National Airspace System: Reauthorizing FAA Provides Opportunities and Options to Address Challenges (02/12/2003, GAO-03-473T}

-------------------------Indexing Terms-------------------------
REPORTNUM:   GAO-03-473T
    TITLE:   National Airspace System: Reauthorizing FAA Provides Opportunities and Options to Address Challenges
     DATE:   02/12/2003



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United States General Accounting Office: 
GAO: 

Testimony: 

Before the Subcommittee on Aviation, Committee on Transportation and 
Infrastructure, House of Representatives: 

For Release on Delivery: 
Expected at 2:00 p.m. EST: 
Wednesday, February 12, 2003: 

National Airspace System: 

Reauthorizing FAA Provides Opportunities and Options to Address 
Challenges: 

Statement of Gerald L. Dillingham: 
Director, Civil Aviation Issues: 

GAO-03-473T: 

GAO Highlights: 

Highlights of GAO-03-473T, a testimony before the Subcommittee on 
Aviation, House Committee on Transportation and Infrastructure. 

Why GAO Did This Study: 

Much has changed since the Congress enacted the Wendell H. Ford 
Aviation Investment and Reform Act for the 21st Century (AIR-21) 3 
years agoï¿½the downturn in the nation's economy and the terrorist 
attacks of September 11, 2001, have taken a heavy toll on aviation. 
Competition for federal funding has also grown. 

The reauthorization of AIR-21 provides an opportunity for the Congress 
and the Federal Aviation Administration (FAA) to focus on several 
challenges to improving the national airspace system. These challenges 
include (1) funding planned airport capital development, (2) increasing
capacity and efficiency, (3) implementing human capital and procurement 
reforms, and (4) ensuring aviation safety. 

This testimony is based on ongoing and published GAO work. The 
information on funding and development, obtained from FAA and the 
Airport Council International (ACI), a key organization representing the
airport industry, is preliminary and therefore subject to change. 

What GAO Found: 

Funding planned airport development: 
Estimates vary as to the annual cost of planned airport capital 
development over the next 5 years, from FAAï¿½s estimate of about $9 
billion to the airport industryï¿½s estimate of about $15 billion. If 
airports continue to receive about $12 billion a year for planned 
capital developmentï¿½the average for 1999 through 2001ï¿½they would be 
able to fund all of the projects included in FAAï¿½s estimate, but would 
fall about $3 billion short of the industryï¿½s estimate. 

Increasing capacity and efficiency: 
Recently, airports have taken about 10 years to develop runways, and 
ongoing runway projects are expected to take even longer. The federal 
government and airports have taken actions to expedite runway 
development, but it is still too early to assess the impact of these 
actions. FAAï¿½s management of costly air traffic control acquisitions
has improved, but cost, schedule, and performance problems remain. 

Implementing human capital and procurement reforms: 
FAA is making progress in implementing human capital and procurement 
reforms, but it has not fully implemented a new compensation system, in 
part because it has to negotiate with multiple unions, and it is not 
yet systematically evaluating the results of reforms in either area. 

Ensuring aviation safety: 
The Safer Skies program, which focuses on identifying and correcting 
the causes of aviation accidents, and FAAï¿½s redesigned program to 
inspect airline operations are two important aviation safety 
initiatives. While both programs have made good starts, some challenges 
remain. The Safer Skies program, which began in 1998, is not fully 
implemented, and the inspection system has encountered startup problems
with inspector training and guidance. 

Past Funding Is Sufficient to Cover FAAï¿½s Estimate but Would Fall $3 
Billion Short of Industryï¿½s Estimate (dollars in billions): 

[See PDF for image] 

Annual FAA Planned Development: $9.2; 
Annual Funding Received by Airports: $11.8; 
Annual ACI Planned Development: $15.0; 
Annual Funding Received by Airports: $11.8. 

Source: FAA and ACI. 

[End of figure] 

What GAO Recommends: 

This testimony does not contain recommendations. However, GAO reports 
containing relevant recommendations are listed among the Related GAO 
Products following the testimony. 

[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-473T]. 

To view the full testimony, including the scope and methodology, click 
on the link above. For more information, contact Gerald L. Dillingham 
at (202) 512-3650 or [email protected]. 

[End of section] 

Mr. Chairman and Members of the Committee: 

We are pleased to be here today to discuss issues relevant to ensuring 
the safe and efficient operation of the national airspace system. These 
issues are particularly relevant as you prepare to reauthorize the 
Wendell H. Ford Aviation Investment and Reform Act for the 21st Century 
(AIR-21). Much has changed since the Congress enacted AIR-21 3 years 
ago. As you know, the downturn in the nationï¿½s economy and the 
terrorist attacks of September 11, 2001, have taken a heavy toll on 
aviation. Flights that were once filled are now being canceled for lack 
of business, and attention has shifted from increasing the capacity of 
the national airspace system to enhancing aviation security. 
Furthermore, as the federal budget deficit has increased, competition 
for federal resources has intensified. 

The Congress and the administration have responded to the publicï¿½s 
concerns about aviation security by federalizing airport screeners, 
upgrading and installing new airport screening equipment, and expanding
the Federal Air Marshal Service. These security measures will continue 
to require and compete for federal funds. At the same time, the 
transfer of some key security responsibilities to the Transportation 
Security Administration, which recently moved to the new Department of
Homeland Security, will allow the Federal Aviation Administration (FAA)
to focus on the challenges it faces in improving the national airspace
system. These challenges include (1) funding planned airport capital
development, (2) increasing capacity and efficiency, (3) implementing
human capital and procurement reforms, and (4) ensuring aviation 
safety. 

My statement today is based on our ongoing work on airport funding and 
on our published reports addressing the other challenges. Because our 
information on planned airport capital development, including the 
information we obtained from surveying 400 smaller airports, is 
preliminary, it is subject to change. 

In summary: 

* Although it is generally agreed that maintaining the integrity of the
national airspace system requires continual funding, estimates vary as 
to the type and cost of planned airport capital development needed to 
ensure a safe and efficient system. For 2001 through 2005, FAA has 
estimated annual planned capital development costs of about $9 billion, 
while the Airport Council International (ACI), a key organization 
representing the airport industry, has estimated annual costs of about 
$15 billion for 2002 through 2006. FAAï¿½s estimate includes only 
projects that are eligible for federal funding, whereas ACIï¿½s estimate 
includes projects that are both eligible and ineligible for federal 
funding. Neither FAAï¿½s nor ACIï¿½s estimate covers the airport terminal 
modifications needed to accommodate the new explosives detection 
systems required to screen checked baggage. According to ACI, these 
modifications could cost $3 billion to $5 billion over the next 5 
years. The Congress has not yet determined how these modifications will 
be funded. If airports continue to receive about $12 billion a year for 
planned capital developmentï¿½the average amount they received from 1999 
through 2001ï¿½they would be able to fund all of the projects included in 
FAAï¿½s estimate, but they would not be able to fund about $3 billion in 
planned development estimated by ACI. While this projected shortfall 
could change with revisions in future funding, planned development, or 
both, it nevertheless provides a useful indication of where funding 
differences may be the greatest. Options are available to increase or 
make better use of the funding for airport development, and these 
options would benefit different types of airports to varying degrees. 
For example, raising the current cap on passenger facility charges would
primarily benefit larger airports, while increasing or redistributing 
Airport Improvement Program grant funds would be more likely to help 
smaller airports. 

* To increase the capacity and efficiency of the national airspace 
system, FAA has focused on building new runways and modernizing air 
traffic control. Results have been mixed in both areas. FAAï¿½s 
Operational Evolution Plan, a 10-year blueprint for increasing capacity 
and efficiency, includes one new runway but notes the cancellation of 
another runway and delays in the construction of six others. Our work 
has identified challenges to runway development, including community 
opposition, environmental concerns (especially noise issues), and 
litigation.[Footnote 1] Because of these and other challenges, airports 
have taken about 10 years to plan and build runways, and they expect to 
take about 14 years for runways that are not yet completed. Several 
federal initiatives, such as an executive order designed to streamline 
the environmental review process, are designed to facilitate runway 
development, but we believe it is too early to assess their impact. To 
modernize air traffic control, FAA spends almost $3 billion annually, 
but its progress has been slow because of cost overruns, schedule 
delays, and performance shortfalls. As a result, we designated this 
area as high risk in 1995, and it remains at high risk today. FAA has 
made some progress in addressing the root causes of its modernization 
problemsï¿½by, for example, improving its cost-estimating and cost-
accounting practicesï¿½but it has not yet determined which modernization 
technologies and initiatives are most likely to increase capacity and 
efficiency and what impact the current financial condition of the 
airline industry will have on the implementation of planned 
modernization efforts. 

* Recognizing the importance of effective human capital and acquisitions
management to FAAï¿½s ability to achieve its mission, the Congress 
exempted FAA from many federal human capital and acquisitions laws, and 
FAA began implementing reforms in these areas in 1996. FAA has made 
progress in implementing the reforms. However, as we reported last 
week,[Footnote 2] FAA has not yet finished implementing some key human 
capital management initiatives, in part because it needs to negotiate 
changes with multiple unions. FAA also lacks data on the effects of its 
human capital initiatives, indicating that it has not fully 
incorporated important elements into its human capital reform effort, 
including data collection and analysis, performance goals and measures, 
and links between its reform goals and program goals. Developing a 
strategic approach to human capital management is particularly 
important because FAA faces the likelihood of hiring thousands of air 
traffic controllers in the next decade to fill vacancies caused by 
retirements. To improve its procurement management, FAA implemented an 
acquisitions management system that is now capturing key information; 
however, FAA has not yet put processes in place to evaluate projects 
after implementation so that it can identify lessons learned and 
improve the investment management process. 

* Finally, FAA and the Congress have taken important steps to enhance
aviation safety; however, some challenges remain. Safer Skies, an 
initiative designed by FAA and the aviation industry to reduce the 
nationï¿½s fatal aviation accident rate by 80 percent by 2007, is the 
centerpiece of FAAï¿½s efforts to improve aviation safety. The initiative 
was implemented in 1998 and many preventive actions are under way but 
have not yet been fully implemented. Another key to improving aviation 
safety is effective inspections of the nationï¿½s airline operations. In 
reporting on FAAï¿½s redesigned Air Transportation Oversight System in 
1999, we noted that it incorporated important features to ensure that 
airlines have systems to control risks and prevent accidents, but that 
it had encountered startup problems with inspector training and 
guidance.[Footnote 3] Many of these problems were not yet fully 
resolved when the Department of Transportationï¿½s Inspector General 
reported on the inspection system last year.[Footnote 4] Finally, to 
reduce the risk of accidents, the Congress enacted the Pilot Records 
Improvement Act of 1996, which requires air carriers to review 
information on a pilotï¿½s performance, qualifications, and training 
before making a final hiring decision. As we reported in 2002,[Footnote 
5] compliance with the act has improved over time, but FAA needs to 
update its guidance and incorporate information on the act in the 
agencyï¿½s training for inspectors so that they can more effectively 
monitor and enforce compliance, particularly among the smaller 
carriers. 

Prior Yearsï¿½ Funding Levels Would Cover Projects Included in FAAï¿½s 
Estimate, but Not All Planned Capital Development: 

Both FAA and ACI have estimated the costs of planned airport capital
development. Our analysis indicates that recent funding levels would
cover the costs estimated by FAA, but not all the costs estimated by 
ACI. Options for addressing the potential difference between funding and
planned development estimates include increasing or reallocating Airport
Improvement Program (AIP) grant funds and removing the current cap on
passenger facility charges. 

FAAï¿½s and the Airport Industryï¿½s Estimates of Planned Capital 
Development Vary Substantially: 

The estimated costs of planned airport capital development vary 
depending on which projects are included in the estimates. According to
FAAï¿½s estimate, which includes only projects that are eligible for AIP
grants, the total cost of airport development will be about $46 
billion, or over $9 billion per year, for 2001 through 2005. FAAï¿½s 
estimate is based on the agencyï¿½s National Plan of Integrated Airport 
Systems, which FAA published in August 2002. ACIï¿½s estimate includes 
all of the projects in FAAï¿½s estimate, plus other planned airport 
capital projects that may or may not be eligible for AIP grants. ACI 
estimates a total cost of almost $75 billion, or nearly $15 billion per 
year, for 2002 through 2006. Projects that are eligible for AIP grants 
include runways, taxiways, and noise mitigation and noise reduction 
efforts; projects that are not eligible for AIP funding include parking 
garages, hangars, and expansions of commercial space in terminals. 

Both FAAï¿½s and ACIï¿½s estimates cover projects for every type of 
airport. As table 1 indicates, the estimates are identical for all but 
the large- and medium-hub airports, which are responsible for 
transporting about 90 percent of the traveling public. ACIï¿½s estimates 
are about twice as large as FAAï¿½s for these airports. 

Table 1: Average Annual Planned Development Costs Estimated by FAA and 
ACI, by Airport Type, 2001-2006 (Dollars in millions): 

Airport type: Large hub; 
Number of airports: 31; 
Annual average, FAA: $4,855; 
Annual average, ACI: $8,554. 

Airport type: Medium hub; 
Number of airports: 37; 
Annual average, FAA: $1,073; 
Annual average, ACI: $3,109. 

Airport type: Small hub; 
Number of airports: 71; 
Annual average, FAA: $675; 
Annual average, ACI: $675. 

Airport type: Nonhub; 
Number of airports: 280; 
Annual average, FAA: $807; 
Annual average, ACI: $807. 

Airport type: Other commercial service; 
Number of airports: 124; 
Annual average, FAA: $142; 
Annual average, ACI: $142. 

Airport type: Reliever; 
Number of airports: 260; 
Annual average, FAA: $526; 
Annual average, ACI: $526. 

Airport type: General aviation; 
Number of airports: 2,558; 
Annual average, FAA: $1,167; 
Annual average, ACI: $1,167. 

Airport type: Total; 
Number of airports: 3,364; 
Annual average, FAA: $9,245; 
Annual average, ACI: $14,980. 

Source: FAA and ACI. 

[End of table] 

According to FAAï¿½s analysis of the planned capital development for 2001
through 2005, airports will use (1) 61 percent of the $46 billion for 
capacity enhancement, reconstruction, and modifications to bring 
airports up to the agencyï¿½s design standards and (2) 39 percent to fund 
safety, security, environmental, and other projects. See figure 1. 

Figure 1: Distribution of FAAï¿½s Estimated $46 Billion for Planned 
Capital Development at Airports by Project Type, 2001-2005: 

[See PDF for image] 

This figure is a pie-chart that represents the distribution of FAAï¿½s 
estimated $46 billion for planned capital development at airports by 
project type, 2001-2005. The following data is depicted: 

Safety and Security: 3%; 
Environment: 4%; 
Reconstruction: 13%; 
Capacity: 18%; 
Standards: 30%; 
Other: 32%. 

Source: FAA. 

[End of figure] 

Neither FAAï¿½s nor ACIï¿½s estimate includes funding for terminal 
modification projects that are needed to accommodate the new explosives
detection systems. ACI estimates that terminal modifications will cost
about $3 billion to $5 billion over the next 5 years. 

Airports Obtain Most Funding from Bonds and Federal Sources: 

From 1999 through 2001, the 3,364 airports that make up the national
airport system received an average of about $12 billion per year for
planned capital development. The single largest source of these funds 
was bonds, followed by AIP grants and passenger facility charges. (See 
table 2.) It is important to note that the appropriated AIP funding for 
fiscal year 2002 totaled $3.2 billion and that the authorized AIP 
funding for fiscal year 2003 is $3.4 billion. However, because data for 
funding from other sources were not available for these years, we used 
the figures from 1999 through 2001, the most recent years for which 
consistent data were available. 

Table 2: Sources of Airport Funding (Dollars in billions): 

Funding source: Airport bonds; 
1999-2001 average annual funding[A]: $6.90[B]; 
Percent of total: 59; 
Source of funds: Usually, state and local governments or airport
authorities issue tax-exempt debt. Funds also include notes. 

Funding source: Airport Improvement Program grants; 
1999-2001 average annual funding[A]: 2.42[C]; 
Percent of total: 21; 
Source of funds: The Congress makes funds available from the Airport 
and Airway Trust Fund, which receives revenue from various aviation-
related taxes. 

Funding source: Passenger facility charges; 
1999-2001 average annual funding[A]: 1.59[D]; 
Percent of total: 13; 
Source of funds: Funds come from passenger fees of up to $4.50 per trip 
segment at commercial service airports. 

Funding source: State and local contributions; 
1999-2001 average annual funding[A]: .44[E]; 
Percent of total: 4; 
Source of funds: Funds include state and local grants, loans, and 
matching funds for AIP grants. 

Funding source: Airport revenue; 
1999-2001 average annual funding[A]: .42[F]; 
Percent of total: 4; 
Source of funds: Funds are generated from (1) ï¿½airsideï¿½ revenues 
derived from the operation and landing of aircraft, passengers, or 
freight and (2) ï¿½landsideï¿½ revenues derived from concessions and
leases. 

Funding source: Total; 
1999-2001 average annual funding[A]: $11.78; 
Percent of total: 100. 

Source: GAO, FAA, and Thomson Financial. 

Note: Totals may not add because of rounding. 

[A] Amounts expressed in inflation-adjusted 2001 dollars. 

[B] Net of refinancing. Of this total, $1.43 billion per year 
represented the proceeds of special facility bonds, which are secured 
by revenue pledges from the indebted facility and issued on behalf of
non-airport beneficiaries, such as airlines. 

[C] Since the passage of AIR-21 in 2000, annual AIP funding has been at 
or above $3.2 billion. Before that, it was less than $2 billion. 

[D] Airports have been eligible to charge $4.50 since fiscal year 2001. 
Before that, the ceiling was $3.00. 

[E] Net operating revenue in excess of a minimum coverage ratio of 125 
percent of the debt service (principal and interest payments) for 
commercial service airports. For general aviation and reliever 
airports, amounts are calculated as net operating revenue. 

[F] Does not include local grants and loans for commercial service 
airports because we found no data to document the amounts from these 
sources. 

[End of table] 

The amount and type of funding vary depending on the airportï¿½s size. For
example, as shown in figure 2, the large- and medium-hub airports depend
primarily on bonds, while the smaller airports rely principally on AIP
grants. Passenger facility charges are a more important source of 
revenue for the large- and medium-hub airports because they have the 
majority of commercial service passengers. 

Figure 2: Distribution of Sources of Funding, by Airport Type: 

[See PDF for image] 

This figure is a multiple vertical bar graph representing the 
distribution of sources of funding, by airport type. The vertical axis 
of the graph represents percentage from 0 to 100. The horizontal axis 
of the graph represents six types of funding for both smaller airports 
and large and medium hub airports. The following data is depicted: 

Source of funding: Bonds: 
Smaller Airports: approximately 12%; 
Large and Medium Hub Airports: approximately 55%. 

Source of funding: Special facility bonds; 
Smaller Airports: approximately 2%; 
Large and Medium Hub Airports: approximately 15%. 

Source of funding: Passenger facility charges; 
Smaller Airports: approximately 8%; 
Large and Medium Hub Airports: approximately 15%. 

Source of funding: AIP grants; 
Smaller Airports: approximately 65%; 
Large and Medium Hub Airports: approximately 10%. 

Source of funding: Available operating revenue; 
Smaller Airports: less than 1%; 
Large and Medium Hub Airports: approximately 4%. 

Source of funding: State and local; 
Smaller Airports: approximately 15%; 
Large and Medium Hub Airports: less than 1%. 

Source: GAO. 

Note: The 1999 and 2000 figures were converted to inflation-adjusted 
2001 dollars. 

Note: Special facility bonds are secured by the revenue from the 
indebted facility for projects such as terminals, hangars, and 
maintenance facilities, rather than by the airportï¿½s general revenue. 

Note: Available operating revenue accounts for less than 1 percent of 
the capital development funding received by smaller airports, and state 
and local contributions represent less than 1 percent of the capital 
development funding received by large- and medium-hub airports. 

[End of figure] 

Prior Yearsï¿½ Funding Levels Would Cover All of FAAï¿½s Planned 
Development Estimate but Would Fall About $3 Billion Short of ACIï¿½s
Estimate: 

If the funding for airport capital development remains at about $12 
billion a year over the next 5 years, it would cover all of the 
projects in FAAï¿½s estimate. However, it would be about $3 billion less 
per year than ACIï¿½s estimate. Figure 3 compares the average annual 
funding airports received from 1999 through 2001 with FAAï¿½s and ACIï¿½s 
annual planned development for 2001 through 2006. This difference is 
not an absolute predictor of future funding shortfalls; both funding 
and planned development may change in the future. However, it does 
provide a useful indication of where funding differences may be the 
greatest. 

Figure 3: Recent Average Annual Funding Compared with Estimates of 
Annual Planned Development Costs (dollars in millions): 

[See PDF for image] 

This figure contains two stacked bar graphs depicting the following 
data: 

Average annual funding 1999-2001: 
Airport bonds (net): $6,898; 
AIP: $2,422; 
Passenger facility charges: $1,587; 
State and local: $444; 
Available operating revenue: $424; 
Total: $11,775. 

Annual planned development 2001-2006: 
Additional planned development, according to ACI: $5,736; 
Other AIP eligible projects: $2,970; 
Standards: $2,971; 
Capacity: $1,688; 
Security, safety, environment, reconstruction: $1,826; 
Total: $14,980. 

Sources: FAA and ACI (data); GAO (analysis). 

[End of figure] 

Funding Difference Would Affect Smaller Airports Proportionally More 
Than Larger Airports, but Difference Has Narrowed: 

The difference between past funding and planned development is
proportionally greater for smaller airports than for large- and medium-
hub airports. If the smaller airports were to continue to receive an 
average of about $2.4 billion per year, they would be able to fund 
about 73 percent of the estimated cost of their total planned 
development. In comparison, large- and medium-hub airports would be 
able to fund about $9.4 billion per year, or about 80 percent, of the 
estimated cost of their total planned development. It is important to 
note that while the airlines may be experiencing financial problems, 
most large airports have very solid credit ratings and could, if 
necessary, issue more debt without facing exorbitant interest rates. 
Figures 4 and 5 illustrate the differences between funding levels and 
estimated planned capital development at smaller and at large and 
medium-hub airports. 

The primary reason that smaller airports would be able to fund 73 
percent of their planned development, rather than the 52 percent 
reported we reported in 1998, is that they have benefited significantly 
from the increases in AIP grants, which is a larger source of funding 
for smaller airports than it is for larger airports. Of the $2.4 
billion in AIP grant funds that airports received each year, on 
average, from 1999 through 2001, smaller airports received almost 63 
percent, whereas large- and medium-hub airports received about 37 
percent. Smaller airports have received an increasing share of AIP 
grants primarily because of statutorily required changes in the 
distribution of these funds. For example, in AIR-21, the Congress 
increased the funding for two categories that primarily or exclusively 
benefit small airportsï¿½the state apportionment fund and the small 
airport fundï¿½and created general aviation entitlement grants, which
also benefit smaller airports.[Footnote 6] 

Figure 4: Average Annual Funding Compared with Estimated Annual Planned
Capital Development for Smaller Airports (dollars in millions): 

[See PDF for image] 

This figure contains two stacked bar graphs depicting the following 
data: 

Average annual funding 1999-2001: 
AIP: $15,30; 
State and local: $387; 
Airport bonds (net): $331; 
Passenger facility charges: $172; 
Available operating revenue: $0.3; 
Total: $2,421. 

Annual planned development 2001-2006: 
Other AIP eligible projects: $259; 
Standards: $1,866; 
Capacity: $165; 
Security, safety, environment, reconstruction: $1,026. 
Total: $3,317. 

Source: FAA and ACI (data), GAO (analysis). 

[End of figure] 

Figure 5: Average Annual Funding Compared with Estimated Planned Capital
Development for Large- and Medium-Hub Airports (dollars in millions): 

[See PDF for image] 

This figure contains two stacked bar graphs depicting the following 
data: 

Average annual funding 1999-2001: 
Airport bonds (net): $6,567; 
Passenger facility charges: $1,415; 
AIP: $892; 
Available operating revenue: $424; 
State and local: $57; 
Total: $9,354. 

Annual planned development 2001-2006: 
Additional planned development, according to ACI: $5,736; 
Other AIP eligible projects: $2,710; 
Standards: $894; 
Capacity: $1,523; 
Security, safety, environment, reconstruction: $800; 
Total: $11,663. 

Source: FAA and ACI (data), GAO (analysis). 

Note: The total for average annual funding may not add because of 
rounding. 

[End of figure] 

Options Are Available to Address Difference between Funding and Planned 
Development: 

Options are available to increase airport funding or to make better use 
of the existing funding. These options, some of which were authorized or
implemented as part of AIR-21, include increasing the AIP grant funding
for smaller airports, increasing passenger facility charges, and using
innovative financing approaches. The various options would benefit
different types of airports to varying degrees. 

To help address the difference between funding and planned development,
AIR-21 provided that up to $150,000 a year in AIP grant funds be made
available to all general aviation airports for up to 3 years for 
airfield capital projects such as runways, taxiways, and airfield 
construction and maintenance projects. In our report issued yesterday, 
we reported that since the programï¿½s inception in fiscal year 2001, 
general aviation airports have received a total of about $325 million, 
which they have used primarily to help build runways, purchase 
navigational aids, and maintain pavements and airfield lighting. 
[Footnote 7] Most of the state aviation officials and general aviation 
airport managers we surveyed said the grants were useful in meeting 
their needs, and some suggested that the $150,000 grant limit be 
increased so that general aviation airports could undertake larger 
projects. However, a number of state officials cautioned that an 
increase in the general aviation entitlement grant could cause a 
decrease in the state apportionment fund, which states use to address 
their aviation priorities. 

Another option would be to increase or eliminate the cap on passenger
facility charges. This option would primarily benefit larger airports,
because passenger facility charges are a function of the volume of
passenger traffic. However, under AIP, airports that collect passenger
facility charges must forfeit a certain percentage of their AIP formula
funds. These funds are subsequently divided between the small airport
fund, which is to receive 87.5 percent, and the discretionary fund, 
which is to receive 12.5 percent. Thus, smaller airports would benefit 
indirectly from any increase in passenger facility charges. In our 1999 
report on passenger facility charges, [Footnote 8] we estimated that a 
small increase in passenger facility charges would have a modest effect 
on passenger traffic. At that time, we estimated that each $1 increase 
would reduce passenger levels by about 0.5 to 1.8 percent, with a 
midrange estimate of 0.85 percent. Since AIR-21 raised the cap on 
passenger facility charges from $3.00 to $4.50, the full effect of the 
increase has not been realized because only 17 of the 31 large-hub 
airports (55 percent) and 11 of the 37 medium-hub airports (30 percent) 
have increased their rates to $4.50. Additionally, 3 large-hub airports 
and 6 medium-hub airports do not charge a passenger facility fee. The 
reluctance to raise passenger facility charges is likely to be the 
result of several factors, including the views of airlines, which are
opposed to any increase in passenger facility charges because an 
increase would raise passenger costs and reduce passenger traffic. 
Nonetheless, if all airports were to increase passenger facility 
charges to the current ceiling, additional revenue could be generated. 

FAA has introduced other mechanisms to make better use of existing
funding sources, the most successful of which has been letters of 
intent, a tool that has effectively leveraged private sources of 
funding. A letter of intent represents a nonbinding commitment from FAA 
to provide multi-year funding to an airport beyond the current AIP 
authorization period. Thus, the letter allows the airport to proceed 
with a project without waiting for a future AIP grant because the 
airport and investors know that allowable costs are likely to be 
reimbursed. A letter of intent may also enable an airport to receive a 
more favorable interest rate on bonds that are sold to refinance a 
project because the federal government has indicated its support for 
the project. FAA has issued 64 letters of intent with a total 
commitment of about $3 billion; large- and medium-hub airports account 
for the majority of the total. 

Other approaches to making better use of existing funding resources were
authorized under AIR-21. Specifically, the act authorized FAA to 
continue its innovative finance demonstration program, which is 
designed to test the ability of innovative financing approaches to make 
more efficient use of AIP funding. Under this program, FAA enabled 
airports to leverage additional funds or lower development costs by (1) 
permitting flexible local matching on some projects, (2) purchasing 
commercial bond insurance, (3) paying interest costs on debt, and (4) 
paying principal and interest debt service on terminal development 
costs incurred before the enactment of AIR-21. FAA has provided about 
$31 million for smaller airports to test these innovative uses of AIP 
funding. According to FAA officials, the results of the program have 
been mixed. The most popular option for airports has been flexible 
matching, which has resulted in several creative loan arrangements. 

Improvements in Capacity and Efficiency Will Be Needed to Meet Future 
Demand: 

Ensuring the efficient operation of the national airspace system is an
important reauthorization issue that is vital to improving mobility and
supporting economic growth. Despite the overall decline in air traffic 
since September 11, demand is gradually increasing, and at some 
airports, especially those in the Midwest, recovery is progressing more 
rapidly. To avoid the congestion and delays that plagued air traffic 
before September 11, FAA, airlines, and airports are continuing to 
pursue capacity-enhancing efforts, such as building new runways, making 
more efficient use of existing capacity, and better managing the 
acquisition of air traffic control technology. Figure 6 illustrates 
congestion at a major airport. 

Figure 6: Aircraft Lined Up to Take Off: 

[See PDF for image] 

This figure is a photograph of five aircraft lined up to take off. 

Source: Used by permission. 

[End of figure] 

FAAï¿½s Operational Evolution Plan Encompasses Capacity and Efficiency 
Improvements: 

In December 2002, FAA published the most recent version of its
Operational Evolution Plan, a 10-year plan to increase the capacity and
efficiency of the national airspace system, primarily by focusing on
building runways. If successfully carried out, the plan would 
substantially increase capacity and improve efficiency. However, FAA 
faces several challenges in implementing the plan. First, the success 
of the plan depends on adequate funding and on the consensus of FAAï¿½s 
aviation industry partners. Yet according to the most recent version of 
the plan, the timing and implementation of some activities may be in 
jeopardy because of the current economic situation and the uncertain 
viability of some industry participants. For example, the plan calls 
for the airline industry to invest $11 billion in new equipment for 
aircraft. FAA is currently reviewing the ability of the airlines to 
make this investment. Second, as noted, the plan relies heavily on 
runway development to increase capacity, but the most recent version 
reports mixed results in building new runways. While the plan indicates 
that one new runway will be built, it points out that another runway 
has been canceled and the construction of six additional runways has 
been delayed because of local situations. Furthermore, building new 
runways would be difficult at several of the most delay-prone airports,
such as La Guardia, Newark, Kennedy, Los Angeles, and San Francisco,
because these airports either are out of room or would face intense 
local opposition. Persistent delays at key airports such as these will 
continue to create ï¿½choke pointsï¿½ that slow air traffic throughout the 
system. In addition, AIR-21 requires the phaseout of slot restrictions 
at Chicago Oï¿½Hare by July 1, 2002, and at LaGuardia and John F. Kennedy 
airports by 2007. Because slot restrictions limit the number of gates 
at an airport, their phaseout could lead to an increase in air traffic. 
According to the Operational Evolution Plan, FAA is undertaking a 
number of efforts to address problems at choke points, such as 
rerouting aircraft and adding technology. 

Building Runways Is Challenging and Takes a Long Time: 

Our work has found that airports face many of the same challenges and
delays in building new runways that FAA reported in the Operational
Evolution Plan. In January 2003, we reported that airports spent about 
10 years planning and building recently completed runways and expect to
spend about 14 years on runways that are not yet completed. [Footnote 
9] Several external factors affect how much time is spent planning and 
building runways, and several airports with unfinished runway projects 
identified significant challenges that had delayed their projectsï¿½ 
completions. While many airports believed that completing the 
environmental review phase was a significant challenge, they also 
described other phases of the runway development process as equally 
challenging. For example, airport officials in Los Angeles and Boston 
said that they faced significant challenges in reaching agreement with 
community interest groups during the planning phase. In Boston, 
differences with these groups have led to lengthy litigation. Other 
airports said that mitigating the potential impact of aircraft noise on 
the surrounding community continues to be a challenge because of 
heightened community concerns about noise. 

Although there may be no single solution to all of the issues involved 
in planning and building runways, the federal government and airport
authorities have taken some actions. For example, a recent executive
order is designed to streamline the environmental review of 
transportation infrastructure projects. In addition, FAA has taken 
several actions to increase communication and coordination and 
streamline the planning and environmental review of runway projects. 
Some airports said these actions could help airports resolve challenges 
more quickly; however, we believe it is too early to assess the impact 
of these actions on the runway development process. 

Our work has shown that airports have also tried to address the 
challenges in building runways by, for example, involving local 
stakeholders, such as community groups, at the beginning of the process 
and reaching early agreement on how to mitigate the adverse effects of 
runway projects. Airports said these efforts helped to facilitate the 
completion of their projects and could be useful for other airports 
considering runway projects. However, the variety of situations that 
airports described and the different levels of challenges they face 
make it difficult to generalize from one airportï¿½s experience to 
anotherï¿½s. 

Recognizing that building new runways is not always a practicable way to
increase capacity at some airports, we identified three alternatives to
building runways:[Footnote 10] 

* Add capacity by using nearby airports that have available capacity or 
by building new airports. 

* Find ways to manage and distribute demand within the systemï¿½s existing
capacity by, for example, limiting the number of takeoffs and landings
during peak periods or limiting the ability of aircraft, other than 
those operated by airlines, to use especially crowded or sensitive 
airports (under current law, all aircraft have equal access to even the 
largest airports). 

* Develop other modes of intercity travel, such as high-speed rail, 
where metropolitan areas are relatively close, to form an integrated, 
intermodal transportation network. 

These alternatives would require extensive change, could conflict with 
the interests of one or more key stakeholder groups, and would often be
costly. Nevertheless, they may be essential to accommodate expected
increases in the demand for efficient transportation services or to 
address security and other concerns prompted by the terrorist attacks. 
To facilitate their implementation, we believe that the federal 
government will need to assume a central role. Accordingly, we have 
recommended that the Department of Transportation (DOT) begin a more 
extensive evaluation of initiatives to address flight delays, including 
intermodal solutions and a dialogue with the aviation community and 
other transportation stakeholders as a basis for developing a 
comprehensive blueprint for addressing the nationï¿½s long-term 
transportation needs. DOT has recognized the need for more and better 
long-range planning on the potential use of such measures, but its 
efforts are in the beginning stages. The current hiatus in air traffic 
growth creates an opportunity for such planning to take place. 

FAAï¿½s Air Traffic Modernization Effort Remains High Risk: 

To increase the safety, capacity, and efficiency of the national 
airspace system, FAA undertook a major effort in 1981 to modernize and 
replace aging air traffic control equipment. This effort has been 
plagued by cost overruns, schedule delays, and performance shortfalls. 
In 1995, we designated it as high risk, and we continue to designate it 
as such.[Footnote 11] Inefficiencies in the air traffic control system 
contributed to some of the delays in the system that peaked in 2000. At 
that time, FAA estimated that modernizing equipment along with other 
changes, such as redesigning the airspace, would increase capacity by 5 
to 15 percent. 

Originally, FAA planned to complete its modernization in 10 years at a 
cost of $12 billion. Now, two decades and $35 billion later, FAA 
estimates that it will need nearly $16 billion more through fiscal year 
2007 to complete key projects, including the Standard Terminal 
Automation Replacement System (STARS), the Wide Area Augmentation 
System (WAAS), the Next-Generation Air/Ground Communications (NEXCOM), 
the Local Area Augmentation System (LAAS), the Integrated Terminal 
Weather System (ITWS), and free flight initiatives, which FAAï¿½s 
Operational Evolution Plan recognizes as a new way of managing air 
traffic that is expected to help lower costs for the airlines and help 
the aviation system accommodate more flights. 

While FAA is making progress in managing the air traffic control
modernization, key programs continue to experience cost, schedule, and
performance problems. As a result, resources have not been spent cost-
effectively and improvements in capacity and efficiency have been
delayed. Table 3 shows the status of three major programs that we have
been monitoring. 

Table 3: Selected Air Traffic Control Modernization Acquisition 
Projects: 

Project: Standard Terminal Automation Replacement System (STARS), 
designed to replace aging displays and processing systems used by air 
traffic controllers; 
Original Estimated cost: $940 million; 
Current Estimated cost: $1.33 billion; 
Original Projected deployment schedule: Start: 1998; Finish: 2005; 
Current Projected deployment schedule: Start: 2002; Finish: 2005; 
Status: FAAï¿½s latest cost and schedule for STARS is based on 
acquisition of 74 systems, as opposed to the original 172 systems. In 
September 2002, we found that FAAï¿½s schedule for deploying STARS to a 
large facility presents challenges in terms of completing efforts to 
test the system, resolve problems, and train all employees on the new 
system.[A] 

Project: Wide Area Augmentation System (WAAS), designed to provide
satellite-based navigation for airspace users; 
Original Estimated cost: $892 million; 
Current Estimated cost: $2.9 billion; 
Original Projected deployment schedule: Start: 1998; Finish: 2001; 
Current Projected deployment schedule: Start: 2003; Finish: to be
determined; 
Status: Integrity concerns have plagued WAASï¿½s development. While the
agency has made progress in resolving these, FAA must decide whether to 
stop WAASï¿½s development in 2003 or continue to refine the technology to 
provide an approach capability with greater precision. 

Project: Next-Generation Air/Ground Communications (NEXCOM), designed 
to replace existing communications systems and provide additional voice 
channels; 
Original Estimated cost: $986 million (1st segment only); 
Current Estimated cost: $986 million (1st segment only); 
Original Projected deployment schedule: Finish: 2009; 
Current Projected deployment schedule: Finish: 2013; 
Status: FAA is only in the early stages of making a final decision to 
select the technology for NEXCOM and still needs to address three major 
issues: whether (1) the preferred technology is technically sound and 
will operate as intended, (2) the preferred technology and equipment it 
requires can be certified as safe for use in the national airspace 
system, and (3) it is cost-effective for users and the agency. 

Source: FAA. 

Note: Dollars are nominal. 

[A] U.S. General Accounting Office, National Airspace System: Status of 
FAAï¿½s Standard Terminal Automation Replacement System, GAO-02-1071 
(Washington, D.C.: Sept. 17, 2002). 

[End of table] 

DOTï¿½s Inspector General has noted similar problems with the Local Area
Augmentation Systemï¿½a new precision approach and landing system that is 
expected to boost airport arrival rates under all weather conditionsï¿½ 
and the Integrated Terminal Weather Systemï¿½which provides enhanced 
weather information. FAA planned to begin operating the Local Area 
Augmentation System in 2004, but it will not meet that milestone because
of additional development work, changing requirements, and unresolved
safety certification issues. In addition, the estimated production 
costs for the Integrated Terminal Weather System, originally expected 
to be about $286 million, have tripled. [Footnote 12] 

Our work has also identified free flight implementation issues. Free 
flight is a new approach to air traffic management that replaces highly
structured rules and procedures with a more flexible system based on
collaboration between air traffic controllers and pilots. The use of new
free flight technologies and procedures is expected to increase the
efficiency and capacity of the airspace system and help to avoid 
gridlock by improving operations in various segments of flight. In 
2001, we made several recommendations to improve the implementation of 
free flight, including improving training for air traffic controllers 
and establishing detailed tracking of costs, schedules, and benefits. 
[Footnote 13] FAA has begun to address our recommendations. However, 
several outstanding issues remain. For example, the airlines are not 
likely to voluntarily equip their fleets with new technologies to 
support free flight until their business improves. 

Since 1995, we have made over 30 recommendations to address the root
causes of FAAï¿½s modernization problems. Although FAA has made progress 
in addressing these root causes, more remains to be done, including the 
following: 

* Improve immature software capabilities. FAA has developed an 
integrated framework for improving its software acquisition, software 
development, and systems engineering processes. In addition, FAA has 
continued to increase the number of system development projects that 
use this integrated framework. However, FAA still does not require all 
systems to achieve a minimum level of progress within the framework 
before being funded. 

* Improve cost-estimating and cost-accounting practices. FAA has
developed a standard work breakdown structure and established an
historical database for tracking systemsï¿½ estimated costs and other
information. Furthermore, FAA has made progress in implementing its
cost-accounting system. However, the agency has not yet fully instituted
rigorous cost-estimating practicesï¿½that is, FAA is not yet incorporating
actual costs from related system development efforts in its processes 
for estimating the costs of new projects. Most recently, we reported 
that the cost estimates for the Standard Terminal Automation 
Replacement System are unreliable because FAA did not follow its own 
acquisition guidance. [Footnote 14] 

* Change organizational culture. FAA issued an organizational culture
framework in 1997 and is working to implement it. However, in 2000, the
DOT Inspector General followed up on problems that we first identified 
in 1996[Footnote 15] and reported that FAAï¿½s culture remains a barrier 
to successful acquisition project management and that integrated teams, 
a key mechanism to deliver more cost-effective and timely products, are 
not working well because FAAï¿½s culture continues to operate in vertical
ï¿½stovepipes,ï¿½ which conflict with the horizontal structure of team
operations. Our 2000 report on the Wide Area Augmentation System also
found that the integrated teams were not working as intended.[Footnote 
16] We found that competing priorities between two key organizations 
that are part of the systemï¿½s integrated team negated the effectiveness 
of the teamï¿½s approach for meeting FAAï¿½s goals for the system. 

As FAA moves forward with modernization in the current economic 
climate, it will be important for the agency to ensure that it is 
spending its resources on the projects that will provide the most 
return. This may require reprioritizing projects in the agencyï¿½s 
investment portfolio, cooperating more closely with private industry to 
leverage federal dollars and share the risk of investments, and seeking 
other opportunities to reduce costs and operate more efficiently. Such 
activities would be under the purview of the Air Traffic Services 
Subcommittee and the chief operating officer, a position created by AIR-
21 to oversee the air traffic control system and FAAï¿½s modernization 
program. However, FAA has not yet hired a chief operating officer to 
direct these efforts. 

FAA Is Implementing Human Capital and Procurement Reforms: 

As problems with the air traffic control modernization program mounted
in the early 1990s, FAA attributed the delays in implementing air 
traffic control projects, at least in part, to burdensome 
governmentwide human capital rules and federal acquisition regulations 
that impeded its ability to hire, train, and deploy personnel and to 
acquire equipment and systems. In response to these claims, the 
Congress exempted FAA from many federal laws governing human capital 
and acquisitions, and the agency began implementing human capital and 
procurement reforms in 1996. 

Human Capital Reforms Have Not Been Fully Implemented, Evaluated, or 
Linked to Goals: 

As we reported last week, FAA has implemented the majority of its human
capital reform initiatives, but it has not yet completed this effort. 
(Fig. 7 shows the status of several key initiatives.) For example, it 
has not implemented a new compensation system for about 20 percent of 
its 50,000 employeesï¿½those staff whose unions have not reached 
agreements with FAA. Among the factors affecting FAAï¿½s progress in 
implementing this initiative were the wide range of skills represented 
in FAAï¿½s workforce and the multiple unions representing FAA employees. 

Figure 7: Implementation Status of Selected FAA Personnel Reform 
Initiatives: 

[See PDF for image] 

Reform area: Compensation and performance management; 
Initiatives: Broadbanded pay systems; 
Status: In progress. 

Reform area: Compensation and performance management; 
Initiatives: Performance appraisals without ratings; 
Status: In progress. 

Reform area: Workforce management; 
Initiatives: Workforce planning; 
Status: In progress. 

Reform area: Workforce management; 
Initiatives: Decentralized competitive hiring; 
Status: Completed. 

Reform area: Workforce management; 
Initiatives: Delegated training management; 
Status: Completed. 

Reform area: Workforce management; 
Initiatives: Flexible relocation policies; 
Status: Completed. 

Reform area: Labor and employee relations; 
Initiatives: Labor partnership forums; 
Status: Completed. 

Reform area: Labor and employee relations; 
Initiatives: Workplace improvement policies; 
Status: Completed. 

Source: FAA (data); GAO (analysis). 

[End of figure] 

FAA has not developed data to assess the effects of its human capital
reforms. For example, it has not systematically surveyed managers and
employees or analyzed their views on the new compensation system.
Although FAA human capital officials cited positive effects of the 
system, nearly two-thirds (110 out of 176) of the managers and 
employees we interviewed disagreed or strongly disagreed that the new 
system is fair to all employees. 

The lack of data on the effects of its human capital reforms is an 
indication that FAA has not fully incorporated elements that are 
important to effective human capital management into its overall reform 
effort. These elements include data collection and analysis, 
performance goals and measures, and links between reform goals and 
program goals. Evaluations of FAAï¿½s human capital reforms have cited 
these shortcomings, but FAA has not developed specific steps and time 
frames for building the missing elements into its human capital 
management and for using these elements to evaluate the effects of its 
initiatives, make strategic improvements, and hold the agencyï¿½s 
leadership accountable. 

Addressing these weaknesses and developing a more strategic approach to
its human capital reforms is particularly important as FAA faces the
likelihood of hiring thousands of air traffic controllers in the next 
decade to replace retiring controllers. While the exact number and 
timing of the controllersï¿½ departures is impossible to determine, FAAï¿½s 
and our analyses show that the attrition rate will grow substantially 
in the near and long term as thousands of controllers hired over a 3- 
to 4-year period in the 1980s become eligible to retire. In June 2002, 
we reported that FAAï¿½s strategy for replacing controllers was generally 
to hire new controllers only when current, experienced controllers 
leaveï¿½an approach that makes it challenging to ensure that well-
qualified new controllers are available when needed.[Footnote 17] For 
example, we found that FAAï¿½s hiring process did not adequately take 
into account the time needed to fully train replacements, which could 
take up to 5 years; there was uncertainty about agencyï¿½s tools for 
screening and testing the aptitude of applicants; and the agency had 
not addressed the resources that may be needed to train these 
replacements. We recommended, among other things, the development of
a comprehensive workforce strategy to address FAAï¿½s impending 
controller needs. While FAA has made some changes in this area since our
report appeared, it remains to be seen whether the agencyï¿½s actions 
will be sufficient to ensure that qualified new controllers are 
available when needed. Figure 8 shows an air traffic controller 
monitoring and handling air traffic. 

Figure 8: Air Traffic Controller: 

[See PDF for image] 

This is a photograph of an air traffic controller at work. 

Source: FAA. 

[End of figure] 

FAAï¿½s Procurement Reforms Have Improved Investment Management
Processes, but Weaknesses Remain: 

As part of its procurement reforms, FAA introduced an acquisition
management system to reduce the time and cost to deploy new products
and services. In 1999, we found that while this was a good first step in
establishing a structured investment management approach for selecting
and controlling the agencyï¿½s investments, the system had weaknesses in 
its selection, control, and evaluation phases that impeded FAAï¿½s 
ability to manage its investments effectively and make sound decisions 
about continuing, modifying, or canceling projects.[Footnote 18] We 
concluded that correcting these weaknesses would increase the 
likelihood that FAAï¿½s projects would meet established cost and schedule 
objectives and contribute to measurable improvements in the agencyï¿½s 
mission performance, and we made several recommendations designed to 
improve the agencyï¿½s selection, control, and evaluation of its 
information technology investments. 

Recently, we found that FAA has improved its investment management
processes, but that more remains to be done. For example, FAA is now
overseeing investment risks and capturing key information from the
investment selection process in a management information system. FAA
has also developed guidance for validating costs, benefits, and risks, 
and expects to finalize this guidance by early 2003. However, FAA has 
not yet implemented processes for evaluating projects after 
implementation in order to identify lessons learned and improve the 
investment management process. Because its procurement reform effort is 
not complete, major projects continue to face challenges that could 
affect their costs, schedule, and performance. 

FAA Is Making Progress in Implementing Safety Initiatives: 

Safety has always been and continues to be FAAï¿½s highest priority. FAA
has taken a number of important steps to improve aviation safety; 
however, planning and implementation could be more effective in some
cases. 

FAA and Industry Have Taken Actions to Reduce the Fatal Accident Rate: 

Reducing fatal aviation accidents is key to improving aviation safety.
FAAï¿½s centerpiece for reaching this goal is Safer Skies, an initiative 
that dates back to 1998, when FAA and aviation industry representatives
worked together to identify the major causes of fatal accidents and to
design and implement preventive actions. Safer Skies is intended to 
reduce the fatal accident rate for commercial aviation by 80 percent 
and to reduce the number of fatal accidents for general aviation to 350 
by 2007.[Footnote 19] Because many preventive actions have not yet been 
fully implemented, it may be too early to assess their effectiveness. 
Achieving the initiativeï¿½s goals will require FAA to systematically 
implement these preventive actions and to maintain good data to monitor 
their progress and evaluate their effectiveness. As of last week, 44 
preventive actions had been undertakenï¿½of which 16 are completed and 28 
are under way, according to FAA. 

FAAï¿½s New Safety Inspection System Offers Promise, but Problems Still 
Need to Be Addressed: 

Improving the effectiveness of FAAï¿½s inspections of airline operations 
is key to improving aviation safety. The FAA Administrator has noted 
that perhaps the greatest support the agency can provide to the 
industry is a robust safety oversight role that will not waver in 
difficult times. FAAï¿½s new inspection program, the Air Transportation 
Oversight System, is central to this oversight role. The program aims 
to ensure not only that airlines comply with FAAï¿½s safety requirements 
but also that they have operating systems to control risks and prevent 
accidents. We found that FAA had not completed many critical steps, 
such as developing guidance and creating usable databases to capture 
information, before implementing the new inspection system in 1998. As 
a result, the agencyï¿½s ability to conduct effective inspections remains 
limited. FAA has begun to address some of these problems. However, 
according to a 2002 review by the DOT Inspector General, many of the 
problems persist, and the programï¿½s implementation remains inconsistent 
because FAA has not established strong oversight and accountability 
procedures.[Footnote 20] These problems limit FAAï¿½s ability to conduct 
more systematic, structured inspections; analyze the resulting data to 
identify safety trends; and target its resources to the greatest 
aviation safety risks. 

Better Implementation and Monitoring of Requirements to Perform 
Preemployment Checks on Pilots Could Enhance Aviation Safety: 

Finally, the Congress has endeavored to keep unsafe pilots out of the
cockpits of commercial aircraft by requiring that carriers perform
preemployment checks on pilot applicants. We found that carriers have
increasingly requested the required records since the Pilot Records
Improvement Act took effect in 1997. In 2000, nearly half of the 
nationï¿½s large commercial airlines reported deciding not to hire pilots 
because of this information. However, our data analyses and surveys of 
carriers showed that a few carriers did not request all required 
records. In a few cases, hiring carriers reported never receiving the 
records. Delays in providing the records can be costly for both 
carriers and pilots because the carrier is not allowed to use the pilot 
to fly passengers or cargo until the records have been received. In 
addition, because FAA did not update its guidance when the law was 
amended, carriers and pilots lack awareness of some provisions, and FAA 
inspectors are not prepared to review compliance. In response to our 
recommendations, FAA has updated its guidance and is taking additional 
steps to better inform carriers, pilots, and inspectors of the lawï¿½s 
requirements. 

In conclusion, Mr. Chairman, the aviation industry and the national
economy are still struggling to recover their health. Analysts 
nonetheless expect the demand for air travel to rebound, and the 
nationï¿½s aviation system must be ready to accommodate the projected 
growth safely and securely. Sustaining recent funding levels for 
planned capital development should allow the majority of airport 
capital improvements to move forward, but it will not address the 
costly terminal modifications needed to accommodate explosives 
detection systems. Options such as additional federal grant funding or 
increases in passenger facility charges could make more funding 
available for airport improvements; however, competition for federal 
budget dollars and concerns about the impact of higher charges on 
airline ticket sales may limit the practicality of these options. 

Enhancing the capacity and efficiency of the national airspace system
through runway development and air traffic modernization is critical to
preparing for the projected growth in demand for air travel. Today, we
have a window of opportunity to prepare for this growth without the
pressures of congestion and flight delays. Yet we also face public and
private constraints on spending that require us to accomplish these
improvements as efficiently as possible. Setting priorities among 
projects, identifying opportunities for streamlining the runway 
development process, and fully implementing human capital and 
procurement reforms should help to ensure efficiency. Finally, moving 
forward with aviation safety initiatives is essential to restore and 
maintain the publicï¿½s confidence in air travel. 

Scope and Methodology: 

To determine how much planned development would cost over the next 5 
years, we obtained planned development data from FAA and ACI. ACI 
provided its estimate to us in January 2003, and we are still analyzing 
the data on which the estimate is based. To determine the sources of 
airport funding, we obtained capital funding data from FAA, the National
Association of State Aviation Officials, Thomson Financial, and a survey
we conducted of 400 general aviation and reliever airports. We obtained
funding data from 1999 through 2001, because they were the most recent
years for which consistent data were available. We screened the planned
development and funding data for accuracy and compared funding streams 
across databases where possible. We also clarified ambiguous 
development or funding source information directly with airports. We 
did not, however, audit how the databases were compiled, except for our 
own survey. However, we have not finished analyzing our survey data, 
and the results presented in this testimony are still preliminary. 

We performed our work from May 2002 through February 2003 in accordance 
with generally accepted government auditing standards. 

This concludes my statement. I would be pleased to answer any questions 
you or other members of the Committee might have. 

Contact Information: 

For further information on this testimony, please contact Gerald
Dillingham at (202) 512-2834. Individuals making key contributions to 
this testimony include Jon Altshul, Bonnie Beckett, Tammy Conquest, 
Howard Cott, Elizabeth Eisenstadt, James Geibel, Charles D. Ireland, 
Edward Laughlin, David Lehrer, Maren McAvoy, Matthew Sakrekoff, John W.
Shumann, Teresa Spisak, Richard Swayze, Larry Thomas, and Alwynne 
Wilbur. 

[End of section] 

Related GAO Products: 

Aviation Finance: Implementation of General Aviation Entitlement
Grants. GAO-03-347. Washington, D.C.: February 11, 2003. 

Human Capital Management: FAAï¿½s Reform Effort Requires a More Strategic 
Approach. GAO-03-156. Washington, D.C.: February 3, 2003. 

National Airspace System: Better Cost Data Could Improve FAAï¿½s 
Management of the Standard Terminal Automation Replacement System. GAO-
03-343. Washington, D.C.: January 31, 2003. 

Aviation Infrastructure: Challenges Related to Building Runways and
Actions to Address Them. GAO-03-164. Washington, D.C.: January 30,
2003. 

High-Risk Series: An Update. GAO-03-119. Washington, D.C.: January 
2003. 

Air Traffic Control: Impact of Revised Personnel Relocation Policies Is
Uncertain. GAO-03-141. Washington, D.C.: October 31, 2002. 

Airport Finance: Using Airport Grant Funds for Security Projects Has
Affected Some Development Projects. GAO-03-27. Washington, D.C.: 
October 15, 2002. 

National Airspace System: Status of FAAï¿½s Standard Terminal Automation 
Replacement System. GAO-02-1071. Washington, D.C.: September 17, 2002. 

Options to Enhance the Long-term Viability of the Essential Air Service
Program. GAO-02-997R. Washington, D.C.: August 30, 2002. 

Aviation Safety: Better Guidance and Training Needed on Providing Files 
on Pilotsï¿½ Background Information. GAO-02-722. Washington, D.C.: August 
30, 2002. 

Air Traffic Control: FAA Needs to Better Prepare for Impending Wave of 
Controller Attrition. GAO-02-591. Washington, D.C.: June 14, 2002. 

Aviation Finance: Distribution of Airport Grant Funds Complied with 
Statutory Requirements. GAO-02-283. Washington, D.C.: April 30, 2002. 

Department of Transportation, Transportation Security Administration: 
Aviation Security Infrastructure Fees. GAO-02-484R. Washington, D.C.: 
March 11, 2002. 

Applying Agreed-Upon Procedures: Airport and Airway Trust Fund Excise 
Taxes. GAO-02-380R. Washington, D.C.: February 15, 2002. 

National Airspace System: Long-Term Capacity Planning Needed Despite 
Recent Reduction in Flight Delays. GAO-02-185. Washington, D.C.: 
December 14, 2001. 

Air Traffic Control: FAA Enhanced the Controller-in-Charge Program, 
but More Comprehensive Evaluation Is Needed. GAO-02-55. Washington,
D.C.: October 31, 2001. 

National Airspace System: Free Flight Tools Show Promise, but 
Implementation Challenges Remain. GAO-01-932. Washington, D.C.:
August 31, 2001. 

Air Traffic Control: Role of FAAï¿½s Modernization Program in Reducing
Delays and Congestion. GAO-01-725T. Washington, D.C.: May 10, 2001. 

Aviation Safety: Safer Skies Initiative Has Taken Initial Steps to 
Reduce Accident Rates by 2007. GAO/RCED-00-111. Washington, D.C.: June 
30, 2000. 

National Airspace System: Problems Plaguing the Wide Area Augmentation 
System and FAAï¿½s Actions to Address Them. GAO/TRCED-00-229. Washington, 
D.C.: June 29, 2000. 

National Airspace System: Persistent Problems in FAAï¿½s New Navigation 
System Highlight Need for Periodic Reevaluation. GAO/RCED/AIMD-00-130. 
Washington, D.C.: June 12, 2000. 

Federal Aviation Administration: Challenges in Modernizing the Agency. 
GAO/T-RCED/AIMD-00-87. Washington, D.C.: February 3, 2000. 

Air Traffic Control: Status of FAAï¿½s Implementation of the Display 
System Replacement Project. GAO/T-RCED-00-19. Washington, D.C.: October 
11, 1999. 

Aviation Safety: FAAï¿½s New Inspection System Offers Promise, but 
Problems Need to Be Addressed. GAO/RCED-99-183. Washington, D.C.: June 
28, 1999. 

General Aviation Airports: Oversight and Funding. GAO/T-RCED-99-214.
Washington, D.C.: June 9, 1999. 

Passenger Facility Charges: Program Implementation and the Potential
Effects of Proposed Changes. GAO/RCED-99-138. Washington, D.C.: May
19, 1999. 

Airport Improvement Program: Analysis of Discretionary Spending for
Fiscal Years 1996-98. GAO/RCED-99-160R. Washington, D.C.: May 18, 1999. 

Air Traffic Control: FAAï¿½s Modernization Investment Management Approach 
Could Be Strengthened. GAO/RCED/AIMD-99-88. Washington, D.C.: April 30, 
1999. 

Air Traffic Control: Observations on FAAï¿½s Air Traffic Control 
Modernization Program. GAO/T-RCED/AIMD-99-137. Washington, D.C.: March 
25, 1999. 

Federal Aviation Administration: Financial Management Issues. GAO/T-
AIMD-99-122. Washington, D.C.: March 18, 1999. 

Airport Financing: Smaller Airports Face Future Funding Shortfalls. 
GAO/T-RCED-99-96. Washington, D.C.: February 22, 1999. 

Airport Financing: Annual Funding As Much As $3 Billion Less Than 
Planned Development. GAO/T-RCED-99-84. Washington, D.C.: February 10, 
1999. 

[End of section] 

Footnotes: 

[1] U. S. General Accounting Office, Aviation Infrastructure: 
Challenges Related to Building Runways and Actions to Address Them, GAO-
03-164 (Washington, D.C.: Jan. 30, 2003). 

[2] U.S. General Accounting Office, Human Capital Management: FAAï¿½s 
Reform Effort Requires a More Strategic Approach, GAO-03-156 
(Washington, D.C.: Feb. 3, 2003). 

[3] U.S. General Accounting Office, Aviation Safety: FAAï¿½s New 
Inspection System Offers Promise, but Problems Need to Be Addressed, 
GAO/RCED-99-183 (Washington, D.C.: June 28, 1999). 

[4] U.S. Department of Transportation, Office of Inspector General, 
Report on the Air Transportation Oversight System: Federal Aviation 
Administration, AV-2002-088 (Washington, D.C.: Apr. 8, 2002). 

[5] U.S. General Accounting Office, Aviation Safety: Better Guidance 
and Training Needed on Providing Files on Pilotsï¿½ Background 
Information, GAO-02-722 (Washington, D.C.: Aug. 30, 2002). 

[6] It is also important to note that if we replaced the AIP figures 
for 1999 through 2001 with the AIP figures appropriated for fiscal year 
2002 and authorized for fiscal year 2003 in our analysis, assuming no 
changes in the distribution of AIP funds, smaller airports would be 
able to cover even more of the estimated cost of their planned 
development because AIP grant funds for fiscal years 2002 and 2003 are 
about $1 billion more than the average annual AIP funding for 1999 
through 2001. Because data for funding from other sources were not
available for these years, we used the figures for 1999 through 2001, 
the most recent years for which consistent data were available. 

[7] U.S. General Accounting Office, Aviation Finance: Implementation of 
General Aviation Entitlement Grants, GAO-03-347 (Washington, D.C.: Feb. 
11, 2003). 

[8] U.S. General Accounting Office, Passenger Facility Charges: Program 
Implementation and the Potential Effects of Proposed Changes, GAO/RCED-
99-138 (Washington, D.C.: May 19, 1999). 

[9] U. S. General Accounting Office, Aviation Infrastructure: 
Challenges Related to Building Runways and Actions to Address Them, GAO-
03-164 (Washington, D.C.: Jan. 30, 2003). 

[10] U.S. General Accounting Office, National Airspace System: Long-
Term Capacity Planning Needed Despite Recent Reduction in Flight 
Delays, GAO-02-185 (Washington, D.C.: Dec. 14, 2001). 

[11] U.S. General Accounting Office High-Risk Series: An Update, GAO-03-
119 (Washington, D.C.: Jan 2003). 

[12] DOT Office of Inspector General, Top Management Challenges, PT-
2003-012 (Washington, D.C.: Jan. 21, 2003). 

[13] U.S. General Accounting Office, National Airspace System: Free 
Flight Tools Show Promise, But Implementation Challenges Remain, GAO-01-
932 (Washington, D.C.: Aug. 31, 2001). 

[14] U.S. General Accounting Office, National Airspace System: Better 
Cost Data Could Improve FAAï¿½s Management of the Standard Terminal 
Automation Replacement System, GAO-03-343 (Washington, D.C.: Jan. 31, 
2003). 

[15] U.S. General Accounting Office, Aviation Acquisition: A 
Comprehensive Strategy Is Needed to Cultural Change at FAA, GAO/RCED-96-
159 (Washington, D.C.: Aug. 22, 1996). 

[16] U.S. General Accounting Office, National Airspace System: 
Persistent Problems in FAAï¿½s New Navigation System Highlight Need for 
Periodic Reevaluation, GAO/RCED/AIMD-00-130 (Washington, D.C.: June 12, 
2000). 

[17] U.S. General Accounting Office, Air Traffic Control: FAA Needs to 
Better Prepare for Impending Wave of Controller Attrition, GAO-02-591 
(Washington, D.C.: June 14, 2002). 

[18] U.S. General Accounting Office, Air Traffic Control: FAAï¿½s 
Modernization Investment Management Approach Could Be Strengthened, 
GAO/RCED/AIMD-99-88 (Washington, D.C. Apr. 30, 1999). 

[19] Commercial aviation includes both large air carrier operations and 
smaller commuter operations. General aviation includes a wide variety 
of aircraft, ranging from corporate jets to small piston-engine 
aircraft as well as helicopters, gliders, and aircraft used in 
operations such as firefighting and agricultural spraying. 

[20] U.S. Department of Transportation, Office of Inspector General, 
Report on the Air Transportation Oversight System: Federal Aviation 
Administration, AV-2002-088 (Washington, D.C.: Apr. 8, 2002). 

[End of section] 

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