the delay of newer, safer technologies and systems that can be deployed 
on our aircraft.
    Recognizing this, Congress directed the FAA to refocus its efforts 
on areas that have the highest impact on safety and to rely more on 
technical expertise and resources of the private sector.
    FAA should be applauded for the progress it's made, but we are 
still dealing with many of the underlying inefficiencies that result in 
long wait times and cost increases for approval of new designs.
    The inability of the FAA certification process to approve aircraft 
and components in a timely manner has a direct bearing on the ability 
of U.S. manufacturers to deliver safer products in an increasingly 
global marketplace.
    The purpose of this hearing is to examine ways we can further 
improve the FAA's certification processes, expand FAA's use of 
underutilized Organization Designation Authorizations, and encourage 
FAA to engage more on foreign validation of its certificates.
    I look forward to working with our Committee Chairman, John Thune, 
our Ranking Member, Bill Nelson, and my Subcommittee counterpart, Maria 
Cantwell, on continued bipartisan success in advancing a comprehensive 
FAA reauthorization this year that is pro-growth, pro-jobs, and, most 
importantly, pro-safety.
    I turn now to Ranking Member Cantwell for any remarks she would 
like to make.

    Senator Blunt. The second panel is on aviation 
manufacturing. The Subcommittee is eager to examine additional 
steps we can take to enhance safety, but also to enhance U.S. 
competitiveness. This is an important area for us to be 
competitive in.
    Obviously, we do not want to give away anything on the 
safety front. But when the FAA uses its limited resources to 
review and certify all products and aspects of manufacturing, 
we need to be sure that we are doing that in a way that does 
not needlessly slow down the whole process.
    So we are pleased to have with us today, as Senator 
Cantwell has already pointed out, Ms. Peggy Gilligan, who has 
been the Associate Administrator for Aviation Safety at the FAA 
for a significant amount of time and knows this area better 
than anybody. But even with that said, while not testifying 
today, Ms. Gilligan has with her, Dorenda Baker, who is the 
Director of Aircraft Certification Services, who will be 
available for questions.
    Dr. Gerald Dillingham, the Director of Civil Aviation 
issues at the Government Accountability Office is here, as is 
Greg Fedele, the President of Sabreliner Aviation.
    So, Ms. Gilligan, we will start with you.

           STATEMENT OF MARGARET GILLIGAN, ASSOCIATE

        ADMINISTRATOR, AVIATION SAFETY, FEDERAL AVIATION

         ADMINISTRATION; ACCOMPANIED BY DORENDA BAKER,

           DIRECTOR, AIRCRAFT CERTIFICATION SERVICES,

                FEDERAL AVIATION ADMINISTRATION

    Ms. Gilligan. Thank you, Chairman Blunt, Senator Cantwell, 
and members of the Committee.
    Let me thank you, Senator Cantwell, for the kind words.
    I am very proud of my service to the FAA, but I want to 
thank this Committee for the strong support that you have 
always given for our efforts and also for the opportunities I 
have had over the years to appear before you, including this 
chance to discuss the aircraft manufacturing community in the 
United States.
    And it is quite clear that the state of American aviation 
manufacturing is strong. The FAA is proud to partner with 
industry to find ways to make it stronger and to continue to 
support innovation.
    As has been noted, civil aviation manufacturing is the 
strongest trade sector for net exports at $60 billion. The 
manufacturing sector supports 1.5 million jobs in the U.S. 
economy and contributes $165 billion to our GDP.
    But more importantly, from my perspective, it contributes 
to our outstanding aviation safety record where we have seen no 
passenger fatalities in U.S. airline operations for more than 8 
years. This accomplishment, our safety record, is not the 
result of luck or happenstance. It is the result of FAA, 
manufacturers, operators, and labor working together to 
establish sound safety standards and practices. And the bedrock 
of this achievement of our safety record is the FAA 
certification process itself, which ensures the American public 
and this Congress that our manufacturers are meeting safety 
standards.
    Now this Committee has asked FAA to improve the process for 
certifying aviation products, and we have done just that. You 
wanted performance objectives and metrics. We have developed a 
joint industry-agency certification scorecard.
    The sample scorecard you have in front of you has three 
sections. At the bottom, we track the manufacturer's 
noncompliance and implementation of corrective actions. In the 
middle, we measure how well FAA is optimizing delegation based 
on the company's capabilities. And at the top, we actually rate 
each other's performance.
    We recognize the need to institutionalize this partnership, 
and we have created an office that will regularly interact with 
industry to monitor these metrics. You wanted us to delegate 
more responsibility to manufacturers.
    According to GAO, FAA designees performed more than 90 
percent of certification activities. With the scorecard, FAA 
and our certificate holders are identifying areas where we can 
safely expand delegation. That means FAA is optimizing our 
involvement and holding manufacturers accountable.
    And our industry has been clear. They appreciate these 
efforts. But we know that to respond to new business models and 
innovations, like additive manufacturing and electric 
propulsion, we need to be agile, and that is why we are 
transforming the Aircraft Certification Service.
    You wanted a process to resolve disputes that slow 
certification. Based on industry recommendations, we developed 
a regulatory consistency communication board that allows for 
unresolved issues to be addressed in a timely fashion by a team 
of safety and legal experts.
    You wanted us to provide support when our manufacturers 
sell products overseas. Starting with Europe and Canada, we 
have agreed to accept each other's approval of repairs, parts, 
and basic aftermarket modifications with no further technical 
review. We intend to extend this approach to Brazil.
    We are also working with other national aviation 
authorities, countries that do considerable business with U.S. 
companies. For example, Ms. Baker was in China recently working 
with her counterpart to expand and improve the use of our 
bilateral agreement because the prompt validation of U.S.-
designed aircrafts like the 737 MAX is among our top 
priorities, and because the more our international partners can 
rely on FAA certification, the more efficient it will be for 
U.S. manufacturers.
    You wanted us to make it easier for the GA fleet to get 
safety equipment into the cockpit. First, we enabled the 
installation of the angle of attack indicator to address loss 
of control accidents, the leading cause of fatalities in 
general aviation. We built on that experience and issued a 
policy for installing other nonrequired safety-enhancing 
equipment.
    We are also working with two applicants to introduce a 
streamlined approval process for low-risk articles. Once 
completed, we will be able to make the approval process easier 
for low-risk articles to be approved even faster, and that will 
get safety enhancing and modern safety replacement equipment 
into GA aircraft.
    And with this Committee's strong support, we issued a new 
set of design standards for GA aircraft, the revision to Part 
23. This rule will allow innovation and efficiency in GA 
aircraft design and manufacturing while ensuring the right 
level of safety.
    As you see, we have made tremendous progress, but there is 
more to do. We have kicked off a committee with industry to 
foster collaboration in an open and transparent manner. We 
committed to develop a blueprint to establish shared objectives 
and priorities. This will allow FAA to meet future needs and 
ensure aviation manufacturers remain competitive in the global 
marketplace.
    Thank you again for this opportunity. I am happy to answer 
your questions.
    [The prepared statement of Ms. Gilligan follows:]

   Prepared Statement of Margaret Gilligan, Associate Administrator, 
            Aviation Safety, Federal Aviation Administration
Introduction
    Chairman Blunt, Senator Cantwell, Members of the Subcommittee:

    Thank you for the opportunity to appear before the Subcommittee on 
Aviation. I look forward to providing you with updates on our progress 
about the aviation manufacturing industry. As you will see, even though 
the system and its components have become increasingly more complex, 
working together with industry and Congress, we nevertheless have been 
able to raise the safety bar.
    As my career in Federal service draws to a close, I look back with 
pride and a great sense of accomplishment knowing how far we have come. 
I would be remiss not to mention the role of Congress in helping us 
operate and maintain what has become the world standard for safety and 
efficiency. Government needs to be a catalyst for innovation; we cannot 
put industry in the place where it must sit on its hands while the 
bureaucracy catches up. Thankfully, that is not the case.
    The Federal Aviation Administration (FAA) has testified before 
Congress a number of times on manufacturing and certification issues. 
We made commitments, and today we come before this subcommittee having 
kept those commitments. We have accomplished much, and in fact, have 
moved well beyond what this committee contemplated as we strengthen our 
efforts to work with industry. The FAA Modernization and Reform Act 
contains provisions requiring that the FAA work more closely with 
industry. We are, and I would like to highlight briefly a few examples.
Keeping Our Commitments
    We set the policy for expanding delegation to companies regarding 
the processes by which aircraft are maintained. We expanded the 
framework to delegate noise and emissions compliance findings. We 
eliminated the delay in certification project initiation by developing 
a new resource management process. We've also created a new training 
program to minimize subjectiveness in our audits of industry.
    We are also taking steps to allow applicants that have demonstrated 
a history of technical competency in certain aspects of a certification 
program to be allowed to work through certification approvals without a 
specific finding by the FAA. This policy gives applicants greater 
control over their business schedules and highlights their 
responsibility to design and produce safe compliant products.
    We have previously highlighted an initiative where, under specified 
conditions, the FAA and EASA would accept each other's approvals 
without further review. We concluded the agreement with EASA in 2016, 
thereby reducing time to market and fees associated with validation of 
the approvals by EASA. We have also reached an agreement with Transport 
Canada Civil Aviation for similar improvements and savings in time. We 
are looking to expand this agreement with Brazil. With these 
agreements, parts made by U.S. manufacturers move more quickly and 
easily in international commerce.
AIR Transformation
    The FAA Modernization and Reform Act also highlighted the need for 
government to work better and smarter. As part of our commitment to 
keep pace with industry, we are transforming our Aircraft Certification 
Service. As you know, the Aircraft Certification Service (AIR) works to 
continuously improve within today's dynamic aviation environment, which 
is heavily characterized by change. Aviation products are designed and 
produced in locations around the world, and an international web of 
networks and complex business arrangements challenge AIR's traditional 
regulatory model. Technological advances and business model changes are 
precipitating higher rates of change and increasing the need for 
organizational agility as the environment shifts. The industry is both 
expanding and contracting much faster than the FAA can ever respond. 
Meanwhile, the expectations of industry, government and the flying 
public continue to increase, demanding we do things faster--and with 
greater levels of safety.
    The FAA Modernization and Reform Act sought to review and reform 
the certification process and make it more nimble, but we are moving 
beyond simple reform to transformation.
    To meet these demands AIR is undergoing a transformation focused on 
3 goals:

   Refresh the certification strategy,

   Invest in management systems to improve performance, and

   Improve our organization and invest in our people.

    Refreshing the certification strategy means FAA will take a systems 
approach, relying on industry's processes and competencies based on 
risk management. This minimizes our involvement along the certification 
path to those areas of higher risk.
    We cannot move to managing risk unless we have systems that will 
focus on the use of data. Information technology will allow us to 
adjust our level of involvement based on risk, and assign our resources 
accordingly.
    Investing in our people is the most important aspect of our ability 
to improve the organization. Our geographically based approach was 
established in the early 80s and was organized around the products we 
certify. Over the last 40 years, the industry's expansion and 
diversification has made that structure outdated and unable to keep up 
with rapidly changing global market. By moving to an organization built 
around the functions we perform we will better match industry's demands 
and global needs. Our emphasis will be placed on up front planning on 
new technologies with industry, development of reusable compliance 
techniques adaptable to industry and a shared risk-based oversight 
program with industry.
    As we work with industry to implement our transformation, we must 
establish metrics to measure our success. AIR recently created a new 
Organizational Performance Division that will oversee our roadmap to 
transformation, tracking outcomes expected by both FAA and industry. 
The new division will establish with industry agreed upon metrics and 
effectiveness measures for both FAA and industry. Then we will hold 
each other accountable to meeting these metrics. We encourage you to 
visit our AIR Transformation webpage (www.faa.gov/go/AIRTransformation) 
to obtain regular updates.
Industry Collaboration
    Safety is a shared responsibility, not a solitary journey. The last 
foundational element in our strategy recognizes that successful 
transformation requires industry's commitment to engage early on 
innovative ideas, embrace systems safety, place value on compliance, 
and work collaboratively with us to develop tools and measures to 
improve both FAA and company performance.
    Working with industry, and leveraging the expertise that resides in 
the aviation community, continues to be advantageous to us both. In 
2013, the International Civil Aviation Organization (ICAO) established 
a requirement for organizations that design and manufacture aircraft to 
have a Safety Management System (SMS). U.S. companies, looking to 
remain competitive on the global market, wanted a way to be recognized 
as having an SMS to meet the ICAO requirement. The FAA turned to 
industry to develop a standard that met the requirements of ICAO Annex 
19. A government-industry team under the auspices of the Aerospace 
Industries Association and the General Aviation Manufacturers 
Association collaborated and published National Aerospace Standard 9927 
on May 31, 2016. Less than a month later, the FAA determined the 
standard to be consistent with our SMS regulation and that it could be 
used as a voluntary means to satisfy the ICAO SMS requirement. We have 
developed a process to accept applications from companies that seek 
recognition for their design and manufacturing systems. This is just 
one more example of where the agency and industry are striving to 
reform and streamline certification in a global market.
    We've also been successful working with industry to address the 
environmental impact of leaded fuels. Thanks to Congressional support, 
FAA and industry established the Piston Aviation Fuels Initiative 
(PAFI). Under that initiative, the FAA has made significant progress in 
qualifying and testing potential unleaded fuels for general aviation 
use. But that is just the first step. FAA will need continued 
Congressional support to streamline the process to approve the use of 
the new fuels in the more than 160,000 general aviation aircraft. We 
are working with aircraft and engine manufacturers, fuel producers, the 
Environmental Protection Agency (EPA) and industry associations to 
overcome technical and logistical challenges to ensure the supply of 
aviation gasoline is not interrupted.
    Congress has shown unwavering support to our effort to streamline 
certification of small aircraft by rewriting Part 23 of our 
regulations. A major endeavor in conjunction with our Part 23 revision 
is streamlining the cost and timelines associated with getting safety 
enhancing equipment into the general aviation cockpit. We are trying to 
``right size'' the level of certification rigor, based on the overall 
risk posed by the new technology, balanced by the potential safety 
enhancement introduced. We have certified angle of attack equipment 
allowing the use of an industry-developed standard. This technology 
helps address loss of control, which is the most prevalent accident 
category in general aviation. We've gone on to streamline the process 
of installing other non-required safety enhancing equipment (or NORSEE) 
in the general aviation cockpit. Now we are beginning a prototype 
program with industry that looks at replacing required equipment with 
more modern equipment with better, safer features. As we gain more 
experience in weighing risk and safety value, we will rely more and 
more on industry to help identify the next technology that will enhance 
general aviation safety and save lives.
Measuring Success
    We are taking steps to measure the success of our efforts to work 
with industry. In 2015, FAA worked with industry and developed a set of 
metrics aimed at measuring the overall performance and health of the 
Organization Designation Authorization system called ODA. The 
objectives were to define mutually agreed measures, identify areas that 
were in need of greater focus and identify issues and concerns with 
respect to FAA and ODA holders' performance. In collaboration with 
industry, the FAA initiated an ODA Scorecard Prototype to resolve 
implementation issues and obtain data to support implementation of the 
metrics nationwide. Twenty-four companies participated in this pilot 
project, which was concluded in December 2015.
    The results of the ODA Scorecard indicated that the initiative was 
successful. Privately and publicly, industry leaders endorse this 
approach. Our industry stakeholders agree that this is the right thing 
to do and the right way to do it. Over 80 percent of participants 
indicated they experienced value in the pilot and recognized the 
greater potential the scorecard could present to all stakeholders. With 
overwhelming support and encouragement from industry, the FAA 
implemented the metrics nationwide for 40 ODA design approval holders 
in 2016.
    National rollup of the Scorecard data demonstrates that FAA and 
industry are successfully working together to meet each other's needs. 
We are also identifying actions to improve how we work together. For 
example, over 75 percent of the companies rated the FAA as ``green,'' 
or ``meeting their expectations,'' and the trend is improving. Over 75 
percent of the companies were also rated ``green'' by their overseeing 
Aircraft Certification Office, and the trend is improving there as 
well.
    Together, we have identified areas in which additional work is 
needed and have developed joint action plans to improve those areas. In 
2016, we completed 97 percent of the local joint action plans from the 
2015 Prototype. We have chartered a joint ODA Metrics FAA-Industry 
Certification Improvement Team to move this initiative forward. The 
team's goal is to improve the reliability and accuracy of indicators. 
That, in turn, will help decrease the involvement of the FAA in lower 
risk areas and maintain industry's compliance expectation.
    The ODA Scorecard is both a tool and a process to help the FAA and 
industry institutionalize how we improve our relationships at the local 
and the national level. Going forward, it is important to keep an open, 
constructive dialogue to be successful in this common effort. Industry 
and FAA need to work together to improve the product approval processes 
and define the timing for transition to more advanced methods of 
product approval.
International
    As you know, our efforts to partner with industry must acknowledge 
the nature of the global marketplace. To that end, we continue to work 
toward an improved validation process, placing greater reliance on the 
certification systems of our bilateral partners. These improved 
processes are beneficial to the FAA and our international partners such 
as EASA when streamlining the acceptance of repairs, parts and 
modifications to aircraft through supplemental type certificates. 
Reliance on these types of agreements with emerging aviation 
authorities requires an up-front investment to be successful and allow 
U.S. industry to succeed in the global marketplace. This translates 
directly to enhancing the safety of the flying public.
    We would also like to extend this reciprocal approach to the 
approval and use of foreign state-of-design continued operational 
safety information. As the state-of-design for U.S. manufacturers, we 
issue Airworthiness Directives (ADs) when there is an unsafe condition 
on a U.S. product. Many foreign countries that own or operate U.S. 
products use our ADs and immediately adopt the corrective methodology 
that they describe. As the certifying authority, we work with the 
manufacturer to develop the corrections for the unsafe conditions and 
have the best information to assess the risk, the corrective action, 
and proper timeline for implementation. The foreign equivalent of our 
AD is a mandatory continued airworthiness information (MCAI), from a 
foreign State of Design. Just as we have the best insight into the 
continued safety of our products, foreign manufacturers and their 
certifying authorities have the best technical knowledge of their 
products and how to maintain the intended level of safety. 
Unfortunately, our rulemaking process makes it impossible for us to 
simply adopt corrective actions from other aviation authorities, like 
EASA. Instead, we have to conduct repetitive assessments and issue our 
own corrective action. This repetition costs FAA time and money that 
could be working on the next safety issue for the U.S. fleet. It also 
delays the implementation of the safety fix, resulting in a U.S.-
operated foreign product that could be less safe than the same product 
operated by foreign users. Allowing the FAA to leverage the work done 
by a competent foreign authority would result in a safer global 
aviation system.
    The industry is changing rapidly, and the threats that face it are 
evolving equally quickly. To counter one such threat, we are working 
with industry on cyber security. We have taken allegations of 
successful cyber vulnerabilities to civil aircraft very seriously.
    Since 2005, we have been addressing cyber vulnerabilities during 
the design and certification process using two Special Conditions. 
These Special Conditions, which carry the weight of regulations, were 
first applied to the Boeing 787 program. The 787 was the first ``e-
enabled'' aircraft, meaning that it had Internet protocol-based (IP-
based) systems that are accessible from within the airplane and 
externally. Our two Special Conditions focused on those access points, 
both inside and outside the aircraft. Since the certification of the 
787, these Special Conditions have been applied to other certification 
programs, as well as to aircraft that are being updated to add 
passenger features, like Internet access and Wi-Fi.
    Realizing that we potentially needed more protection for important 
aircraft systems, the FAA tasked the Aviation Rulemaking Advisory 
Committee (ARAC) to form a working group to provide recommendations on 
cybersecurity. ARAC answered our request and the Aircraft Systems 
Information Security and Protection (ASISP) working group was formed in 
2015. The working group membership was comprised of a wide range of 
domestic and international industry and government experts. We also 
invited three international aviation authorities to be observers--
Transport Canada, EASA, and ANAC, the Brazilian authority. The working 
group delivered its report to the ARAC in mid-September and the ARAC 
forwarded it to us in early October.
    There are 30 recommendations that range from rulemaking to 
developing best practices. The recommendations were aimed at the full 
spectrum of civil aviation products--from transport aircraft to general 
aviation aircraft to engines. We will take the working group's 
recommendations and work together to establish an internationally 
harmonized basis to protect civil aircraft from cyber vulnerabilities. 
We need to work as one to establish a set of common requirements that 
can be institutionalized globally, so that aircraft designers and 
operators are confident that their aircraft are protected in domestic 
and foreign airspace.
    We also intend to engage ICAO and its membership to help inform a 
regulatory framework for cyber protection. ICAO provides a unique 
ability to leverage foreign expertise and an invaluable forum that 
fosters international acceptance. We are sending a delegation to 
Montreal later this month to initiate this effort. Cybersecurity of 
civil aircraft is a priority for us.
Conclusion
    We have been diligent in our efforts to address what is at the 
heart of your direction: that the system be responsive, flexible and 
safe. We are making sure that our own organization is among the first 
to adapt to the new world market. AIR is transforming to improve its 
efficacy to meet the needs of industry while advancing the FAA's 
mission to provide the safest, most efficient aerospace system in the 
world. As a result, to respond to the drivers of change, we are moving 
forward with a comprehensive approach to increasing efficiency and 
effectiveness, known as AIR Transformation.
    This concludes my statement. I will be happy to answer your 
questions at this time.

    Senator Blunt. Thank you, Ms. Gilligan.
    Dr. Dillingham.

      STATEMENT OF GERALD L. DILLINGHAM, Ph.D., DIRECTOR,

PHYSICAL INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY 
                             OFFICE

    Dr. Dillingham. Thank you, Mr. Chairman, Ranking Member 
Cantwell, members of the Subcommittee.
    At the request of this subcommittee and other committees of 
the Congress, GAO has tracked and reported on several occasions 
on FAA efforts to improve its certification and approval 
processes, as well as its efforts to achieve greater 
consistency in the interpretation of its regulations.
    In 2015, during the course of examining certification 
issues, we also heard from industry stakeholders that they were 
experiencing some serious difficulties in getting their U.S. 
certificate products approved or validated for sale and export 
to foreign markets.
    My statement today is our latest status report on FAA's 
efforts in these areas and focuses specifically on FAA's 
progress in implementing the recommendations issued by the 
aviation rulemaking committees that were established as a 
result of the 2012 FAA Modernization and Reform Act and FAA's 
responses to the challenges that some U.S. companies reported 
to us that they were facing when attempting to obtain foreign 
validations for their products.
    Mr. Chairman and members of the Subcommittee, this is 
largely a good news story for FAA and industry. FAA has made 
significant progress in addressing both committees' 
recommendations. FAA has completed 13 of the 14 initiatives it 
developed to address the 6 certification process committee's 
recommendations. It is worth noting that five of the completed 
initiatives involve improving and expanding the ODA program.
    For FAA, these changes can mean being able to do more with 
its limited resources. And for industry, these changes can mean 
potentially fewer delays in completing certification tasks.
    As you just heard from Ms. Gilligan, FAA is planning to 
roll out the outcome of the 14 initiatives into a large 
organizational transformation concept for its Aircraft 
Certification Service. We think this is an extremely important 
step forward.
    Regarding the regulatory consistency committee's 
recommendations, FAA has initiated or completed actions to 
address five of the six committee recommendations. The agency's 
actions to date include finalizing the order to create a Board 
to provide clarification on regulation-related questions from 
FAA inspectors and industry stakeholders, and improve the 
training curriculum for agency personnel who are charged with 
developing the relevant policies and guidance documents.
    FAA is continuing work on a very critical recommendation to 
develop an electronic platform that will allow agency and 
industry users to access consolidated information on FAA's 
regulations and guidance.
    Regarding the challenges that U.S. companies face when 
seeking foreign validation and approval of their products, as 
FAA has testified, the agency's efforts to date include working 
with the civil aviation authority for the European Union to 
develop a roadmap of various initiatives aimed at reducing the 
time and cost involved in obtaining approvals of U.S. and 
European aviation products. According to FAA, changes completed 
to date have already begun to eliminate some fees for parts 
approval and reduce the approval time for simple, low-risk 
modifications of product design from weeks to days.
    FAA officials tell GAO that it plans to use this roadmap as 
a template for working with other countries on these issues. 
The industry representatives that we interviewed said that they 
consider this a very viable plan if implemented as designed.
    Mr. Chairman, Ranking Member Cantwell, and members of the 
Subcommittee, as we said earlier, this is largely a good news 
story. However, we would be remiss if we did not point out some 
of the very difficult challenges that FAA must address to 
continue its progress and achieve the stated goal of efficient 
certification and validation processes.
    First, FAA must maintain its commitment at all levels of 
the organization to the changes that have been described here 
this morning and keep going forward with implementation of its 
plans. Success will also require continued stakeholder 
communications and involvement, and continued congressional 
oversight.
    Second, FAA's initiatives and plans will mean doing 
business in a different way. This will require a cultural 
change for FAA and industry stakeholders. Cultural change and 
organizational transformation are very difficult and can 
require a significant amount of time and resources to achieve.
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. Dillingham follows:]

                             GAO Highlights
Why GAO Did This Study
    FAA issues certificates approving new U.S.-manufactured aviation 
products, such as new aircraft, engines, and propellers. GAO has 
previously reviewed the efficiency of FAA's certification process and 
the consistency of its regulatory interpretations. As required by the 
2012 FAA Modernization and Reform Act, FAA chartered two aviation 
rulemaking committees--one to improve certification processes and 
another to address regulatory consistency--that recommended 
improvements in 2012. FAA also assists U.S. aviation companies seeking 
approval of their FAA-certificated products in foreign markets. FAA has 
negotiated agreements with many of its counterparts in other countries 
to provide a framework for the reciprocal approval of aviation 
products. However, GAO testified in April 2015 that selected U.S. 
aviation companies reported challenges in obtaining such approvals, 
citing delays and cost.
    This testimony discusses (1) the status of FAA's progress in 
implementing the aviation rulemaking committees' 2012 recommendations 
and (2) FAA's responses to the challenges that selected U.S. companies 
reported in 2015 that they faced when attempting to obtain foreign 
approvals of their products. It is based on GAO products issued from 
2010 to 2015, selectively updated in March 2017 based on FAA documents 
and information from FAA officials and three key industry stakeholder 
organizations.
                         Aviation Certification
FAA Has Made Continued Progress in Improving Its Processes for U.S. 
        Aviation Products
What GAO Found
    The Federal Aviation Administration (FAA) has made progress in 
addressing two rulemaking committees' recommendations regarding its 
certification process and the consistency of its regulatory 
interpretations.

   FAA has completed 13 of 14 initiatives for addressing the 6 
        certification process recommendations. For example, 5 of the 13 
        completed initiatives involved improving and expanding its 
        program that authorizes other organizations to act on its 
        behalf in issuing certificates. The remaining initiative--
        issuing a final rule on regulations dealing with the 
        certification of aircraft products--will likely not be issued 
        this calendar year due to internal delays and the 
        administration's efforts to review agencies' rules and 
        regulations. FAA's Aircraft Certification Service (AIR) is 
        responsible for implementing the certification process 
        initiatives and the outcomes of the 14 initiatives are intended 
        to be rolled into a larger organizational transformation 
        concept. The initial phase involves restructuring AIR's 
        organization, shifting its structure from a product-based focus 
        to a function-based focus, with a new division responsible for 
        monitoring and managing performance. FAA expects to complete 
        this realignment in 2017, and noted that the overall aim of 
        this transformation is to create a process that is more 
        responsive to stakeholder expectations and more efficient and 
        effective.

   FAA has completed efforts to address 2 of the 6 regulatory 
        consistency recommendations, has efforts underway to address 
        three, and is not planning to implement one. Completed efforts 
        include ensuring better clarity in final rules and improvements 
        in regulatory training for FAA personnel and industry. FAA is 
        continuing work on an electronic platform to allow agency and 
        industry users to access consolidated information on 
        regulations and on creation of a consistency board to provide 
        clarification on regulation-related questions from FAA and 
        industry stakeholders. FAA did not establish a centralized 
        support center to provide guidance to FAA personnel and 
        industry, noting the consistency board would do this.

    FAA has also made progress in developing measures for assessing the 
outcomes of the actions being taken for most of the initiatives. In 
addition, industry stakeholders GAO spoke to indicated a better sense 
of progress being achieved by FAA and better communication and 
collaboration from FAA.
    FAA has continued efforts to address challenges that selected U.S. 
aviation companies reported facing when seeking foreign approval of 
their products. In April 2015, GAO testified on these challenges, which 
included the length and uncertainty of some approval processes, 
difficulty with communications, and high fees. FAA's efforts to address 
these challenges include working with its counterpart in the European 
Union to develop a ``roadmap,'' approved in February 2016, of various 
initiatives aimed at reducing the time and costs of European approval 
of U.S. aviation products. According to FAA, completed changes have 
already eliminated approval and associated fees for all approved 
aircraft parts and reduced the approval time for simple low-risk 
modifications of product design from weeks to days. FAA plans to use 
this roadmap as a template for working with other countries on these 
issues.
                                 ______
                                 
 Prepared Statement of Gerald L. Dillingham, Ph.D., Director, Physical 
      Infrastructure Issues, U.S. Government Accountability Office
    Chairman Blunt, Ranking Member Cantwell, and Members of the 
Subcommittee:

    I am pleased to be here today to testify on the status of the 
Federal Aviation Administration's (FAA) efforts to improve its 
processes for certifying new aviation products for domestic use, and 
the challenges faced by U.S. aviation companies seeking product 
approvals in foreign countries. Studies published since 1980,\1\ our 
prior work,\2\ industry stakeholders, and experts have long raised 
questions about the efficiency of FAA's certification processes and 
varying interpretations and applications of its regulations in making 
compliance decisions during certification. The 2012 FAA Modernization 
and Reform Act required FAA to work with industry to resolve issues 
related to the efficiency of its certification processes and varying 
interpretations and applications of its regulations in making 
compliance decisions during certification.\3\ In response, FAA 
chartered two aviation rulemaking committees--one to address 
certification process issues (the Certification Process Committee) and 
another to address regulatory consistency issues (the Regulatory 
Consistency Committee)--which recommended improvements in 2012. FAA 
also assists U.S. aviation companies in getting their U.S.-certificated 
products approved for sale and export to foreign countries. However, in 
a January 2015 testimony, we noted that representatives of 15 selected 
U.S. aviation companies we interviewed reported that their companies 
faced challenges related to process, communications, and cost in 
obtaining such approvals.\4\ For example, some raised concerns that 
some countries do not accept the FAA certification and conduct their 
own approval processes for U.S. products, which they said can be 
lengthy and provide no additional safety benefit.
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    \1\ See National Academy of Sciences, Improving Aircraft Safety: 
FAA Certification of Commercial Passenger Aircraft, National Research 
Council, Committee on FAA Airworthiness Certification Procedures 
(Washington, D.C.: June 1980); Booz Allen & Hamilton, Challenge 1000: 
Recommendations for Future Aviation Safety Regulations (McLean, VA: 
Apr. 19, 1996); RTCA Task Force 4, Final Report of the RTCA Task Force 
4 ``Certification'' (Washington, D.C.: Feb. 26, 1999; and Independent 
Review Team Appointed by Secretary of Transportation Mary E. Peters, 
Managing Risks in Civil Aviation: A Review of FAA's Approach to Safety 
(Washington, D.C.: Sept. 2, 2008).
    \2\ GAO, Aviation Safety: Certification and Approval Processes Are 
Generally Viewed as Working Well, but Better Evaluative Information 
Needed to Improve Efficiency, GAO-11-14 (Washington, D.C.: Oct. 7, 
2010); and GAO, Aircraft Certification: New FAA Approach Needed to Meet 
Challenges of Advanced Technology, GAO/RCED-93-155 (Washington, D.C.: 
Sept. 16, 1993).
    \3\ FAA Modernization and Reform Act of 2012, Pub. L. No. 112-95, 
Sec. Sec. 312, 313, 126 Stat. 11, 66, 67 (2012).
    \4\ GAO, Aviation Safety: Issues Related to Domestic Certification 
and Foreign Approval of U.S. Aviation Products, GAO-15-327T 
(Washington, D.C.: Jan. 21, 2015).
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    My statement today discusses (1) the status of FAA's progress in 
implementing the aviation rulemaking committees' 2012 recommendations 
regarding its certification process and the consistency of its 
regulatory interpretations and (2) FAA's responses to the challenges 
that selected U.S. companies reported to us in 2015 that they faced 
when attempting to obtain foreign approvals of their products. This 
testimony is based on several GAO products issued from 2010 through 
2015 \5\ and selected updates of this work conducted in March 2017. 
These updates are based on FAA documents and information from FAA 
officials and selected industry stakeholders, including the Aerospace 
Industries Association, Aeronautical Repair Station Association, and 
General Aviation Manufacturers Association.\6\ Each of these products 
contains detailed information on our objectives, scope, and methodology 
for performing this work. The work on which this statement is based was 
performed in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives.
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    \5\ GAO, Aviation Certification: Issues Related to Domestic and 
Foreign Approval of U.S. Aviation Products, GAO-15-550T (Washington, 
D.C.: Apr. 21, 2015); GAO-15-327T; Aviation Manufacturing: Status of 
FAA's Efforts to Improve Certification and Regulatory Consistency, GAO-
14-829T (Washington, D.C.: July 31, 2014); Aviation Safety: FAA's 
Efforts to Implement Recommendations to Improve Certification and 
Regulatory Consistency Face Some Challenges, GAO-14-728T (Washington, 
D.C.: July 23, 2014); Aviation Safety: Status of Recommendations to 
Improve FAA's Certification and Approval Processes, GAO-14-142T 
(Washington, D.C.: Oct. 30, 2013); GAO-11-14.
    \6\ The Aerospace Industries Association represents the U.S. 
aerospace and defense industry. The Aeronautical Repair Station 
Association is the international trade group that represents 
certificated repair stations and the global civil aviation maintenance 
industry. The General Aviation Manufacturers Association represents 
leading global manufacturers of general aviation airplanes and 
rotorcraft, engines, avionics, and components.
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FAA Has Made Continued Progress in Addressing the Certification Process 
        and Regulatory Consistency Committees' Recommendations
FAA Has Completed All But One of the Initiatives to Improve Its 
        Aircraft 
        Certification Processes and Has Implemented a Tool to Help 
        Measure the Outcomes of Some Initiatives
    As you know, among its responsibilities for aviation safety, FAA's 
Aircraft Certification Service (AIR) grants approvals (called type 
certificates) for new aircraft, engines, and propellers. Certification 
projects, which involve the activities to determine compliance of new 
products with applicable regulatory standards and to approve products 
for certificates, are typically managed by one of AIR's local offices 
(generally known as aircraft certification offices).\7\
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    \7\ AIR has local offices that serve geographic areas across the 
United States for aircraft certification-related activities: Anchorage, 
AK, Atlanta, GA; Boston, MA; Chicago, IL; Denver, CO; Fort Worth, TX; 
Los Angeles, CA; New York, NY; Seattle, WA; and Wichita, KS.
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    In 2012, the Certification Process Committee made six 
recommendations. As of March 2017, FAA has made significant progress in 
addressing these recommendations, but as we testified in April 2015, 
challenges remain that could affect their successful implementation.\8\ 
AIR has been primarily responsible for addressing these 
recommendations. FAA's plan for addressing them involves completing 14 
initiatives. According to a March 2017 update that FAA provided to us, 
13 initiatives have been completed. These initiatives included 
developing a roadmap for change initiatives and a tracking system for 
certification initiatives, improving and expanding FAA's organization 
designation authorization (ODA) program,\9\ improving the project 
sequencing process, improving the validation process,\10\ expediting 
the rulemaking process, and reorganizing the regulations for the 
certification of small airplanes.\11\ The one initiative that is not 
complete involves a revision of regulations dealing with the 
certification of aircraft products and parts to include a systems 
safety approach.\12\ FAA had planned to issue a final rule with these 
revisions in June 2017. However, FAA officials told us that given 
internal delays and the administration's efforts to review agencies' 
rules and regulations, the notice of proposed rulemaking will not be 
issued in the 2017 calendar year.
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    \8\ GAO-15-550T.
    \9\ FAA's ODA process is used to authorize organizations 
(designees) to act on behalf of FAA in conducting some safety 
certification work. 14 C.F.R. Sec. 183.41(a).
    \10\ The approval (i.e., validation) process is a form of 
certification to establish compliance for aviation products designed 
outside the country for which the products are being developed in order 
to issue a type certificate for these products.
    \11\ Small airplanes are certificated under 14 C.F.R. Part 23.
    \12\ Certification Procedures for Products and Articles, 14 C.F.R. 
pt. 21 (2017). A system safety approach is an organizational oversight 
philosophy to identify and control the hazards and risks associated 
with the various elements of a system on an individual and system 
level.
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    Five of the completed certification process initiatives were 
related to ODA. In January 2015, we noted that industry stakeholders 
favored expanding the ODA program, while the employee unions were 
concerned about FAA resources to effectively expand it.\13\ With 
completion of all five ODA-related initiatives, FAA has completed all 
items in its ODA action plan, deployed specialized audit training for 
personnel conducting supervision of ODA inspections, and expanded 
delegation to authorize designees to approve instructions for continued 
airworthiness,\14\ emissions data, and noise certification.
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    \13\ GAO-15-550T.
    \14\ Instructions for continued airworthiness include such things 
as maintenance manuals and inspection programs for maintaining 
operational safety of aviation products.
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    Based on an update from FAA in March 2017, FAA also developed an 
ODA scorecard as a measure of the outcome of all of the ODA-related 
initiatives. The scorecard was developed in collaboration with industry 
and to determine how well the ODA program is doing. Specifically, the 
scorecard is used to monitor performance metrics for both manufacturer 
compliance to the standards related to delegated activities, and FAA 
utilization and delegation oversight. FAA created a prototype of the 
scorecard, with consultation with industry stakeholders, and conducted 
a test trial with industry volunteers in 2015. The trial led to several 
national level improvement initiatives. For example, the scorecard 
revealed that FAA policy required its staff to review low-risk design 
changes and mandated that project notification letters be created for 
almost all ODA project activity. FAA issued a policy amendment to 
eliminate the letters, where appropriate; this should result in 
reducing FAA involvement. By the end of 2016, FAA had implemented the 
scorecard across all ODAs that have design approval authorization.
    According to FAA officials, they chartered an ODA Scorecard 
Continuous Improvement Team comprised of FAA and industry 
representatives to conduct analyses of the ODA scorecard data across 
each year, and to jointly consider recommendations and options for 
continually improving areas of the certification process.
AIR Is in the Process of a Major Transformation, Including an 
        Organizational 
        Realignment, to Improve Its Certification Process
    Based on an update from FAA in March 2017, AIR has initiated the 
AIR Transformation, envisioned as a holistic approach to creating a 
certification process that is more responsive to stakeholder 
expectations and changes in the environment and that increases 
efficiency and effectiveness. AIR plans that this transformation 
concept will include the 14 certification process initiatives discussed 
above, as well as take into account a variety of other sources 
affecting this process--such as previous GAO work, congressional 
hearings, industry and market drivers of change, and international 
commitments. According to FAA, the transformation seeks to focus AIR's 
contributions to safety in ways that will be more effective for 
achieving safety improvements, such as supporting industry's innovation 
by engaging companies early to understand new concepts and ensure a 
viable path to compliance. FAA expects benefits from the transformation 
to include a more agile and adaptable AIR organization as well as a 
streamlined certification process and improvements to consistency in 
how the process is carried out.
    According to FAA's plans, the key enabler of the reorganization is 
the organizational realignment and it will initially involve AIR 
shifting from its product-based structure to one that is functionally 
aligned. For example, the current directorates (e.g., small airplane, 
rotorcraft) will be replaced by five functional divisions (see fig. 1). 
Three of the divisions--policy and innovation, compliance and 
airworthiness, and system oversight--will perform essential regulatory 
functions. Two other divisions--organizational performance and 
enterprise operations--will provide strategic leadership for planning 
and change management and core services to the organization, 
respectively. Specifically, the organizational performance division 
will be tasked with establishing practices for monitoring and managing 
the performance of AIR. AIR plans to complete the realignment process 
in calendar year 2017. In March 2017, AIR published its AIR Blueprint 
that outlined the strategic vision for the AIR transformation and 
included 8 vision elements, and which was reviewed by industry in 
draft. AIR has begun working with industry in developing a 
Comprehensive Strategic Plan (the what). Also, AIR has begun working 
with industry in developing a Comprehensive Strategic Plan for the 
entire transformation. Industry participants are co-leading 4 of the 8 
elements to further develop what is needed to be achieved for each of 
those vision elements. AIR officials told us that until the strategic 
plan has been completed, they cannot estimate when the transformation 
will be expected to be completed. They noted that the strategic plan 
will allow them to determine the needed implementation steps (the how) 
and time frames, which they intend to document in an implementation 
plan.
Figure 1: Proposed Realignment of the Federal Aviation Administration's 
        (FAA) Aircraft Certification Service (AIR)
        
        
    a Chief Scientific and Technical Advisors. This program 
consists of a cadre of specialized technical experts involved in 
certification, research & development, education & training, and 
technical advising.

    b Continued operational safety (COS). COS processes 
refer to oversight of the people and products already operating within 
the national airspace system.

    c Information technology.

    As part of the transformation, FAA, in conjunction with industry, 
has also revised and updated the Certification Process Improvement 
guide, which would be the first revision since 2004. The updated guide 
will contain a description of the purpose and vision of the 
certification process and also includes an overview of the phases for 
product certification. The revised guide will also include the ODA 
Program, including the roles related to expanded delegation authority 
from FAA to ODA holders. According to FAA, this tool will help to 
improve the efficiency and effectiveness of the product certification 
process by establishing a clear, up-front understanding of the needs 
and expectations of all parties involved in the product certification 
process. The revised guide is currently out for comment.
    The three aviation industry groups we contacted recently to discuss 
FAA's progress in implementing the certification process initiatives 
recognized FAA's success in completing the bulk of the initiatives, and 
in general, its efforts to remain transparent while doing so. However, 
one group was concerned that ``completion'' meant that a task had been 
completed, not necessarily that the actions taken to complete the 
initiative produced observable benefits to FAA or industry. For 
instance, even though FAA developed its roadmap for the change 
initiatives, it is difficult to determine what has been achieved and 
whether or not the initiatives are efficient and effective. However, 
FAA officials said the AIR realignment and transformation efforts will 
help address these concerns. For instance, the AIR organizational 
performance division was put in place last year and will monitor and 
assess the overall internal health of AIR and provide strategic 
leadership for planning and change management--including implementation 
of the certification process initiatives--within the organization. 
Regarding the AIR transformation, the groups had mixed reactions. Two 
groups were generally supportive, but cautiously skeptical, of the 
forthcoming functional organizational structure. One group was 
concerned that it would spread responsibility and accountability across 
newly-created function offices, which they said could present 
challenges for companies to resolve certification problems with FAA 
when they arise. This group was also concerned that there was little 
industry engagement before the plan for the transformation was 
unveiled. However, FAA officials told us they had been engaging with 
industry all along on AIR Transformation and a potential reorganization 
of AIR. FAA officials also noted that the new organizational structure 
is changing the reporting hierarchy, and allowing AIR to provide more 
consistent responses to companies during the certification process. In 
addition, they said companies would maintain the same points of contact 
for undergoing certification of their aviation products.
FAA Has Made Progress in Addressing the Remaining Recommendations to 
        Improve the Consistency of Its Regulatory Interpretations
    In 2012, the Regulatory Consistency Committee made six 
recommendations to address issues it had found related to FAA's 
consistency in interpreting and applying its regulations when making 
decisions during certification regarding compliance with these 
regulations. As of March 2017, FAA has made progress in addressing 
these recommendations. FAA's Flight Standards Service (AFS) has been 
primarily responsible for addressing them. As you know, AFS issues 
certificates and approvals allowing individuals and entities to operate 
in the national airspace system. Based on our previous work \15\ and an 
update that FAA provided to us in March 2017, FAA has completed efforts 
to address two of the six recommendations, has efforts underway to 
address three, and is not planning to implement one, as discussed 
below:
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    \15\ GAO-15-550T.
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Completed FAA Efforts

   Clarity of final rules. The Regulatory Consistency Committee 
        had recommended that FAA ensure that each final rule includes a 
        comprehensive explanation of the rule's purpose and how it will 
        increase safety. In response, FAA implemented a rulemaking 
        prioritization process and tool in 2013. FAA officials told us 
        in 2015 that they considered this recommendation addressed 
        through those efforts as well as other process elements already 
        in place to ensure clarity in final rules.

   FAA and Industry Training Priorities and Curriculums. The 
        Regulatory Committee had recommended that FAA, in consultation 
        with industry stakeholders, review and revise its regulatory 
        training for applicable agency personnel and make the 
        curriculum available to industry. According to an update 
        provided to us by FAA in March 2017, it had addressed this 
        recommendation through a number of course requirement and 
        programmatic changes made by AFS and AIR that will enable them 
        to continually evaluate, improve, and align course content with 
        workforce needs. Specifically, over the past 2 years, they have 
        created a more agile course development and management system 
        by introducing new course development and revision request 
        procedures, adding needs analyses requirements, and expanding 
        course offering assessments. FAA also reported that it had 
        received concurrence from the committee members on July 1, 2015 
        that this recommendation was addressed.
Ongoing FAA Efforts

   Master Source Guidance System. The Regulatory Consistency 
        Committee had recommended that FAA develop a master system that 
        would consolidate rules and guidance to improve access to them 
        by FAA and industry users. In response, FAA is developing the 
        Dynamic Regulatory System (DRS), an electronic platform that 
        will allow users to search the content of various sources--such 
        as the Code of Federal Regulations and FAA's internal systems 
        dealing with regulations and guidance, FAA legal 
        interpretations, and exemptions, through a single interface. 
        The DRS is currently being tested by internal and external 
        stakeholders, including the Aeronautical Repair Station 
        Association and the General Aviation Manufacturers Association. 
        FAA plans to roll it out in phases with an initial roll out to 
        internal users to be completed by the end Fiscal Year 2018. The 
        rollout for external users has not yet been determined.

   Develop instructions for FAA personnel with policy 
        development responsibilities. The Regulatory Consistency 
        Committee had recommended that FAA ensure consistency in the 
        interpretation and application of regulations by developing a 
        standardized method for developing policy and guidance 
        documents based on them. In response, in January 2016, FAA 
        issued an order on guidance document development.\16\ This 
        order outlines the role and correct usage of guidance documents 
        within a regulatory schema. According to FAA, the Regulatory 
        Consistency Committee members concurred that the order was 
        responsive to the recommendation.
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    \16\ FAA Order 8000.96, Flight Standards Service Guidance Document 
Development, January 2016.

   Regulatory Consistency Communications Board (RCCB). The 
        Regulatory Consistency Committee had recommended that FAA 
        establish such a board comprising various FAA representatives 
        that would provide clarification on questions from FAA and 
        industry stakeholders on the application of regulations. The 
        RCCB consists of a chair, liaison, and points of contact--who 
        are staff from each AFS and AIR policy office, each Aircraft 
        Evaluation Group, and the Regulations Division. The RCCB also 
        includes subject matter experts to support resolution of the 
        issues. The RCCB process was introduced with an initial 
        submission of 12 issues in 2015 for the RCCB to consider. The 
        RCCB has addressed all but one of the issues. FAA expects the 
        RCCB process to complement other issue resolution mechanisms, 
        such as the Consistency and Standardization Initiative,\17\ and 
        the RCCB does not replace this internal process or other issue-
        resolution processes available to internal and external 
        stakeholders. FAA finalized an order establishing the RCCB on 
        March 9, 2017.\18\
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    \17\ The FAA Office of Aviation Safety implemented the Consistency 
and Standardization Initiative in 2004 to provide industry stakeholders 
with a mechanism for appealing certification and other decisions. For 
more information, see GAO-11-14.
    \18\ FAA Order 8000.70, Regulatory Consistency Communication Board 
(RCCB), March 2017. FAA indicated on March 20, 2017 that this order had 
been signed by FAA's Aviation Safety Organization, which houses AFS and 
AIR, but that permission to post it on the FAA website had not yet been 
granted.
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Not Implemented

   Regulatory Operations Communication Center. The Regulatory 
        Consistency Committee had recommended that FAA determine the 
        feasibility of establishing a full-time Regulatory Operations 
        Communication Center as a centralized support center to provide 
        real-time guidance to FAA personnel and industry certificate 
        and approval holders and applicants. Based on an update from 
        FAA in March 2017, FAA chose not to address this recommendation 
        because, according to FAA officials, the agency has addressed 
        the intent of this recommendation with its plan to establish 
        the RCCB, as described above.
FAA Has Taken Steps to Address Challenges to Implementaton of the 
        Committees' Recommendations
    While FAA has continued to make progress in addressing the 
committees' recommendations, it is still too soon for us to determine 
whether the recommendations have been adequately addressed. Challenges 
that could affect the successful implementation of FAA's planned 
actions remain, and FAA has taken steps to address them. Industry 
stakeholders we interviewed remained concerned about FAA's ability to 
measure the benefits and effectiveness of the actions being taken as a 
whole. Though most of the initiatives have been noted as completed by 
FAA, stakeholders raised concerns that completion, in many cases, means 
that a document or process was completed and not whether the outcome of 
its efforts will successfully address the committees' recommendations. 
FAA officials acknowledged that there are challenges ahead that could 
affect the successful outcomes of its planned actions, but said they 
had begun to put measures in place to monitor potential outcomes. FAA's 
implementation plans for addressing the recommendations include 
``measures of effectiveness'' for most of the initiatives, and 
according to FAA, will to be used for measuring the outcomes of FAA's 
efforts. Also, to its credit, FAA has been more active in communicating 
its work on these initiatives. FAA has held regular meetings with 
industry representatives and has kept the committees' members apprised 
of their accomplishments.
    In our July 2014 statement, we noted that for organizational 
transformations, implementing large-scale change management 
initiatives--like those the committees tasked FAA with--are not simple 
endeavors and require the concentrated efforts of both leadership and 
employees to realize intended synergies and accomplish new 
organizational goals.\19\ The best approach for these types of 
initiatives depends upon a variety of factors specific to each context, 
but there has been some general agreement on a number of key practices 
that have consistently been found at the center of successful change 
management initiatives. These include, among other things, securing 
organizational support at all levels, developing clear principles and 
priorities to help change the culture, communicating frequently with 
partners, and setting performance measures to evaluate progress. Based 
on our prior work and updates from FAA in March 2017, FAA has taken 
some necessary steps to address these additional challenges to 
successfully implementing the committees' recommendations.
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    \19\ GAO-14-728T.

   Organizational support. We have previously found that 
        successful organizational transformations and cultural changes 
        require several years of focused attention from the agency's 
        senior leadership.\20\ Top leadership's clear and personal 
        involvement in the transformation represents stability for both 
        the organization's employees and its external partners. 
        According to one stakeholder group we interviewed in March 2017 
        and updates from FAA, it is clear that FAA's senior leadership 
        has been focused on the transformations and cultural changes 
        emanating from the certification process and regulatory 
        consistency initiatives.
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    \20\ GAO, National Airspace System: Transformation Will Require 
Cultural Change, Balanced Funding Priorities, and Use of All Available 
Management Tools, GAO-06-154 (Washington, D.C.: Oct. 14, 2005).

   Commitment to cultural change. We previously found that 
        FAA's organizational culture was a primary challenge for 
        successfully implementing the initiatives and cultural shifts 
        were necessary for FAA staff in how regulations, policy, and 
        guidance are applied, and ultimately how certification and 
        approval decisions are made. AIR established the organizational 
        performance division with dedicated staff to facilitate change 
        management and the cultural shift. In March 2017, FAA officials 
        emphasized that for the AIR transformation to succeed, industry 
        has to forgo past perceptions about negative experiences with 
        FAA inspectors and engineers on certification issues. They told 
        us that success of the transformation will depend, in part, on 
        industry's buy-in, engagement, and recognition that they are a 
        key part of the cultural shift. FAA officials emphasized that 
        for the AIR transformation to succeed industry also has to 
        commit to change. However, FAA and industry must hold 
        themselves accountable to building a compliance culture within 
        their organizations and to engage in constructive dialogue to 
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        resolve issues at the lowest level possible.

   Communication with stakeholders. We have previously found 
        that successful agencies we have studied based their strategic 
        planning, to a large extent, on the interests and expectations 
        of their stakeholders, and that stakeholder involvement is 
        important to ensure agencies' efforts and resources are 
        targeted at the highest priorities.\21\ In March 2017, industry 
        representatives we spoke to indicated that communication has 
        been a higher priority for FAA as it has kept the industry and 
        committees apprised of the progress of its initiatives. 
        According to FAA officials, they have conducted numerous 
        briefings to industry stakeholders on the status of the 
        certification process initiatives and the realignment/
        transformation, as well as to congressional committees and 
        subcommittees.
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    \21\ GAO, Executive Guide: Effectively Implementing the Government 
Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June 1, 
1996).

   Setting performance measures. We found in 2014 that FAA had 
        not fully developed performance metrics to ensure the 
        initiatives are achieving their intended outcomes. For this 
        statement, we observed that AIR and AFS are developing such 
        outcome-based performance measures. For instance, AIR has 
        consulted a report by a leading expert in organizational 
        performance metrics--as we suggested to them. The officials 
        told us that the realignment and transformation efforts are an 
        opportunity for AIR to incorporate outcome-based performance 
        measures intended to better align resources, address industry 
        needs, and ensure staff accountability and consistency for 
        decisions being made across the group functions. The 
        organizational performance division is to monitor and assess 
        the operational performance of AIR to ensure continuous 
        improvement within the organization. As we have noted since 
        2014, it is critically important that FAA develop outcome-based 
        performance measures to determine what is actually being 
        achieved through the current and future initiatives.
FAA Has Taken Additional Steps to Address Challenges U.S. Companies 
        Face Obtaining Foreign Approvals of Their Aviation Products
    As counterparts to FAA, other countries' foreign civil aviation 
authorities (FCAA) approve U.S.-manufactured aviation products for use 
in their respective countries. These approvals (known as 
``validation'') are typically conducted within the parameters of 
bilateral aviation safety agreements (BASA), which are negotiated 
between FAA and other FCAAs. As we testified in April 2015, some 
countries accept the FAA approval outright as evidence that the product 
is safe for use in their country.\22\ Some countries, however, do not 
accept the FAA certification and conduct their own approval processes 
for U.S. products, which can be lengthy, according to some U.S. 
industry stakeholders. Specifically, at that time, we identified 
several challenges related to FCAAs' approval processes that selected 
aviation companies had reported to us. These challenges included (1) 
the length of and uncertainty about some FCAA approval processes, (2) 
the lack of specificity and flexibility in some of the BASAs negotiated 
between FAA and FCAAs, (3) difficulty with or lack of FCAA 
communications, and (4) high fees charged by some FCAAs.
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    \22\ GAO-15-550T.
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    We testified in April 2015 that FAA had taken some actions to 
address these challenges. Since we last testified, FAA has taken 
further actions to address them. Most notably, FAA has worked with the 
FCAA for the European Union, the European Aviation Safety Agency 
(EASA), to improve the process for EASA approval of U.S. aviation 
products. One key outcome of this effort was the development of a 
``roadmap'' for improving the validation process. This roadmap, which 
was approved in February 2016, aims to reduce the time and costs of 
EASA approval of U.S. aviation products by 20 percent compared to a 
2011 agreement under the BASA. The roadmap includes a number of 
initiatives, including the release of the revised implementation 
procedures that are planned for completion in April 2017, and extend 
through the 2022 time-frame established by the roadmap. According to 
FAA, changes completed to date have already eliminated approval and 
associated fees for all approved aircraft parts and reduced the 
approval time for simple low-risk modifications of product design from 
weeks to days.
    Based on an update from FAA in March 2017, the agency plans to use 
this roadmap as a template for working with other countries on these 
issues. FAA is planning to work with Canada and Brazil to reduce 
validation approval time, and is working with other partners to 
incorporate a risk-based approach to validation into BASAs to promote 
streamlined validation of approvals. FAA is also engaging with the 
International Civil Aviation Organization \23\ on specific validation 
initiatives to gain global recognition of its best practices. One 
industry group that we recently spoke to indicated that FAA should 
focus its efforts on countries with less mature civil aviation 
authorities, and ensure that FAA resources are spent on high-risk and 
new technology and innovative products.
---------------------------------------------------------------------------
    \23\ ICAO was formed following the 1944 Convention on International 
Civil Aviation, and in 1947 it became a specialized agency of the 
United Nations. A primary objective of ICAO is to provide for the safe, 
orderly, and efficient development of international civil aviation. 
There are currently 191 signatory nations to the Chicago convention, 
including the United States. ICAO members, including the United States, 
are not legally bound to act in accordance with ICAO standards and 
recommended practices. Nations that are signatories to the Chicago 
convention, however, agree to cooperate with other member countries to 
meet standardized international aviation measures.
---------------------------------------------------------------------------
    FAA provides assistance to U.S. companies by facilitating the 
application process for foreign approvals of aviation products. In 
April 2015, we also testified on several challenges related to FAA's 
role in this process that selected aviation companies had reported to 
us. These challenges involved (1) FAA's process for facilitating 
validation approval applications, which sometimes delayed the 
submission of applications to FCAAs; (2) limited availability of FAA 
staff for facilitating approval of applications; and (3) lack of FAA 
staff expertise in issues unique to foreign approvals, such as 
intellectual property concerns and export control laws. We testified 
that FAA's efforts to increase the efficiency of its foreign approval 
process could help address reported challenges related to FAA's process 
and its limited staff and financial resources. Since that time, FAA has 
made further progress in addressing these types of challenges. 
Specifically, in September 15, 2015, FAA signed agreements with EASA 
and Transport Canada Civil Aviation (Canada's FCAA), that allow the 
authorities to rely on each other's regulatory systems to approve 
products. The new safety agreements allow reciprocal acceptance of the 
majority of Technical Standard Order (TSO)-approved articles. According 
to FAA, this change benefits the U.S., Canadian, and European aerospace 
industries by eliminating fees and time required to get the other 
authorities' approval. FAA has also continued efforts to improve the 
robustness of its data on foreign approvals, to further improve the 
efficiency of its process for supporting these approvals. FAA officials 
reported in March 2017 that they have established basic performance 
metrics, such as acknowledging receipt of validation applications and 
identifying missing information within a specific time period.
    We plan to continue to monitor FAA's progress, highlight the key 
challenges that remain, and identify potential steps that FAA and 
industry can take to find a way forward on the issues covered in this 
statement as well as other issues facing the industry. Some initiatives 
will likely take years to implement and, therefore, will require FAA's 
sustained commitment as well as congressional oversight.
    Chairman Blunt, Ranking Member Cantwell, and Members of the 
Subcommittee, this concludes my prepared remarks. I would be happy to 
answer any questions you or other members of the Subcommittee may have.

    Senator Blunt. Thank you, Dr. Dillingham.
    Mr. Fedele.

   STATEMENT OF GREGORY J. FEDELE, EXECUTIVE VICE PRESIDENT--
             CORPORATE DEVELOPMENT, INOVA AEROSPACE

    Mr. Fedele. Chairman Blunt, Ranking Member Cantwell, and 
distinguished members of the Subcommittee, thank you for the 
opportunity to testify today. My name is Greg Fedele, and I 
appear before the Committee representing a growing aviation 
business focused on many aspects of the industry.
    On behalf of the manufacturing industry, I would like to 
thank Peggy as we appreciate your leadership in promoting 
aviation safety not only in the U.S. but globally.
    Innova Aerospace is headquartered in San Antonio, Texas, 
and is a niche company in the aerospace industry focused on 
aircraft modernization, performance enhancement, and life 
extension, with over 600 supplemental type certificates 
developed in the past.
    Innova Aerospace started with the acquisition of Sabreliner 
Aviation based in Missouri. The Sabreliner name holds a 
significant place in aviation history as the world's first twin 
engine business jet.
    Innova has been designing and preparing for certification 
the world's first all-composite, light single gas turbine 
powered helicopter, the C630. Originally intended to be 
certified in New Zealand, we are in the process of moving the 
program to the U.S. to be certified by the FAA. Overall, Innova 
Aerospace employs several hundred people in the aviation 
industry in Missouri, Texas, Colorado, Massachusetts, and 
Florida.
    Innova's main business focus is on modernizing older 
aircraft. As you are most likely aware, current engine and 
avionics technology have improved dramatically from what was 
installed when most aircraft flying today were developed and 
sold, and need to be replaced or changed to meet FAA 
requirements, mandates, or for operational reasons. 
Certification reform can have a positive impact on all these 
initiatives.
    Innova is currently developing two major cockpit retrofits 
that bring modern technology to the cockpit, and three major 
engine retrofit STCs. These programs replace the current 
engines with more environmentally friendly and efficient 
engines, bringing lower fuel burn, improved maintenance, and 
longer range to the airplane.
    Every opportunity we have in front of us will require an 
FAA certification approval before we can bring the opportunity 
to market.
    A key priority from Innova's perspective is our ability to 
deliver products to our customers in a timely and efficient 
manner.
    Utilization of the FAA's ODA process is a way to 
effectively manage certification programs by leveraging both 
public and private resources. Today, Innova Aerospace does not 
hold an ODA. However, to meet our business needs, we have 
decided to utilize another company with an ODA to better manage 
schedule for products.
    As a small business, our margin of error to schedule is 
narrow and our customers demand performance. A significant 
schedule delay and the costs associated can have a significant 
impact on our business. Use of an ODA allows us to protect our 
schedule and get our products to market while maximizing the 
return on our investments.
    We have been investigating and preparing for the rigorous 
application process of becoming an ODA. However, we need to 
believe that the payback on the investment will be achieved.
    Our STC programs address thousands of aircraft flying all 
over the world. Once certified by the FAA, our products are 
ready for introduction into the marketplace. While the majority 
of the aircrafts our products address are U.S.-registered, 
there are several hundred aircraft all over the world that can 
be addressed with our modifications.
    Our C630 helicopter will receive an FAA Type Certificate 
and will be marketed all over the world, which will require 
validated TCs in the countries in which it will operate. The 
demand for validations of the FAA TC from other countries and 
turn times can be very long and costly without corresponding 
safety or operational benefits in many cases.
    Innova supports the efforts of GAMA, AIA, and the FAA to 
work toward a more effective and efficient certification and 
regulatory process. Innova also supports the certification 
title passed by the Senate in 2016 as part of the Senate FAA 
reauthorization bill.
    Fully embracing the ODA authorization, driving acceptance 
of FAA standards in product approvals globally, and ensuring an 
effective risk-based aviation safety system, we believe these 
reforms need to be passed by Congress and signed by the 
President this year to have maximum impact.
    Chairman Blunt, Ranking Member Cantwell, thank you for the 
opportunity to talk about the aviation industry and 
certification from a small company perspective. Innova's 
overall vision is that we can create value for aircraft owners 
and improve the efficiency and safety of their aircraft over 
the short and long term.
    We appreciate your focus on aviation manufacturing and look 
forward to working with you to bring meaningful change and 
improve safety, industry competitiveness, and exports.
    I would be glad to ask--answer any questions you may have.
    [The prepared statement of Mr. Fedele follows:]

  Prepared Statement of Gregory J. Fedele, Executive Vice President--
                Corporate Development, Innova Aerospace
Introduction
    Chairman Blunt, Ranking Member Cantwell, and distinguished members 
of the Subcommittee, thank you for the opportunity to testify today. My 
name is Greg Fedele and I appear before the committee representing an 
aviation business focused on many aspects of aviation, including 
general aviation, commercial aviation, and military aviation as an 
Original Equipment Manufacturer (OEM), a Maintenance Repair and 
Overhaul (MRO) provider, and an Engineering Services provider.
    Innova Aerospace is headquartered in San Antonio, TX and is a niche 
company in the aerospace industry focused on aircraft modernization, 
performance enhancement, and life extension. We apply advanced design, 
technology, engineering, and creative thinking to develop products and 
services that increase safety and deliver real value to customers. We 
focus on:

  1.  Avionics Retrofits/Upgrades

  2.  Engine Retrofits/Upgrades

  3.  Aerodynamic Enhancements

  4.  Structural Life Extension Programs

  5.  Aircraft Manufacturing

    Innova Aerospace started with the acquisition of Sabreliner 
Aviation. The Sabreliner name holds a significant place in aviation 
history. The Sabreliner aircraft was first developed by North American 
Aviation in 1959 as the T-39 Trainer for the U.S. Air Force. In 1963, 
the Sabreliner was developed into a commercial variant that was the 
world's first twin-engine business jet. From 1963 to 1986 over 800 
aircraft were built, most of them in Perryville, Missouri. After 
production ceased, Sabreliner continued to support the fleet and 
several other types of aircraft as a Maintenance, Repair, and Overhaul 
facility in Missouri. To date, Sabreliner has two Type Certificates, 
and has developed and owns 282 Supplemental Type Certificates.
    In 2015, Innova Aerospace acquired Sierra Industries in Uvalde, TX. 
Sierra's main focus was as an MRO facility, however, over the past 
twenty years, Sierra developed and introduced to market 296 
Supplemental Type Certificates mainly for performance and enhancement 
modifications of Cessna Citation jets. However, they also designed and 
developed many STCs for large commercial aircraft. Sierra has performed 
Engineering Services helping OEMs certify engines in new and used 
aircraft. In addition, Innova acquired the SkyPlace Fixed Base 
Operation (FBO) at the San Antonio International Airport where we 
perform FBO services along with MRO services for several different 
types of aircraft. This has become the corporate headquarters for 
Innova Aerospace. Innova has also recently committed to a large capital 
investment towards the expansion of aviation related facilities at the 
airport.
    For the past 18 months, Innova has been designing and preparing for 
certification the world's first all composite light single gas turbine 
powered helicopter, the C630. Originally designed and developed in New 
Zealand, the initial intent was to certify the helicopter with the New 
Zealand CAA, with a shadow program performed by the FAA for validation 
once the helicopter was certified. Innova made the decision earlier 
this year to move the program from New Zealand to San Antonio and 
change our focus to an initial certification with the FAA. The program 
is in the process of being reconstituted in the US, with an in house 
and external U.S. team of engineers, designated engineering 
representatives (DERs), and certification experts with a target date of 
certification of 2019.
    Overall, Innova Aerospace employs several hundred people in the 
aviation industry in Missouri, Texas, Colorado, Massachusetts, and 
Florida. We have the distinction of re-engining more jet aircraft than 
any non-OEM. We are currently leveraging our expertise in avionics, 
engines, and structures as we invest heavily in several major retrofit 
STC programs. Innova is committed to long term growth in the aviation 
industry, has a solid backing to invest in the future, and intends to 
continue to make additional acquisitions where it will support and 
strengthen our long-term growth plans.
Modernization of Older Aircraft
    As you are all most likely aware, current engine and avionics 
technology have improved dramatically from what was installed when most 
aircraft flying today were developed and sold. With the correct care 
and maintenance, the fuselage of an aircraft can last many decades. 
However, other aspects of the aircraft need to be upgraded for 
efficiency, capability, government mandates, and safety. For instance, 
fuel consumption of older gas turbine engines are not as efficient as 
what we see today and need to be replaced. The round dial cockpits of 
yesterday have been replaced in new aircraft with beautiful large glass 
displays that are more reliable, easier to maintain, and provide much 
more capability improving safety by increasing pilot situational 
awareness and reducing pilot workload. Also, older Cathode Ray Tube 
displays are becoming obsolete and spare parts are becoming more 
difficult to find, leading to aircraft on ground (AOG) situations due 
to unavailable parts. Lastly, many aircraft are not compliant with the 
FAA NextGen mandates that are quickly coming upon us. Certification 
reform can have a positive impact on all these initiatives.
    Innova is currently developing with our Honeywell/BendixKing 
partner two major cockpit retrofits that replace obsolete parts, bring 
modern technology to the cockpit, and satisfy all mandate compliance 
needs. These are significant investments by both Innova and Honeywell/
BendixKing creating STCs for the Beechcraft King Air 90 and the Cessna 
Citation 560 Series aircraft. We also have plans to expand these 
products into other aircraft in the near future.
    Innova is also working on three major engine retrofit STCs. We 
currently own an STC to re-engine the King Air 90 with General 
Electric's H80 engine, and are now modifying that STC for even better 
performance and ease of installation. In addition, we are working with 
Williams International to re-engine the Cessna CitationJet and Cessna 
Citation V and Ultra. These programs replace the current engines with 
more environmentally friendly and efficient engines bringing lower fuel 
burn, improved maintenance, and longer range to the aircraft.
    The Innova focus on retrofits and modifications will be leveraged 
from these initial programs to larger business jets, commercial 
aircraft and military applications. The value we can bring to a 
customer by extending the life and improving the performance and safety 
of an aircraft versus acquisition of a new aircraft, is exciting. 
However, every opportunity we have in front of us will require an FAA 
certification approval before we can bring the opportunity to market.
Innova's Approach to STCs--ODA Utilization
    Another key priority from Innova Aerospace's perspective is our 
ability to deliver products to our customers in a timely and efficient 
manner. We have very deep contact with the FAA, through the Flight 
Standards District Offices (FSDO) that manage and support our Repair 
Stations, the Manufacturing Inspection District Offices (MIDO) that 
manage and support our Production Certificates, and the Aircraft 
Certification Offices (ACO) that manage and support our retrofit and 
modification projects. Our ability to do business depends on the FAA's 
timely approval of our design and production systems which manifests in 
the awarding of Type Certificates and Production Certificates for our 
new aircraft programs along with Supplemental Type Certificates for our 
modification programs. We respect the role the FAA plays and we respect 
the people we work with.
    One approach many companies and FAA use to manage certification 
programs in a more effective and efficient manner is an Organization 
Designation Authorization (ODA). This has benefits to the FAA and 
companies by better leveraging both public and private resources. 
Today, Innova Aerospace does not hold an ODA. However, to meet our 
business needs we have decided to utilize another company with an ODA 
to better manage the schedule for our projects. While this may appear 
to be a costlier approach, our analysis is that by using an ODA, we can 
limit project delay and costs, and therefore, have decided to trade 
dollars for schedule certainty. As a small business, our margin of 
error to schedule is narrow and our customers demand performance. A 
significant schedule delay and the costs associated can have a 
significant impact on our business. If the ODA's authorization is not 
being fully utilized by FAA for our programs, it will impact costs, 
schedule, and our customers. Furthermore, even if we were not utilizing 
ODAs in this manner, we recognize the importance of them being 
effectively used since it will allow FAA to focus more of their 
resources on small businesses like ours that are trying to move through 
the certification process.
    We recognize the long-term the advantages of an ODA, and for the 
past two years we have been investigating and preparing for the 
rigorous application process of becoming an ODA. For us to justify the 
investment, we need to first achieve critical mass in our programs. The 
investment is so great, along with the cost to keep the system up and 
running, that it will take time until we have grown to the point where 
our own resources and capabilities support an ODA. As a board member of 
the General Aviation Manufacturers Association (GAMA), I am aware that 
many manufacturers who have spent significant expense and effort to 
become an ODA did not see adequate benefits. Industry and the FAA are 
aware that improvements are needed to take fuller advantage of the 
system and are working collaboratively to that end. Innova supports 
intense focus on ODA efficiency. We look forward to working with the 
Committee on this important issue. If you can help us bring 
efficiencies through reform, the industry will respond with growth and 
improved safety technology. If costs can be reduced, and efficiencies 
enhanced, it would help Innova move towards proceeding to become an ODA 
which would benefit my and other companies and help FAA increase the 
effectiveness of their safety oversight.
    As I said before, as we are investing in our programs, unforeseen 
delays can be devastating for several reasons. As for any business, we 
need to see a return on our investment as quickly as possible. Delays 
due to the FAA having limited resources, varying direction, and/or 
interpretive requirements can significantly lower our return as the 
revenue from a project is delayed.
    Additionally, one of our major programs addresses compliance with 
an FAA safety mandate. By design, these programs have a shelf-life 
because we must complete these programs in a time-frame to allow 
customers to take advantage of our solution for mandate compliance. If 
our programs were to be delayed beyond a mandate compliance date, there 
is potential that the investment could be wasted as customers will find 
other solutions or decide to stop flying the airplane altogether.
Certification in a Global Marketplace
    Aviation is an incredibly competitive, global marketplace and first 
to market is essential for many of our projects. In our industry, there 
are many ways to solve a problem for our customers. Those who have the 
idea first should be rewarded. Unfortunately, a good idea can be 
squandered if the implementation of that solution is not timely. As one 
solution is being certified, others may enter the market, and for many 
different reasons may even get to market faster if their certification 
program is completed more efficiently.
    Our STC programs address thousands of aircraft that are flying all 
over the world. Once certified by the FAA, our products are ready for 
introduction into the marketplace. While the majority of the aircraft 
our products address are US-registered, there are several hundred 
aircraft all over the world that can be addressed with our 
modifications.
    Innova is developing all our modification programs as kits. This 
approach allows us to ship kits worldwide for installation either at a 
maintenance shop or in the field. We have designed these kits 
specifically because we want to make it easier for our customers to 
take advantage of our products. FAA's international relationships with 
foreign civil aviation authorities and the establishment of agreements 
to facilitate efficient processes for acceptance and import of FAA 
certified products and STCs is paramount to the success of our business 
and other U.S. companies in the industry.
    Our C630 helicopter will receive an FAA Type Certificate (TC). The 
initial market for the helicopter will be training, tourism, and 
general utility. As a gas turbine helicopter, the C630 will operate all 
over the world wherever Jet-A fuel is available. While we expect 
significant orders from the United States, we are expecting orders 
worldwide. The demand for validations of the FAA TC from other 
countries and turn times can be very long and costly. I am not aware of 
any FAA certified aircraft that has not been accepted or validated by 
any country in the world, yet even with this safety record, we often 
face significant delays in getting our projects validated in other 
countries. This is a high priority for industry and a focus of the FAA 
and we would appreciate any support you can give us to address these 
challenges.
Risk-Based Decision Making
    In our industry, Safety is the absolute. Anyone who works in this 
industry knows that accidents and incidents still sometimes happen, 
however, we do everything in our power to make sure our customers are 
safe.
    I truly believe that as we look to improve the efficiency and 
effectiveness of the certification process, we need to incorporate risk 
analysis tools and techniques to inform the level of involvement of 
FAA's limited resources. We need to drive consistent decision making 
and eliminate redundant activities throughout the system.
    As I discussed earlier, Innova is currently working on a new 
cockpit upgrade for the King Air 90. This cockpit uses the BendixKing 
AeroVue system which is an Electronic Flight Instrument System (EFIS). 
The BendixKing AeroVue system--a commercial off the shelf system--was 
not specifically developed for the King Air, and has been installed in 
several other aircraft types. The FAA-approved ODA procedures manual 
does not require a Project Notification Letter to the FAA for this type 
of project. This is very good for our program because it means all 
processes and authorizations are fully delegated to the ODA and that 
FAA participation is not necessary. Despite all of this, the local FAA 
office required the ODA to submit an Issue Paper explaining this system 
which has already been certified on several other aircraft before. The 
issue paper turnaround time is typically 60-90 days and could be much 
more which adds delays and uncertainty. The impact to our program is 
still unknown, but it has added schedule risk. This appears to us as an 
area where a more effective risk-based safety oversight system would be 
beneficial and the FAA's time and resources better applied elsewhere.
Where We Would Like To See Reform Go
    As a GAMA member, Innova supports the efforts of GAMA, AIA, and the 
FAA to work towards a more effective and efficient certification and 
regulatory process. We believe the development of the ODA scorecard and 
the Aircraft Certification Service (AIR) transformation initiative, if 
effectively implemented, will bring real benefits. Innova also supports 
the certification title passed by the Senate in 2016 as part of the 
Senate FAA Reauthorization bill. This would help support FAA 
certification reform by addressing the key issues I have discussed in 
my testimony--fully embracing the ODA authorization to the benefit of 
industry and the FAA, directing FAA engagement and leadership with 
other aviation authorities to help facilitate efficient validation and 
acceptance of FAA safety standards and product approvals globally, and 
ensuring an effective risk-based aviation safety system. We believe 
these reforms need to be passed by Congress and signed by the President 
this year to have maximum impact.
Conclusion
    Chairman Blunt and Ranking Member Cantwell: thank you for the 
opportunity to talk about the aviation industry and certification from 
a small company perspective. Innova's overall vision is that we can 
create value for aircraft owners and improve the efficiency and safety 
of their aircraft over the short and long term. We anticipate rapid 
growth as we believe this business model is applicable to all aircraft 
owners from private aviation to commercial and military. We are excited 
about the opportunities this brings and becoming a leader in the 
aviation industry while bringing significant employment opportunities 
in the future. I value the opportunity to speak to you as a business 
leader of a growing company that does all its work in a federally 
regulated system. We appreciate your focus on aviation manufacturing 
and look forward to working with you to bring meaningful change and 
improve safety, industry competitiveness, and exports.
    I would be glad to answer any questions that you may have.

    Senator Blunt. Or ask them.
    Mr. Fedele, thank you for being here.
    Senator Hassan.

               STATEMENT OF HON. MAGGIE HASSAN, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Hassan. Thank you very much, Mr. Chairman.
    And thank you to all the panelists for being here this 
morning and for the work you do.
    You know, New Hampshire is the home of a growing aerospace 
component part industry sector, so I am very grateful for the 
insight you have provided this morning. I did though want to go 
back to an issue that I think was touched on by the last panel, 
but I thought you all might comment on it as well.
    I will start with you, Mr. Dillingham. It goes back to the 
fact that we were talking about improvements we could make in 
certification, ways we can help our manufacturing folks in this 
sector see a return on their investment earlier and invest in 
new technologies. But at the same time, we have been presented 
with a budget blueprint by the Administration that causes a lot 
of constituents in my small state of New Hampshire concern.
    Specifically, the proposal that we saw and is particularly 
relevant to today is the Administration's proposal to eliminate 
a program known as Essential Air Service, or EAS, because, 
obviously, if everybody in our country cannot have access to 
aviation services, a lot of what we are talking about becomes 
less pressing, at least for my constituents.
    So the EAS program was designed to ensure rural communities 
still receive commercial air service even in areas that would 
otherwise not be profitable for the airlines because of their 
geographic location. Entire communities depend on this program, 
which makes travel possible where it otherwise might not be.
    The Lebanon Airport in Lebanon, New Hampshire, for example, 
provides services for 10,000 to 11,000 Granite Staters every 
year. Without this critical funding source, these passengers 
would be left with less options, higher ticket prices, and 
lengthy commutes to other airports.
    So, without objection, Mr. Chair, I would like to enter a 
letter from the Lebanon Airport into the hearing record.
    Senator Blunt. Without objection.
    [The information referred to follows:]

                                            Lebanon Airport
                                   West Lebanon, NH, March 21, 2017
Hon. Margaret Wood Hassan,
Washington, DC.

Re: Essential Air Service

Dear Senator Hassan:

    The EAS Program provides a subsidy to air carriers providing 
scheduled airline service to certain airports where scheduled air 
service has long been in-place and proven to be required for the 
welfare of the area. The EAS subsidy to air carriers allows carriers to 
offer much needed service at reasonably affordable prices. Without the 
subsidy, the airline would pass on the costs to passengers, making use 
of EAS routes cost-prohibitive. Specifically, the EAS program provides 
timely, world-wide connection and access to rural areas that would not 
be possible otherwise. The City of Lebanon, NH and the Upper Valley 
(central-western New Hampshire and eastern Vermont) realize these 
benefits daily.
    At present, Cape Air is the LEB's only airline. Cape Air provides 
LEB with 9-seat aircraft and four daily round trips to Boston Logan 
International Airport; and two daily round trips to Westchester County 
(White Plains) Airport/New York City. The flight to Boston is 55 
minutes and the flight to White Plains is 1:30 and to Manhattan, an 
additional 1:00. This level of airline access, (only possible with EAS) 
provides the following to Lebanon and the Upper Valley.
    After a 55-minute flight to Boston on Cape Air, we have cost-
effective, timely access to:

   75 domestic non-stop destinations from Boston.

   54 International non-stop destinations from Boston.

   84 destinations by Low-Cost Carriers from Boston.

    The trip to White Plains/New York City in 2:30 provides cost-
effective and timely access for:

   a round trip to the financial capital of the world in one 
        day.

    The LEB Airport tracks revenues monthly. The attached table shows 
the airport's monthly revenues for 2016. If EAS to the LEB Airport were 
to cease; the following would occur:

   Cape Air would cease service.

   Transportation Security Administration (passenger screening) 
        would leave the airport.

   Our on-airport rental cars (Avis and Hertz would leave the 
        airport.

   As a result, revenue from Air Carrier Landing Fees, Rental-
        A-Car Fees, current Terminal Building Rent, current Parking Lot 
        Rental (from the rent-a-cars), Air Carrier Fuel Flow Fee would 
        all decrease to $0.00.

    We track revenues monthly. This is from CY 2016. The yellow-shaded 
numbers on the attached table show the revenue accounts that would go 
to ``0'' if Essential Air Service to LEB Airport ceased and Cape Air 
ceased. That would mean:

   An average monthly revenue loss of $37,216.

   An annual revenue loss of $446,592 which would be 
        approximately 52% of our 2016 operating revenue.

    Without scheduled passenger service, the LEB Airport would lose our 
Passenger Facility Charge (PFC) revenue. In 2016 this was $42,685. This 
has paid the 5% City share of FAA-funded airport improvements for a 
number of years and would serve to decrease cost to the taxpayers of 
more expensive capital improvements for the next number of years.
    We are in hopes that the initiative to do away with this critical 
Essential Air Service program is defeated.
    Please let us know if you need any further information.
            Sincerely,
                                         Richard J. Dyment,
                                                   Airport Manager.

encl
cc: Paula Maville, Interim City Manager
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Senator Hassan. Thank you.
    And this is not just a concern for New Hampshire. I know 
Senator Klobuchar touched on it a little bit, but places as 
well like Montana, Colorado, and Alaska, Americans in rural 
communities will find it extremely hard to access alternative 
airports if EAS service is disconnected. Over time, eliminating 
EAS will kill jobs and hurt commuters and hurt the industry. 
And I simply do not think we should be balancing the budget on 
the backs of rural Americans who need access to aviation 
services.
    So, Mr. Dillingham, in your analysis of rural air service, 
what would the impact of eliminating the EAS program be?
    Dr. Dillingham. Thank you, Senator.
    We have looked at the EAS program several times over the 
last few years, and the total elimination of the program will 
have differing impacts on different airports. But as you spoke, 
one of the most serious concerns is for those communities, 
rural communities, small communities where that is the only 
connection that those communities have to the larger national 
transportation network, and it could be disastrous in that 
case.
    At the other end of the spectrum, we have also suggested 
that, should the EAS program be eliminated, it will be very 
critical to establish other means, other links to link those 
communities, and not only just for passenger traffic but 
usually those airports are also very critical to the economic 
well-being of the communities.
    Senator Hassan. Absolutely. Thank you.
    Anyone else like to comment on it, on the panel?
    Thank you, Mr. Chair. I yield my time.
    Senator Blunt. Thank you, Senator.
    Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman.
    To any of the witnesses, this notion of how you keep pace 
with innovation and yet keep pace with certification without 
making the FAA 40,000 people, so, I do not know what your 
thoughts--but obviously, the organization design authorization 
has been one of those tools, and I do not know if people want 
to comment on that. But obviously, we want to utilize it but at 
the same time make sure that we are enhancing safety. But I 
just keep thinking about, for example, where we were with 
composites, and we used the integration of outside research and 
development as well I think in helping to advise the FAA.
    So anyway, anybody have thoughts on where we go again with 
keeping pace with innovation?
    Ms. Gilligan. If I may?
    Senator Cantwell. OK.
    Ms. Gilligan. First, we will take 40,000 people, but if 
not, you are right, we need some alternatives, and I actually 
would like to ask Ms. Baker to give you some details.
    But I think you have heard that we are transforming the 
aircraft certification organization, and we call it that 
because this is not a sort of minor rejiggering of some 
processes. We have done a lot of that. We have fixed individual 
processes. We have addressed individual concerns. But we have 
realized that we really do need to take a whole new look at how 
we provide these certification services.
    So if I could ask Ms. Baker to walk you through very 
quickly what we are doing, and we would love to come and brief 
you or your staff in more detail.
    Ms. Baker. Thank you.
    One of the things that I think really helps us get started 
on opening the doors for innovation is to do something like we 
did with Part 23, which Congress was very instrumental in 
helping us to get through. It allows us to have performance-
based rules rather than prescriptive, so it leaves it open for 
innovation. And then we use industry standards where we can get 
the means of compliance much more easily and not have to go 
through the regulatory process to get there.
    To even further innovate, what we have been doing is 
thinking about our organization and how we can align it 
functionally. One of the things that we decided to do was to 
designate a division called ``policy and innovation'' where the 
people in that division would be reaching out to industry and 
think tanks and any opportunity that we can have to understand 
what is coming.
    We talked about additive manufacturing. 3D printing was 
something you could see on the horizon. It is going to reduce 
the cost of aviation. It is going to make things lighter. It is 
something that we should get ahead of instead of waiting for 
someone to have it in their design and then walk in the door 
with an application.
    Senator Cantwell. Thank you.
    Mr. Fedele. I will just add, as the manufacturer, from the 
manufacturer side, two things.
    One, as I talked about in my testimony, truly embracing the 
full ODA authorization program, any time that we can limit the 
FAA resources and delegate out, use the full delegation, will 
speed the process.
    The other thing is we have talked about, in the 
transformation program, about risk-based decisionmaking. We 
need to start really utilizing risk-based tools to analyze what 
resources we actually need to put toward the projects.
    At the end the day, safety is ultimate. I mean, we will 
never compromise on that. But there are ways we can be more 
effective and efficient in the way we do things.
    Senator Cantwell. Well, I hope that--I do not want us to 
fall behind where, say, the Europeans are. I want us to be the 
innovators and continue to have a process that allows us to 
innovate. I know I had this experience walking through one of 
our training programs. We had gotten an air--now I cannot 
remember the exact terminology. But it was about training more 
people in air transportation jobs, part of the Department of 
Labor.
    But when we were walking through, we saw some of the 
students working on wood, and we said, why are you working on 
wood as opposed to other types of metals or composites? And 
they said, well, it is because the FAA still requires this 
level and this certification on wood.
    So maybe that has come and gone now. I do not know for 
sure. But I just hope that we can figure this out.
    And I do like the universities and other organizations 
advising the FAA on the latest and greatest technology, because 
I think that is a way for them to understand some of the 
dynamics.
    But anyway, we are very proud of aviation manufacturing in 
the United States. We want to stay very competitive in it.
    Mr. Fedele, I definitely want us to have the safety 
standards that are the pride of the aviation world, and I think 
this is a calling card for the U.S.
    But I think the challenges are becoming more real because 
there is such a great--let me even take the biofuels area. We 
definitely want to stay ahead on that as well.
    So I thank the witnesses.
    Thank you, Mr. Chairman.
    Senator Blunt. Thank you, Senator Cantwell.
    Dr. Dillingham, did you want to say something on that?
    Dr. Dillingham. Thank you, Mr. Chairman.
    I just wanted to respond to Senator Cantwell's original 
comment about composites, because the GAO led a study that 
looked at composites on the Dreamliner. And at that point in 
time, there were concerns about whether FAA, indeed, had the 
skills to oversee that kind of new technology. And we followed 
up on that and found that FAA has really gone into a full court 
press in terms of that kind of--making sure they have that kind 
of expertise, and as you said, bringing in universities, 
developing training plans for the workers, strategic plans for 
all kinds of new technology.
    So the recommendations we made in that area, FAA has met 
those recommendations. So we would say that they are definitely 
on the cutting edge.
    In addition, we all know that FAA has some of the smartest 
people in the world in some areas, and they are really trying 
to keep up with the new technologies as well.
    Senator Cantwell. Thank you. I appreciate that. I do think 
the center of excellence that we have been establishing at the 
FAA, which is that partnership between universities and the FAA 
and businesses to look at those emerging technologies, has been 
a very, very helpful tool, so I think we should keep that in 
mind with what Ms. Gilligan was saying about resources and 
people.
    Thank you, Mr. Chairman.
    Senator Blunt. Mr. Fedele, in your submitted testimony, you 
cited an incident where you needed to get an issue paper done 
on an electronic flight information system that had already 
been certified on several other aircraft.
    Do you think that was necessary?
    Mr. Fedele. No, we do not believe that was warranted. The 
system we were installing, it is currently installed in other 
aircraft and new build aircraft that are coming off the line 
today. It has been certified on many different airplanes. It 
has a long pedigree.
    Our project did not require what is called a project 
notification letter from the ODA, so what that really means is 
it was fully delegated to the ODA to run the program, run the 
certification program.
    This now brings the FAA back to having to put resources 
into the project, which will lead to delays, hopefully not too 
much, but their involvement is now there. And we will move 
quickly through it, but it is something that we did not feel 
really we should have had to have done.
    Senator Blunt. Your point is that it had already been 
certified, the exact same system, to go into other aircraft? Is 
that----
    Mr. Fedele. Correct. The hardware, the electronic hardware, 
the glass panels, are already in other airplanes. So to us, it 
is, OK, why now?
    Senator Blunt. Ms. Gilligan, do we need to give you more 
authority in this area, or is there a reason here that Mr. 
Fedele and I don't quite understand?
    Ms. Gilligan. Senator, I do not think we need more 
authority. We did see the reference in Mr. Fedele's testimony, 
and we are trying to track back to see just what it is.
    But I would make the comment, and I know Mr. Fedele would 
agree, that certification of a system in a particular make and 
model of aircraft does not mean that the same system will work 
in all makes and models. And there is a requirement that they 
be able to demonstrate, when you want to put it in a different 
make and model of aircraft, that, in fact, it meets those 
standards. And I believe that is a piece of the issue that was 
involved here.
    I do not know if Dorenda wants to comment further, but we 
are looking to see if there is something that we should have 
done differently. And if not, we will be sure to explain why we 
believe that that was a necessary step.
    But, Dorenda, if you would like to comment?
    Ms. Baker. I do not have much to add, but I did talk to Mr. 
Fedele before the hearing, and I felt that we should get a few 
more details before we can determine what exactly happened in 
this particular case.
    Mr. Fedele. And we will work with them to get the full 
details of why we were asked to do it. Hopefully, we can get an 
answer to you.
    Senator Blunt. And you will get back to us on how this 
works out?
    Ms. Gilligan. Oh, yes, Senator. Of course. And it also is 
really a process that, with the new organizational structure, 
we are looking at how we can make sure that these kinds of 
issues are elevated, if necessary, early enough in the process 
that, if there is to be a change, it can be made. Or if there 
is an explanation or rationale that needs to be provided to the 
applicant, that that can be provided as well.
    But, yes, we will look into this and be sure to inform you 
with outcome.
    Senator Blunt. And Ms. Gilligan mentioned, Mr. Fedele, what 
they were doing with Brazil and other countries. Any thoughts 
you have on what we can do to more adequately make sure 
certification of other countries is quicker for things that we 
have already certified?
    Mr. Fedele. Overall in our experience, we found that many 
foreign airworthiness authorities, they do not necessarily have 
the technical expertise in certain areas, and that is a 
challenge.
    At the end of the day, the FAA is the gold standard in the 
world. This is important because, for us, we see exports as a 
way of growth, and we need to leverage our investment.
    We have been in discussion with many of our peers in the 
industry, and we have heard about the struggles they have to 
take these products outside the U.S. The challenges we face are 
when foreign authorities want to recertify the entire project. 
This can be very expensive. It is redundant and has little-
known value. And we know of no time that an FAA-certified 
product was turned down by a foreign authority.
    To be clear, we recognize that foreign authorities have 
their own different requirements and risks that they want to 
address. We understand and welcome that, but we need to focus 
on eliminating the redundant and unnecessary review.
    Senator Blunt. And I think we see cooperation from Ms. 
Gilligan with these other countries trying to achieve that.
    Ms. Gilligan. Absolutely, Senator. We could not agree more. 
We do believe that certification by the FAA should be 
sufficient for many of our partners to simply do what we call 
validation, to confirm for themselves that we have, in fact, 
found compliance with the standards but not to repeat the work.
    We have made great strides with our European partners and 
with our Canadian partners. We are just about there with our 
Brazilian partners. But those three states, like the U.S., have 
been major manufacturing states for a long time. We do see new 
states that are trying to elevate their competence in this 
area. But we are always interested in working closely with our 
manufacturers to support them and assist them in those 
validations.
    We believe that our partner countries should come to the 
FAA, if they believe there is a question or issue about the 
validation of a product.
    Senator Blunt. Well, thank you.
    Senator Duckworth is here to ask questions, and I am going 
to let her gavel out and give the proper notice at the end of 
the hearing and, again, thank all of you for attending.
    Senator Duckworth.

              STATEMENT OF HON. TAMMY DUCKWORTH, 
                   U.S. SENATOR FROM ILLINOIS

    Senator Duckworth [presiding]. Thank you, Mr. Chairman. I 
want to thank both the Chairman and the Ranking Member for 
convening this important hearing to examine how we can enhance 
our airport infrastructure and strengthen American aviation 
manufacturing.
    I proudly represent the state of Illinois, home of Chicago 
O'Hare International Airport, one of the busiest airports in 
the world, along with Midway, Quad City, and other vital 
airports. And I understand how important it is for our Nation 
to invest in our airports to make sure we can move both people 
and goods effectively and efficiently.
    I am also very aware of how important airports are to the 
local economy, having represented in my congressional district 
the area outside of O'Hare, and that is an issue I would like 
to address this morning.
    Mr. Dillingham, would you concur that airports are 
important to surrounding communities' economies?
    Dr. Dillingham. Absolutely, Senator. I think in almost all 
occasions, the airport is an economic generator for both 
business as well as bringing the communities together and tying 
those communities to the larger transportation network of the 
country.
    Senator Duckworth. Thank you. I do agree that airport 
infrastructure is a win-win for American aviation 
manufacturers, the tourism industry, and just general job 
creation.
    I also want to make sure that, if we bolster investment in 
our airports, we use that opportunity to strengthen our small 
businesses as well. I strongly support the Airport Improvement 
Program's Disadvantaged Business Enterprise Program. This 
incorporates a 10 percent goal for DBE firms to participate in 
airport procurement, capital improvement, and concession 
contracts.
    I am very concerned that some may seek to weaken or even 
eliminate this critical small business program during the 
upcoming FAA reauthorization.
    I would like Mr. Dillingham and Mr. Fedele--did I pronounce 
that correctly?
    Mr. Fedele. It is Fedele, but you are not the first or the 
last.
    Senator Duckworth. I am sorry. My last name is 
``Duckworth.''
    So, Mr. Dillingham and Mr. Fedele, would you each be able 
to speak to the importance of small businesses in supporting 
airport operations, concessionaires, and the like, and how 
small businesses can be used to enhance the traveler experience 
while supporting local job creation?
    Dr. Dillingham. Oftentimes, small businesses are the 
businesses that provide services to the airports either through 
the concessions or the opportunities that are surrounding the 
airport. So they are a very critical element of the support for 
airports.
    What we are finding is sort of non-aeronautical revenues 
are becoming an increasingly important source of revenue for 
airports, and those sometimes are operated by small businesses.
    So, again, it is a very critical element both for the 
community as well as resources for the airports. And airports, 
in turn, can use those resources for infrastructure 
construction.
    Senator Duckworth. Very interesting. So actually, revenue 
from the small business DBEs are actually helping with vital 
infrastructure projects to keep the planes running.
    Dr. Dillingham. Absolutely, as part of the non-aeronautical 
revenues, the revenues that they do not get from the planes 
landing and taking off, it is an increasingly large share of 
the revenues that airports are using or have available to them.
    Senator Duckworth. Thank you.
    Mr. Fedele?
    Mr. Fedele. So I have a slightly different take on that. We 
are a small business. We have our main location in San Antonio, 
Texas, right on the other side of the airport from the 
commercial side, and we have just partnered with Customs and 
Border Protection to build a Federal inspection station at the 
airport. We partnered with them. We built the building.
    Now, when it opens in the next month or so, general 
aviation traffic will not have to go get in line with 
commercial traffic to clear Customs. They will actually come to 
the other side of the field.
    And that is something we, as a small business, did to 
invest in the airport. And as part of our agreement with the 
airport, we will be making other major investments in the 
airport infrastructure to help bring jobs on the general 
aviation side.
    Senator Duckworth. Great. I am glad you brought up general 
aviation. My next question is going to be more on general 
aviation, which is, according to a recent FAA report on the 
economic impact of civil aviation to the U.S. economy, civil 
aircraft manufacturing was America's top net exporter, with a 
positive trade balance of almost $60 billion in 2014. U.S. 
aviation manufacturers such as Boeing continue to produce 
technologically advanced products that create high-quality jobs 
here in our country and fuel the growing demand for aircraft 
all around the world.
    Despite their best efforts to stay ahead of the competitive 
international market, U.S. manufacturers continue to face 
delays from international civil aviation authorities when 
seeking validation of FAA approved certificates. While I 
appreciate FAA's initiatives with Transport Canada, the 
European Aviation Safety Agency, and others to improve the 
validation process, delays persist even with countries with 
which we have bilateral aviation safety agreements.
    Ms. Gilligan, how would you assess the success of some of 
these bilateral agreements, given the challenges faced by U.S. 
aviation manufacturers? And what the FAA specifically--what is 
it specifically doing to improve their effectiveness?
    Ms. Gilligan. Thank you, Senator, and thank you for 
acknowledging that we have made great headway with our more 
mature partners in Europe, Brazil, and in Canada.
    What we do see around the world are emerging aviation 
authorities that want to build their competency at being able 
to evaluate that products they are taking into their aviation 
system meet an appropriate level of safety. So we are 
encouraged, in fact, that, in some regards, they are becoming 
more informed and more capable.
    But we do see where sometimes they ask for more information 
and more verification of the work that FAA has already done 
than we think is appropriate. In those cases, we reach out 
directly to our partner to explain how they can take advantage 
of the work we have already done and minimize the amount of 
resources that they may need to apply to the project as well.
    And we have been very successful, in many circumstances. 
But there are still some cases where we are struggling. Right 
now, the Boeing 737 MAX is a project that we have focused on 
with our Chinese partners.
    Ms. Baker was in China just a few weeks ago to make sure 
that that project was moving along, so I would like to ask her 
to comment on how we handle that kind of example, as you just 
asked.
    Senator Duckworth. Ms. Baker?
    Ms. Baker. Thank you.
    First of all, I will take it out to a much more general 
situation. We work with 10 partners in the Asia-Pacific region, 
and we have convened a group called the Asia-Pacific Bilateral 
Partners, and I will be meeting with all of them next week in 
Long Beach, California.
    What we did was with them is to charter a group that looked 
at the risk. If it is a mature thorough authority, a mature 
technology, and a mature company, there should be very, very 
little intervention by the other authority into work that the 
FAA has done.
    And on the other end of the spectrum, where there is an 
emerging authority, of course, everybody recognizes there needs 
to be more intervention.
    So what we have done is propose a spectrum and taken it up 
to ICAO to propose as a best practice for everyone to use.
    For the Boeing 737 MAX, I was in China and I talked to them 
about the certification of that aircraft and now their 
validation, and they will be meeting with us in Seattle, 
Washington, the second and third week of April. What I will be 
doing is going out there to meet with the team and the 
equivalent of me in the Chinese authority to ensure that this 
program keeps moving forward.
    So that is the kind of action that we take when we know 
that there needs to be a little bit more emphasis on the 
progress of the program.
    Senator Duckworth. Thank you so much.
    And I have no other colleagues here, and I have gone way 
over my time, but I guess that is the advantage of having the 
gavel. As a freshman, it is kind of interesting to do this.
    So let me just say that the hearing record will remain open 
for 2 weeks. During this time, Senators are asked to submit any 
questions for the record. Upon receipt, the witnesses are 
requested to submit their written answers to the Committee as 
soon as possible.
    I would like to thank the witnesses for your time and 
preparation for this on this very important issue and again 
extend my thanks to the Chairman and Ranking Member for 
convening this hearing.
    Again, thank you, and the hearing is now adjourned.
    [Whereupon, at 11:57 a.m., the hearing was adjourned.]

                            A P P E N D I X

    Response to Written Questions Submitted by Hon. Deb Fischer to 
                       Rhonda K. Hamm-Niebruegge
    Question 1. How would you address the very serious concern that a 
PFC increase places a higher burden on passengers from rural and 
smaller communities in our country, who often have to fly multiple-leg 
journeys to get to their destination? Ultimately, rural Americans would 
pay higher PFC's than Americans living near large-city airports with 
many direct flights.
    Answer. Increasing or eliminating the PFC statutory cap to fund 
much needed airport safety, security, and capacity infrastructure 
projects does not necessarily mean that rural Americans would pay 
higher PFCs than those living near large-city airports. First, just 
because the PFC statutory cap is increased or eliminated does not mean 
that airports, particularly large and medium hub airports that serve 
connecting passenger, will increase the PFCs they charge. Hub airports 
compete with each other for passengers and service. If St. Louis were 
to raise its PFCs too high, it would lose connecting passengers to 
perhaps Chicago Midway or DFW. Eventually, once enough connecting 
passengers begin to avoid St. Louis, airlines will reduce or eliminate 
service through St. Louis and use other less expensive hubs. And for 
hub airports, losing a passenger is more than just losing the PFC 
income from that passenger; it also means losing concession revenue 
and, ultimately, risking the reduction or loss of airline service.
    Second, while PFCs are included in the ticket prices, it does not 
mean that higher PFCs result in higher ticket prices. Airlines compete 
with each other, and price their tickets pragmatically, based on what 
the market will bear. A higher or lower PFC at any particular airport 
does not mean a correspondingly higher or lower ticket price. This was 
most vividly demonstrated in 2011 when the Federal Aviation 
Administration budget authority expired and with it, also the authority 
for airlines to collect excise taxes on tickets. From July 22 until 
August 7 of that year, the airlines did not collect excise taxes. But, 
for the most part, ticket prices did not change. Instead, as it was 
widely reported at the time,\1\ most airlines simply raised the ``air 
fare'' component of the ticket price by roughly the same amount that 
they would have remitted to the Federal Government had the excise taxes 
not expired. In other words, the market price of tickets did not 
change; the airlines continued charging what the market would bear and 
pocketed the tax savings. As airlines compete with each other, through 
different hubs, the prices they charge for tickets are a function of 
the other choices passengers have, not the level of PFCs at different 
airports.
---------------------------------------------------------------------------
    \1\ See e.g., Jane Engle, Airline ticket tax holiday is windfall--
for airlines, L.A. Times, July 23, 2011; and Joe Sharkey, A Bonanza for 
Airlines as Taxes End, N.Y. Times, July 25, 2011.
---------------------------------------------------------------------------
    Lastly, increasing or eliminating the PFC cap would directly 
benefit passengers at smaller, rural airports in Nebraska and 
elsewhere. Providing new funding resources would allow hub airports 
that are currently space constrained to build new essential facilities, 
including new gates, which, in turn, should lead to more air service 
options to a wider variety of destinations.
    All of these factors suggest that higher PFCs would not necessarily 
impose an undue burden on travelers from rural America. On the 
contrary, having a mechanism to fund much needed airport infrastructure 
projects should benefit the entire Nation and all passengers alike--
both rural and urban.

    Question 2. Ms. Hamm-Niebruegge, last year in the Senate FAA bill, 
I advocated for expanding the critical resources provided by the 
Airport Improvement Program. Although the extension bill did not 
include these provisions, I was pleased that it included provisions to 
protect the AIP funding for small airports like Scottsbluff, Nebraska. 
Fortunately, our Airport and Airways Trust Fund faces a surplus, 
something not many areas of our government can say. Can you please tell 
us how important it is that Congress continue to support a robust AIP 
program for all airports across our country?
    Answer. As you know, the Airport Improvement Program provides 
Federal grants to airports for projects that enhance safety, capacity, 
security, and address environmental concerns. The program has a proven, 
decades-long record of success. It is funded entirely by users of the 
aviation system through various taxes that are deposited into the 
Airport and Airway Trust Fund. No general fund revenues are 
appropriated to fund the program.
    AIP grants are of critical importance to airports of all sizes, but 
play a crucial role in funding infrastructure upgrades at smaller 
airports that often are limited in their ability to raise revenue and 
access capital markets to finance necessary improvements.
    The distribution of AIP funds among national system airports is 
based on a combination of formula apportionments (often referred to as 
``entitlements'') that take into account the number of passengers and 
amount of cargo at each airport, and discretionary grants that FAA 
awards for selected eligible projects. Under current law, whenever the 
program's total annual appropriation is $3.2 billion or more, the 
amount of entitlement grant funding distributed to all primary airports 
is doubled, and non-primary airport entitlements are created from state 
apportionments. Also, since 2000, large and medium hub airports that 
collect PFCs have had their AIP entitlement funding reduced--if 
collecting a PFC of $3 or less, by 50 percent; if collecting a PFC of 
$4 or $4.50, by 75 percent. Most of these reductions are then 
redistributed to smaller airports.
    I am a strong advocate for reauthorizing a robust AIP program that 
will benefit all airports. The airport I manage in St. Louis, Missouri, 
relies on the great network of airports served by our airlines, 
including small Essential Air Service airports in Arkansas, Illinois, 
Kentucky, Missouri, and Tennessee. Without spoke airports like the 
Western Nebraska Regional Airport in Scottsbluff, Nebraska, hub 
airports like St. Louis would not exist as they are today.
                                 ______
                                 
     Response to Written Question Submitted by Hon. Deb Fischer to 
                             Bob Montgomery
    Question. How would you address the very serious concern that a PFC 
increase places a higher burden on passengers from rural and smaller 
communities in our country, who often have to fly multiple-leg journeys 
to get to their destination? Ultimately, rural Americans would pay 
higher PFC's than Americans living near large-city airports with many 
direct flights.
    Answer. We could not agree more. In my testimony, I included ten 
reasons for why Southwest Airlines opposes an increase in the Federal 
PFC cap. In short, there's simply no good reason to raise our 
Customers' tax and free burden considering commercial airports have 
sufficient financial resources to meet their capital needs.
    Regarding small and midsized communities, the empirical evidence is 
clear--higher fares destroys air service in those communities. A PFC 
increase would represent a fare increase because, per DOT rules, we 
have to embed the PFC increase in our advertised fares.
    Because there tends to be fewer nonstop flight options for 
consumers at small and midsized airports, our Customers in those 
communities often are required to connect through a larger station to 
get where they want to go. So those Customers are often paying the PFC 
four times based on typical roundtrip itinerary.
    Moreover, at Southwest, we fly exclusively Boeing 737s. To be 
successful, at a minimum, we need to fill a 737 with paying Customers a 
few times a day at any airport we serve. This can be challenging in 
smaller markets. So, for example, say St. Louis doubles its PFC. Then 
that's a fare increase in Wichita, Kansas, or in Panama City, Florida, 
or in Omaha, Nebraska--all cities with nonstop flights to St. Louis. We 
do not want to raise ticket prices, especially in those smaller markets 
where large-plane service is harder to sustain.
                                 ______
                                 
     Response to Written Question Submitted by Hon. Todd Young to 
                             Bob Montgomery
    Question. I had the distinct pleasure to meet with four of 
Indiana's airport authorities from Indianapolis, Fort Wayne, South 
Bend, and Evansville this week. The availability of revenues from the 
Airport Improvement Program and Passenger Facility Charges ensure 
Hoosier airports are able to invest in needed infrastructure, maintain 
competitiveness, and ensure passenger safety. In fact, these two 
programs are part of the reason why Indianapolis International was 
awarded the Best Airport in North America six of the last seven years. 
Mr. Montgomery, we all recognize these PFC fees result in higher ticket 
costs, especially for passenger with multiple flight legs. Could you 
speak to any scenarios in which you could potentially support minor 
increases in the PFC? Are there proposals where airport users, 
including passengers and airlines, could have more of a seat at the 
table concerning how PFC revenues are spent? Are there ways in which we 
can better notify passengers of PFC fees and the direct investment they 
have for airport infrastructure?
    Answer. Thank you for your question. It is a good one. In my 
testimony, I included ten reasons for why Southwest Airlines opposes an 
increase in the Federal PFC cap. Those reasons include the fact that 
airline tenants at an airport literally have no seat at the table when 
an airport decides to increase the PFC or use scarce PFC revenues for a 
project. Today, we only comment as to whether a project is PFC-
eligible. And, the Federal eligibility criteria are quite broad.
    Second, in 2012, DOT began requiring airlines to hide all 
government-imposed taxes and fees into the price of an airline ticket. 
Overnight, advertised ticket prices increased somewhere in the range of 
15 to 30 percent. This DOT regulation--called the Full Fare Advertising 
Rule--has clearly resulted in the airlines ``digging in their heels'' 
to oppose any proposed tax or fee increase on our Customers.
    Finally, towards the end of the hearing, there was a discussion 
about the 1982 grandfather clause to the FAA's anti-revenue diversion 
rule. Today, because of this 25-year old grandfathering provision, over 
a dozen commercial airports divert nearly $1 billion in airport funds 
collectively to finance non-aviation programs. Until this loophole is 
closed, airlines will be hard pressed to support any new government-
imposed tax or fee on our Customers.
                                 ______
                                 
     Response to Written Question Submitted by Hon. Deb Fischer to 
                             Peggy Gilligan
    Question. Duncan Aviation, located in Lincoln, Nebraska, is the 
largest family-owned maintenance, repair & overhaul (MRO) in the world. 
However, inconsistent interpretation of regulatory compliance by the 
FAA regional offices has placed serious burdens and delays on Duncan 
and other general aviation manufacturers. Last year, my office worked 
with Ducan, GAMA, and the Commerce Committee to include language in the 
Senate FAA bill. How is the FAA working to ensure consistency in 
interpreting regulatory authorities across its regional offices?
    Answer. The Flight Standards Service (AFS) and Aircraft 
Certification Service (AIR) launched the Regulatory Consistency 
Communication Board (RCCB) in March 2017. The RCCB is the result of 
recommendations made by the Consistency of Regulatory Interpretation 
Aviation Rulemaking Committee (ARC). The ARC recommended the FAA 
establish the RCCB to provide clarification to internal and external 
stakeholders on questions related to the application of regulations. 
The RCCB consists of members from AFS, AIR, and the FAA Office of Chief 
Counsel, who review and resolve the issues submitted to the RCCB. 
Issues related to lack of consistency across AFS and AIR offices would 
fall under the purview of the RCCB.
    Order 8000.70, Regulatory Consistency Communication Board (RCCB), 
describes the roles and responsibilities of the RCCB, including how to 
submit issues. To assist external stakeholders in their submissions, 
the FAA created an online submission form that supports anonymous 
submission. More information on the RCCB, including the online form to 
submit topics to the RCCB, can be found at https://www.faa.gov/
regulations_policies/faa_regulations/rccb/
    To proactively help reduce the possibility of inconsistencies in 
the future, Order 8000.96, Flight Standards Guidance Document 
Development, was published January 2016. This order clearly describes 
the role of policy documents within a regulatory scheme and provides an 
outline for drafting policy documents that support existing regulations 
and are easy to understand.
    Also, to reduce the possibility of inconsistency, AFS reviewed its 
existing policy documents in 2015. The intent of this review was to 
cancel documents that were redundant or out of date. As a result of 
this review nine percent of Advisory Circulars and orders were 
canceled.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Deb Fischer to 
                      Gerald L. Dillingham, Ph.D.
    Question 1. In your testimony, you provided a generally positive 
overview of the FAA's progress in addressing the concerns raised by 
industry stakeholders as it relates to the certification process. Are 
there any areas of particular concern that GAO has with the FAA's 
implementation of recommendations to enhance regulatory consistency and 
the certification process?
    Answer. As noted in our written statement,\1\ we previously found 
that FAA's organizational culture was a primary challenge for 
successfully implementing the certification process and regulatory 
consistency initiatives. We also found that cultural shifts for FAA 
staff were necessary in how regulations, policy, and guidance are 
applied, and ultimately how certification and approval decisions are 
made. FAA's Aircraft Certification Service (AIR) established an 
organizational performance division, with dedicated staff, to 
facilitate change management and cultural shifts. In March 2017, FAA 
officials emphasized that for the AIR transformation to succeed, 
industry has to forgo past perceptions about negative experiences with 
FAA inspectors and engineers on certification issues. FAA officials 
told us that the success of the transformation will depend, in part, on 
industry's buy-in, engagement, and recognition that they are a key part 
of the cultural shift. FAA officials emphasized that for the AIR 
transformation to succeed industry also has to commit to change. FAA 
and industry must hold themselves accountable to building a compliance 
culture within their organizations and engaging in constructive 
dialogue to resolve issues at the lowest level possible.
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    \1\ GAO, Aviation Certification: FAA Has Made Continued Progress in 
Improving Its Processes for U.S. Aviation Products, GAO-17-508T 
(Washington, D.C.: March 23, 2017).

    Question 2. Dr. Dillingham, in your testimony you talked about 
industry stakeholders being concerned that the FAA is more focused on 
completing recommendations, or checking the boxes, than ensuring there 
are substantial improvements to the certification process. You followed 
that by saying the FAA is reaching out to stakeholders to update them 
on the agency's progress. Would you please elaborate on the means and 
frequency by which the FAA is updating industry stakeholders on the 
progress it is making?
    Answer. As noted in our written statement,\2\ FAA has been more 
active in communicating its work on these initiatives, both by meeting 
with industry representatives to update them and by involving industry 
groups in various activities to complete the initiatives. Aircraft 
Certification Service (AIR) officials told us, and industry 
stakeholders confirmed, that AIR has conducted numerous briefings to 
industry stakeholders on the status of the certification process 
initiatives and the realignment/transformation effort. AIR is working 
with industry to charter an organization designation authorization 
Scorecard Continuous Improvement Team--which will include FAA and 
industry representatives--to conduct analyses of the scorecard data 
across each year and consider recommendations/options for continually 
improving areas of the certification process. Recently, the Los Angeles 
Aircraft Certification Office manager created a team and partnered with 
the General Aviation Manufacturers Association and the Aerospace 
Industries Association to rewrite the 2004 FAA and Industry Guide to 
Product Certification, which contains a description of the purpose and 
vision of the certification process and an overview of the product 
certification phases. AIR also periodically updates and publishes its 
implementation plan for the Certification Process Committee 
recommendations to show the status of each initiative.
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    \2\ GAO-17-508T.

    Question 3. Dr. Dillingham, one idea that is frequently brought 
before this committee is that technology is evolving rapidly, and 
government is having a difficult time keeping up. This appears to be 
one of the concerns you stated GAO heard from industry stakeholders 
when reviewing the Aircraft Certification Service transformation 
process. Do you believe the recommendations given to FAA will allow for 
flexibility in the Aircraft Certification Service's rulemakings as new 
technology is developed?
    Answer. Yes, to the extent that FAA fully implements the 
recommendations from the Future of Aviation Advisory Committee (FAAC) 
\3\ and the Certification Process Committee,\4\ it will allow for 
flexibility in FAA's rulemaking as new technology is developed. Often 
when new technologies are part of a certification project, FAA uses 
special conditions to evaluate that technology. For example, FAA 
applied five special conditions to the certification of the Boeing 787 
Dreamliner for composite structures (see GAO-11-849).\5\ At some point, 
some special conditions become the subject of rulemakings in order to 
codify them as regulations. Both the FAAC and the Certification Process 
Committee have recommended that FAA improve its rulemaking process. The 
FAAC recommended in 2011 that FAA prioritize its rulemaking program, 
and the Certification Process Committee recommended to FAA in 2012 that 
the Aircraft Certification Service (AIR) undertake a review of the 
continued operational safety and rulemaking processes and implement 
reforms necessary to improve efficiency, including fast tracking the 
rulemaking process to update airworthiness standards in cases where 
special conditions have been used for a period of time and the design 
is no longer new and novel.\6\ In response to both recommendations, FAA 
developed a rulemaking prioritization tool. This tool considers special 
conditions and updating airworthiness standards per the FAAC 
recommendations. AIR adopted the rulemaking prioritization tool to 
update airworthiness standards for special conditions in September 
2014.
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    \3\ In 2010, in response to these and other challenges, DOT 
established the FAAC to develop a manageable, actionable list of 
recommendations for DOT. In April 2011, the FAAC released a report 
outlining 23 recommendations in five areas: environment, financing, 
competitiveness and viability, labor and workforce, and safety. GAO was 
asked to review the status of DOT's efforts to implement the FAAC 
recommendations. GAO examined 10 of the FAAC's 23 recommendations. For 
more information see GAO, Aviation: Status of DOT's Actions to Address 
the Future of Aviation Advisory Committee's Recommendations, GAO-13-657 
(Washington, D.C.: July 25, 2013).
    \4\ The Certification Process Committee is one of two aviation 
rulemaking committees that FAA chartered as required by the 2012 FAA 
Modernization and Reform Act. Both committees made recommendations to 
FAA, and the Certification Process Committee recommendations are being 
address by FAA's Aircraft Certification Service.
    \5\ GAO, Aviation Safety: Status of FAA's Actions to Oversee the 
Safety of Composite Airplanes, GAO-11-849 (Washington, D.C.: September 
21, 2011).
    \6\ FAA issues special conditions to address novel or unusual 
design features during the aircraft certification process. A special 
condition is a regulation that applies to a particular aircraft design. 
FAA issues special conditions when the airworthiness regulations for an 
aircraft, aircraft engine, or propeller design do not contain adequate 
or appropriate safety standards, because of a novel or unusual design 
feature. 14 C.F.R. Sec. 11.19.
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